gthp_ex424





 






 Exhibit 4.24



 


NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I)
IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL
SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II)
UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.


 


Principal
Amount: US$1l2,750.00


 


Issue
Date: March 31, 2020


 


Purchase
Price: US$112,750.00


 



CONVERTIBLE PROMISSORY NOTE


 


FOR VALUE RECEIVED, GUIDED THERAPEUTICS, INC., a
Delaware corporation (hereinafter called the "Borrower") (Trading
Symbol: GTHP), hereby promises to pay to the order of AUCTUS FUND,
LLC, a Delaware limited liability company, or registered assigns
(the "Holder") the sum ofUS$112,750.00 together with any interest
as set forth herein, on January 26, 2021 (the "Maturity Date"), and
to pay interest on the unpaid principal balance hereof at the rate
of twelve percent (12%) (the "Interest Rate") per annum from the
date hereof (the "Issue Date") until the same becomes due and
payable, whether at maturity or upon acceleration or by prepayment
or otherwise. This Note may not be prepaid in whole or in part
except as otherwise explicitly set forth herein. Any amount of
principal or interest on this Note which is not paid when due shall
bear interest at the rate of the lesser of (i) twenty-four percent
(24%) per annum and (ii) the maximum amount permitted under law from the
due date thereof until the same is paid (the "Default Interest").
Interest shall commence accruing on the date that the Note is
funded by the Holder and shall be computed on the basis of a
360-day year and the actual number of days elapsed. All payments
due hereunder (to the extent not converted into common stock,
$0.001 par value per share (the "Common Stock") in accordance with
the terms hereof) shall be made in lawful money of the United
States of America. All payments shall be made at such address as
the Holder shall hereafter give to the Borrower by written notice
made in accordance with the provisions of this Note. Whenever any
amount expressed to be due by the terms of this Note is due on any
day which is not a business day, the same shall instead be due on
the next succeeding day which is a business day and, in the case of
any interest payment date which is not the date on which this Note
is paid in full, the extension of the due date thereof shall not be
taken into account for purposes of determining the amount of
interest due on such date. As used in this Note, the term "business
day" shall mean any day other than a Saturday, Sunday or a day on
which commercial banks in the city of New York, New York are
authorized or required by law or executive order to remain closed.
Each capitalized term used herein, and not otherwise defined, shall
have the meaning ascribed thereto in that certain securities
purchase agreement dated the date hereof, pursuant to which this
Note was originally issued (the "Purchase
Agreement").


 


This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.



 







 






 


The
following terms shall also apply to this Note:


 


ARTICLE
1. CONVERSION RIGHTS




1.1

Conversion Right. The Holder shall have the right
from time to time, and at any time following the
90th
calendar day after the Issue Date, and
ending on the later of (i) the Maturity Date and (ii) the date of
payment of the Default Amount (as defined in Article III) pursuant
to Section 1.6(a) or Article III, each in respect of the remaining
outstanding principal amount of this Note to convert all or any
part of the outstanding and unpaid principal, interest, penalties,
and all other amounts under this Note into fully paid and
non-assessable shares of Common Stock, as such Common Stock exists
on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall
hereafter be changed or reclassified at the Conversion Price (as
defined below) determined as provided herein (a "Conversion");
provided, however, that in no event shall the Holder be entitled to
convert any portion of this Note in excess of that portion of this
Note upon conversion of which the sum of (I) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Notes
or the unexercised or unconverted portion of any other security of
the Borrower subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the conversion of the
portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by
the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (the "Beneficial Ownership Limitations").
For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
l3(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Regulations l3D-G thereunder, except as
otherwise provided in clause (1) of such proviso. The number of shares of Common
Stock to be issued upon each conversion of this Note shall be
determined by dividing the Conversion Amount (as defined below) by
the applicable Conversion Price then in effect on the date
specified in the notice of conversion, in the form attached hereto
as Exhibit A (the "Notice of Conversion"), delivered to the
Borrower by the Holder in accordance with Section 1.4 below;
provided that the Notice of Conversion is submitted by facsimile or
e-mail (or by other means resulting in, or reasonably expected to
result in, notice) to the Borrower before 11:59 p.m., New York, New
York time on such conversion date (the "Conversion Date"). The term
"Conversion Amount" means, with respect to any conversion of this
Note, the sum of (1) the principal amount of this Note to be converted
in such conversion plus (2) at the Holder's option, accrued and
unpaid interest, if any, on such principal amount at the interest
rates provided in this Note to the Conversion Date, provided
however, that the Borrower shall have the right to pay any or all
interest in cash plus (3) at the Holder's option, Default Interest,
if any, on the amounts referred to in the immediately preceding
clauses (1) and/or (2) plus (4) at the Holder's option, any amounts
owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof.






 



 

2







 






 


1.2
Conversion Price.


 


Calculation
of Conversion Price. Subject to the adjustments described herein,
the conversion price (the "Conversion Price") shall equal the
lesser of: (i) the lowest Trading Price (as defined below) during
the twenty-five (25) Trading Day period ending on the latest
complete Trading Day prior to the Issue Date and (ii) the Variable
Conversion Price (as defined herein) (subject to equitable
adjustments for stock splits, stock dividends or rights offerings
by the Borrower relating to the Borrower's securities or the
securities of any subsidiary of the Borrower, combinations,
recapitalization, reclassifications, extraordinary distributions
and similar events). The "Variable Conversion Price" shall mean 55%
multiplied by the Market Price (as defined herein) (representing a
discount rate of 45%). "Market Price" means the lowest Trading
Price (as defined below) for the Common Stock during the
twenty-five (25) Trading Day period ending on the latest complete
Trading Day prior to the Conversion Date. "Trading Price" means,
for any security as of any date, the lesser of: (i) the lowest
trade price on the OTC Pink, OTCQB or applicable trading market as
reported by a reliable reporting service ("Reporting Service")
designated by the Holder or, if the OTC Pink is not the principal
trading market for such security, the trading price of such
security on the principal securities exchange or trading market
where such security is listed or traded or, if no trading price of
such security is available in any of the foregoing manners, the
average of the trading prices of any market makers for such
security that are listed in the "pink sheets" by the National
Quotation Bureau, Inc., or (ii) the closing bid price on the OTC
Pink, OTCQB or applicable trading market as reported by a Reporting
Service designated by the Holder or, if the OTC Pink is not the
principal trading market for such security, the closing bid price
of such security on the principal securities exchange or trading
market where such security is listed or traded or, if no closing
bid price of such security is available in any of the foregoing
manners, the average of the closing bid prices of any market makers
for such security that are listed in the "pink sheets" by the
National Quotation Bureau, Inc. To the extent the Conversion Price
of the Borrower' s Common Stock closes below the par value per
share, the Borrower will take all steps necessary to solicit the
consent of the stockholders to reduce the par value to the lowest
value possible under law. The Borrower agrees to honor all
conversions submitted pending this adjustment. If the shares of the
Borrower's Common Stock have not been delivered within three (3)
business days to the Borrower, the Notice of Conversion may be
rescinded. At any time after the Closing Date, if in the case that
the Borrower's Common Stock is not deliverable by DWAC (including
if the Borrower's transfer agent has a policy prohibiting or
limiting delivery of shares of the Borrower's Common Stock
specified in a Notice of Conversion), an additional 10% discount
will apply for all future conversions under all Notes. If in the
case that the Borrower's Common Stock is "chilled" for deposit into
the DTC system and only eligible for clearing deposit, an
additional 15% discount shall apply for all future conversions
under all Notes while the "chill" is in effect. If in the case of
both of the above, an additional cumulative 25% discount shall
apply. Additionally, if the Borrower ceases to be a reporting
company pursuant to the 1934 Act or if the Note cannot be converted
into free trading shares after one hundred eighty-one (181) days
from the Issue Date, an additional 15% discount will be attributed
to the Conversion Price. If the Trading Price cannot be calculated
for such security on such date in the manner provided above, the
Trading Price shall be the fair market value as mutually determined
by the Borrower and the holders of a majority in interest of the
Notes being converted for which the calculation of the Trading
Price is required in order to determine the Conversion Price of
such Notes. "Trading Day" shall mean any day on which the Common
Stock is tradable for any period on the OTC Pink, OTCQB or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded. The Borrower shall be
responsible for the fees of its transfer agent and all DTC fees
associated with any such issuance. Holder shall be entitled to
deduct $500.00 from the conversion amount in each Notice of
Conversion to cover Holder's deposit fees associated with each
Notice of Conversion.


 


While
this Note is outstanding, each time any 3rd party has the right to
convert monies owed to that 3rd party (or receive shares pursuant
to a settlement or otherwise), including but not limited to under
Section 3(a)(9) and Section 3(a)(10), at a discount to market
greater than the Conversion Price in effect at that time (prior to
all other applicable adjustments in the Note), then the Holder, in
Holder's sole discretion, may utilize such greater discount
percentage (prior to all applicable adjustments in this Note) until
this Note is no longer outstanding. While this Note is outstanding,
each time any 3rd party has a look back period greater than the
look back period in effect under the Note at that time, including
but not limited to under Section 3(a)(9) and Section 3(a)(10), then
the Holder, in Holder's sole discretion, may utilize such greater
number of look back days until this Note is no longer outstanding.
The Borrower shall give written notice to the Holder within one (1)
business day of becoming aware of any event that could permit the
Holder to make any adjustment described in the two immediately
preceding sentences.


 


(a)
Conversion Price During Major Announcements. Notwithstanding
anything contained in Section 1.2(a) to the contrary, in the event
the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a
merger in which the Borrower is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any
person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower's Common
Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement Date"), then the Conversion Price shall, effective
upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to
the lower of (x) the Conversion Price which would have been
applicable for a Conversion occurring on the Announcement Date and
(y) the Conversion Price that would otherwise be in effect. From
and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in this Section
1.2(a). For purposes hereof, "Adjusted Conversion Price Termination
Date" shall mean, with respect to any proposed transaction or
tender offer (or takeover scheme) for which a public announcement
as contemplated by this Section 1.2(b) has been made, the date upon
which the Borrower (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this
Section 1.2(b) to become operative.



 

3







 






 


(b) Pro Rata Conversion; Disputes.
In
the event of a dispute as to the
number of shares of Common Stock issuable to the Holder
in
connection with a conversion of this
Note, the Borrower shall issue to the Holder the number of shares
of Co=on Stock not in dispute and resolve such dispute in
accordance with Section 4.13.


 


(c)
If at any time the Conversion Price as determined hereunder for any
conversion would be less than the par value of the Common Stock,
then the Conversion Price hereunder shall equal such par value for
such conversion and the Conversion Amount for such conversion shall
be increased to include Additional Principal, where "Additional
Principal" means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
conversion shares issuable upon such conversion to equal the same
number of conversion shares as would have been issued had the
Conversion Price not been subject to the minimum price set forth in
this Section 1.2(c).


 


1.3 Authorized Shares. The Borrower covenants that
during the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Co=on Stock a sufficient
number of shares, free from preemptive rights, to provide for the
issuance of Co=on Stock upon the full conversion of this Note
issued pursuant to the Purchase Agreement. The Borrower is required
at all times to have authorized and reserved ten times the number
of shares that is actually issuable upon full conversion of the
Note (based on the Conversion Price of the Notes in effect from
time to time) (the "Reserved Amount"). The Reserved Amount shall be
increased from time to time in accordance with the Borrower's
obligations pursuant to Section 3(d) of the Purchase Agreement. The
Borrower represents that upon issuance, such shares will be duly
and validly issued, fully paid and non-assessable.
In
addition, if the Borrower shall issue
any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the
Notes shall be convertible at the then current Conversion Price,
the Borrower shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Co=on
Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Notes. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue
certificates for the Co=on Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall
constitute full authority to its officers and agents who are
charged with the duty of executing stock certificates to execute
and issue the necessary certificates for shares of Co=on Stock in
accordance with the terms and conditions of this Note.
Notwithstanding the foregoing, in no event shall the Reserved
Amount be lower than the initial Reserved Amount, regardless of any
prior conversions.


 


If,
at any time the Borrower does not maintain or replenish the
Reserved Amount within three (3) business days of the request of
the Holder, the principal amount of the Note shall increase by Five
Thousand and No/100 United States Dollars ($5,000) (under Holder's
and Borrower's expectation that any principal amount increase will
tack back to the Issue Date) per occurrence.


 


1.4
Method of Conversion.


 


(a) Mechanics of Conversion. Subject to Section
1.1, this Note may be converted by the Holder in whole or in part
at any time from time to time after the 90th
calendar day after the Issue Date, by
(A) submitting to the Borrower a Notice of Conversion (by
facsimile, e-mail or other reasonable means of communication
dispatched on the Conversion Date prior to 11:59 p.m., New York,
New York time) and (B) subject to Section 1.4(b), surrendering this
Note at the principal office of the Borrower.



 

4







 






 


(b) Surrender of Note Upon Conversion.
Notwithstanding anything to the contrary set forth herein, upon
conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid principal amount of this Note
is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion.
In
the event of any dispute or
discrepancy, such records of the Borrower shall,
prima
facie, be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder
rust
physically surrenders this Note to the
Borrower, whereupon the Borrower will forthwith issue and deliver
upon the order of the Holder a new Note of like tenor, registered
as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of this Note. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion
of a portion of this Note, the unpaid and unconverted principal
amount of this Note represented by this Note may be less than the
amount stated on the face hereof.


(c)
Payment of Taxes. The Borrower shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock or other securities or
property on conversion of this Note in a name other than that of
the Holder (or in street name), and the Borrower shall not be
required to issue or deliver any such shares or other securities or
property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be
held for the Holder' s account) requesting the issuance thereof
shall have paid to the Borrower the amount of any such tax or shall
have established to the satisfaction of the Borrower that such tax
has been paid.


 


(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the
Borrower from the Holder of a facsimile transmission or e-mail (or
other reasonable means of communication) of a Notice of Conversion
meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and
delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within three (3)
business days after such receipt (the "Deadline") (and, solely in
the case of conversion of the entire unpaid principal amount
hereof, surrender of this Note) in accordance with the terms hereof
and the Purchase Agreement.


 


(e) Obligation of Borrower to Deliver Common
Stock. Upon receipt by the Borrower of a Notice of Conversion, the
Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this Note
shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article
I,
all rights with respect to the portion
of this Note being so converted shall forthwith terminate except
the right to receive the Common Stock or other securities, cash or
other assets, as herein provided, on such conversion.
If
the Holder shall have given a Notice
of Conversion as provided herein, the Borrower's obligation to
issue and deliver the certificates for Common Stock shall be
absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure
or delay in the enforcement of any other obligation of the Borrower
to the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the
Conversion Date so long as the Notice of Conversion is received by
the Borrower before 11:59 p.m., New York, New York time, on such
date.


 


(f) Delivery of Common Stock by Electronic
Transfer. In
lieu of delivering physical
certificates representing the Common Stock issuable upon
conversion, provided the Borrower is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon request of the Holder and its compliance
with the provisions contained in Section 1.1 and in this Section
1.4, the Borrower shall use its commercially reasonable best
efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion to the Holder by crediting
the account of Holder's Prime Broker with DTC through its Deposit
Withdrawal At Custodian ("DWAC") system.


 


(g) DTC Eligibility &
Market Loss. If the Borrower fails to
maintain its status as "DTC Eligible" for any reason, or, if the
Conversion Price is less than $0.05 at any time after the
30th
calendar day after the Issue Date, the
principal amount of the Note shall increase by Fifteen Thousand and
No/ IOO United States Dollars ($15,000) and the Variable Conversion
Price shall be redefined to mean thirty percent (30%) multiplied by
the Market Price, subject to adjustment as provided in this
Note.



 

5







 






 


(h)
Failure to Deliver Common Stock Prior to Delivery Deadline. Without
in any way limiting the Holder's right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is not delivered by the Deadline (other than a failure
due to the circumstances described in Section 1.3 above, which
failure shall be governed by such Section) the Borrower shall pay
to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock until
the Borrower issues and delivers a certificate to the Holder or
credit the Holder's balance account with OTC for the number of
shares of Common Stock to which the Holder is entitled upon such
Holder's conversion of any Conversion Amount (under Holder's and
Borrower's expectation that any damages will tack back to the Issue
Date).. Such cash amount shall be paid to Holder by the fifth day
of the month following the month in which it has accrued or, at the
option of the Holder (by written notice to the Borrower by the
first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in
which event interest shall accrue thereon in accordance with the
terms of this Note and such additional principal amount shall be
convertible into Common Stock in accordance with the terms of this
Note. The Borrower agrees that the right to convert is a valuable
right to the Holder. The damages resulting from a failure, attempt
to frustrate, interference with such conversion right are difficult
if not impossible to qualify. Accordingly the parties acknowledge
that the liquidated damages provision contained in this Section
1.4(h) are justified.


 


(i) Rescindment of a Notice of Conversion. If (i)
the Borrower fails to respond to Holder within one (l) business day
from the Conversion Date confirming the details of Notice of
Conversion, (ii) the Borrower fails to provide any of the shares of
the Borrower's Common Stock requested in the Notice of Conversion
within three (3) business days from the date of receipt of the Note
of Conversion, (iii) the Holder is unable to procure a legal
opinion required to have the shares of the Borrower's Common Stock
issued unrestricted and/or deposited to sell for any reason related
to the Borrower's standing, (iv) the Holder is unable to deposit
the shares of the Borrower's Common Stock requested in the Notice
of Conversion for any reason related to the Borrower's standing,
(v) at any time after a missed Deadline, at the Holder's sole
discretion, or (vi) if OTC Markets changes the Borrower's
designation to 'Limited Information' (Yield), 'No Information'
(Stop Sign), 'Caveat Emptor' (Skull &
Crossbones), 'OTC', 'Other OTC' or
'Grey Market' (Exclamation Mark Sign) or other trading restriction
on the day of or any day after the Conversion Date, the Holder
maintains the option and sole discretion to rescind the Notice of
Conversion ("Rescindment") with a ''Notice of
Rescindment."


 


1.5
Concerning the Shares. The shares of Common Stock issuable upon
conversion of this Note may not be sold or transferred unless (i)
such shares are sold pursuant to an effective registration
statement under the Act or (ii) the Borrower or its transfer agent
shall have been furnished with an opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the shares
to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or
transferred pursuant to Rule 144 under the Act (or a successor
rule) ("Rule 144") or (iv) such shares are transferred to an
"affiliate" (as defined in Rule 144) of the Borrower who agrees to
sell or otherwise transfer the shares only in accordance with this
Section 1.5 and who is an Accredited Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase
Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon
conversion of this Note have been registered under the Act or
otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, each certificate for shares of Common
Stock issuable upon conversion of this Note that has not been so
included in an effective registration statement or that has not
been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:


 


"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY TIDS CERTIFICATE NOR THE SECURITIES INTO WIDCH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I)
IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."



 

6







 






 


The
legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to
the effect that a public sale or transfer of such Common Stock may
be made without registration under the Act, which opinion shall be
reasonably accepted by the Borrower so that the sale or transfer is
effected or (ii) in the case of the Common Stock issuable upon
conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under
the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold.


 


1.6
Effect of Certain Events.


 


(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder,
the sale, conveyance or disposition of all or substantially all of
the assets of the Borrower, the effectuation by the Borrower of a
transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the
consolidation, merger or other business combination of the Borrower
with or into any other Person (as defined below) or Persons when
the Borrower is not the survivor shall either: (i) be deemed to be
an Event of Default (as defined in Article ill) pursuant to which
the Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount
equal to the Default Amount (as defined in Article ill) or (ii) be
treated pursuant to Section 1.6(b) hereof. "Person" shall mean any
individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.


 


(b) Adjustment Due to Merger,
Consolidation. Etc. If, at any time when this Note is issued and
outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on
conversion set forth herein), and in any such case appropriate
provisions shall be made with respect to the rights and interests
of the Holder of this Note to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares issuable upon
conversion of the Note) shall thereafter be applicable, as nearly
as may be practicable in relation to any securities or assets
thereafter deliverable upon the conversion hereof. The Borrower
shall not affect any transaction described in this Section 1.6(b)
unless (a) it first gives, to the extent practicable, thirty (30)
days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special
meeting of shareholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event or
sale of assets (during which time the Holder shall be entitled to
convert this Note) and (b) the resulting successor or acquiring
entity (if not the Borrower) assumes by written instrument the
obligations of this Section 1.6(b). The above provisions shall
similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.


 


(c) Adjustment Due to Distribution.
If
the Borrower shall declare or make any
distribution of its assets (or rights to acquire its assets) to
holders of Common Stock as a dividend, stock repurchase, by way of
return of capital or otherwise (including any dividend or
distribution to the Borrower's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the Holder of this Note shall
be entitled, upon any conversion of this Note after the date of
record for determining shareholders entitled to such Distribution,
to receive the amount of such assets which would have been payable
to the Holder with respect to the shares of Common Stock issuable
upon such conversion had such Holder been the holder of such shares
of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.


 


(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes
are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6(d) hereof is deemed to have issued
or sold, except for shares of Common Stock issued directly to
vendors or suppliers of the Borrower in satisfaction of amounts
owed to such vendors or suppliers (provided, however, that such
vendors or suppliers shall not have an arrangement to transfer,
sell or assign such shares of Common Stock prior to the issuance of
such shares), any shares of Common Stock for no consideration or
for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Conversion Price in effect on
the date of such issuance (or deemed issuance) of such shares of
Common Stock (a "Dilutive Issuance"), then immediately upon the
Dilutive Issuance, the Conversion Price will be reduced to the
amount of the consideration per share received by the Borrower in
such Dilutive Issuance.



 

7







 






 


The Borrower shall be deemed to
have issued or sold shares of Common Stock if the Borrower in any
manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock
("Convertible Securities") (such warrants, rights and options to
purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for
which Common Stock is issuable upon
the exercise of such Options is less than the Conversion Price then
in effect, then the Conversion Price shall be equal to such price
per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such
Options" is determined by dividing (i) the total amount, if any,
received or receivable by the Borrower as consideration for the
issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Borrower upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable, by
(ii) the maximum total number of shares of Common Stock issuable
upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to
the Conversion Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Options or upon the
conversion or exchange of Convertible Securities issuable upon
exercise of such Options.


 


Additionally,
the Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of
Options), and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the
Conversion Price then in effect, then the Conversion Price shall be
equal to such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Borrower as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion
or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment
to the Conversion Price will be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities.


 


(e) Purchase Rights. If,
at any time when any Notes are issued
and outstanding, the Borrower issues any convertible securities or
rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of any class
of Common Stock, then the Holder of this Note will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if
such Holder had held the number of shares of Common Stock
acquirable upon complete conversion of this Note (without regard to
any limitations on conversion contained herein) immediately before
the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights or, if no such record is taken, the date as
of which the record holders of Common Stock are to be determined
for the grant, issue or sale of such Purchase
Rights.


 


(f)
Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events
described in this Section 1.6, the Borrower, at its expense, shall
promptly compute such adjustment or readjustment and prepare and
furnish to the Holder a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Borrower shall, upon the
written request at any time of the Holder, furnish to such Holder a
like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon
conversion of the Note.



 

8







 






 


1.7
[Intentionally Omitted]


 


1.8 Status as Shareholder. Upon submission of a Notice
of Conversion by a Holder, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their
issuance would exceed such Holder's allocated portion of the
Reserved Amount or Maximum Share Amount) shall be deemed converted
into shares of Common Stock and (ii) the Holder's rights as a
Holder of such converted portion of this Note shall cease and
terminate, excepting only the right to receive certificates for
such shares of Common Stock and to any remedies provided herein or
otherwise available at law or in equity to such Holder because of a
failure by the Borrower to comply with the terms of this Note.
Notwithstanding the foregoing, if a Holder has not received
certificates for alI shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Deadline with
respect to a conversion of any portion of this Note for any reason,
then (unless the Holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Borrower) the Holder
shall regain the rights of a Holder of this Note with respect to
such unconverted portions of this Note and the Borrower shall, as
soon as practicable, return such unconverted Note to the Holder
or, if
the Note has not been surrendered,
adjust its records to reflect that such portion of this Note has
not been converted. In all cases, the Holder shall retain all of
its rights and remedies (including, without limitation, (i) the
right to receive Conversion Default Payments pursuant to Section
1.3 to the extent required thereby for such Conversion Default and
any subsequent Conversion Default and (ii) the right to have the
Conversion Price with respect to subsequent conversions determined
in accordance with Section 1.3) for the Borrower's failure to
convert this Note.


 


1.9
Prepayment. The Borrower may prepay the amounts outstanding
hereunder pursuant to the following terms and conditions and
subject to the terms of this Note:


(a) At any time during the period beginning on the
Issue Date and ending on the date which is sixty (60) calendar days
following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written
notice to the Holder of the Note, to prepay the outstanding Note
(principal and accrued interest), in full by making a payment to
the Holder of an amount in cash equal to 115%, multiplied by the
sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount
ofthis Note plus (y) Default Interest, if any.


 


(b)
At any time during the period beginning the day which is sixty one
(61) calendar days following the Issue Date and ending on the date
which is one hundred twenty (120) calendar days following the Issue
Date, the Borrower shall have the right, exercisable on not less
than three (3) Trading Days prior written notice to the Holder of
the Note, to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to the Holder of an amount
in cash equal to 125%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note plus
(y) Default Interest, if any.


 




 

9








 






(c)
At any time during the period beginning the day which is one
hundred twenty one (121) calendar days following the Issue Date and
ending on the date which is one hundred eighty (180) calendar days
following the Issue Date, the Borrower shall have the right,
exercisable on not less than three (3) Trading Days prior written
notice to the Holder ofthe Note, to prepay the outstanding Note
(principal and accrued interest), in full by making a payment to
the Holder of an amount in cash equal to 150%, multiplied by the
sum of: (w) the then outstanding principal amount of this Note plus
(x) accrued and unpaid interest on the unpaid principal amount of
this Note plus (y) Default Interest, if any


 


1.10 Any notice of prepayment hereunder (an
"Optional Prepayment Notice") shall be delivered to the Holder of
the Note at its registered addresses by physical mail and shall
state: (I) that the Borrower is requesting to prepay the Note, and
(2) the date of the requested prepayment which shall be not more
than three (3) Trading Days from the date of the Optional
Prepayment Notice. On the date fixed for prepayment (the "Optional
Prepayment Date"), the Borrower shall make payment of the
applicable prepayment amount to or upon the order of the Holder as
specified by the Holder in writing to the Borrower.
If the Borrower
delivers an Optional Prepayment Notice, and Borrower fails to pay
the applicable prepayment amount due to the Holder of the Note within two (2) business
days following the Optional Prepayment Date, the Borrower shall
forever forfeit its right to request a prepayment pursuant to
Section 1.9.


 


ARTICLE
II. CERTAIN COVENANTS


 


2.1
Distributions on Capital Stock. So long as the Borrower shall have
any obligation under this Note, the Borrower shall not without the
Holder's written consent (a) pay, declare or set apart for such
payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than
dividends on shares of Common Stock solely in the form of
additional shares of Common Stock or (b) directly or indirectly or
through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders' rights plan which is approved by a majority of
the Borrower's disinterested directors.


 


2.2
Restriction on Stock Repurchases. So long as the Borrower shall
have any obligation under this Note, the Borrower shall not without
the Holder's written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other
securities or otherwise) in anyone transaction or series of related
transactions any shares of capital stock of the Borrower or any
warrants, rights or options to purchase or acquire any such
shares.


 


2.3
Borrowings. Other than Permitted Indebtedness, so long as the
Borrower shall have any obligation under this Note, the Borrower
shall not, without the Holder's written consent, create, incur,
assume guarantee, endorse, contingently agree to purchase or
otherwise become liable upon the obligation of any person, firm,
partnership, joint venture or corporation, except by the
endorsement of negotiable instruments for deposit or collection, or
suffer to exist any liability for borrowed money, except (a)
borrowings in existence or committed on the date hereof and of
which the Borrower has informed Holder in writing prior to the date
hereof, (b) indebtedness to trade creditors financial institutions
or other Holders incurred in the ordinary course of business or (c)
borrowings, the proceeds of which shall be used to repay this
Note.


 


2.4
Sale of Assets. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's
written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of
business. Any consent to the disposition of any assets shall be
conditioned on a specified use of the proceeds towards the
repayment of this Note.


2.5
Advances and Loans. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder's written consent, lend money, give credit or make advances
to any person, firm, joint venture or corporation, including,
without limitation, officers, directors, employees, subsidiaries
and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the date hereof and which the
Borrower has informed Holder in writing prior to the date hereof,
(b) made in the ordinary course of business or (c) not in excess of
$100,000.00.



 

10







 






 


2.6
Section 3(a)(9) or 3 (a)(l 0) Transaction. So long as this Note is
outstanding, the Borrower shall not enter into any transaction or
arrangement structured in accordance with, based upon, or related
or pursuant to, in whole or in part, either Section 3(a)(9) of the
Securities Act (a "3(a)(9) Transaction") or Section 3(a)(to) of the
Securities Act (a "3(a)(to) Transaction"). In the event that the
Borrower does enter into, or makes any issuance of Common Stock
related to a 3(a)(9) Transaction or a 3(a)(10) Transaction while
this note is outstanding, a liquidated damages charge of 25% of the
outstanding principal balance of this Note, but not less than
Fifteen Thousand Dollars $15,000, will be assessed and will become
immediately due and payable to the Holder at its election in the
form of cash payment or addition to the balance of this
Note.


 


2.7
Preservation of Existence, etc. The Borrower shall maintain and
preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries (other than dormant
Subsidiaries that have no or minimum assets) to become or remain,
duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary.


 


2.8
Non-circumvention. The Borrower hereby covenants and agrees that
the Borrower will not, by amendment of its Certificate or Articles
of Incorporation or Bylaws, or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement,
dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Note, and will at all times in good faith
carry out all the provisions of this Note and take all action as
may be required to protect the rights of the Holder.


 


 


ARTICLE
III. EVENTS OF DEFAULT


If
any of the following events of default (each, an "Event of
Default") shall occur:


 


3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Note, whether
at maturity, upon acceleration or otherwise.



 

11







 






 


3.2 Conversion and the Shares. The Borrower (i)
fails to issue shares of Common Stock to the Holder (or announces
or threatens in writing that it will not honor its obligation to do
so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Note, (ii) fails to
transfer or cause its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for shares
of Common Stock issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note,
(iii) directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or
issuing) (electronically or in certificated form) any certificate
for shares of Co=on Stock to be issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, (iv) fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement
or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for three
(3) business days after the Holder shall have delivered a Notice of
Conversion, (v) fails to remain current in its obligations to its
transfer agent, (vi) causes a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent, (vii) fails to repay Holder, within forty eight
(48) hours of a demand from the Holder, any amount of funds
advanced by Holder to Borrower's transfer agent in order to process
a conversion, (viii) fails to reserve sufficient amount of shares
of co=on stock to satisfy the Reserved Amount at all times,
(ix)
fails to provide a Rule 144 opinion
letter from the Borrower's legal counsel to the Holder, covering
the Holder's resale into the public market of the respective
conversion shares under this Note, within two (2) business days of
the Holder's submission of a Notice of Conversion to the Borrower
(provided that the Holder must request the opinion from the
Borrower at the time that Holder submits the respective Notice of
Conversion and the date of the respective Notice of Conversion must
be on or after the date which follows the date that the shares may
be sold pursuant to Rule 144), and/or (x) an exemption under Rule
144 is unavailable for the Holder's deposit into Holder's brokerage
account and resale into the public market of any of the conversion
shares under this Note at any time after the date which is six (6)
months after the date that the Holder funded the Purchase Price
under this Note.


 


3.3
Failure to Deliver Transaction Expense Amount. The Borrower fails
to deliver the Transaction Expense Amount (as defined in the
Purchase Agreement) to the Holder within three (3) business days of
the date such amount is due.


 


3.4
Breach of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the
Holder.


 


3.5
Breach of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and
the breach of which has (or with the passage of time will have) a
material adverse effect on the rights of the Holder with respect to
this Note or the Purchase Agreement.


 


3.6
Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors or commence
proceedings for its dissolution, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee
shall otherwise be appointed for the Borrower or for a substantial
part of its property or business without its consent and shall not
be discharged within sixty (60) days after such
appointment.


 


3.7
Judgments. Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the
Borrower or any of its property or other assets for more than
$50,000, and shall remain unvacated, unbonded or unstayed for a
period of twenty (20) days unless otherwise consented to by the
Holder, which consent will not be unreasonably
withheld.


 


3.8
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings, voluntary or involuntary, for
relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower, or the Borrower admits in writing its
inability to pay its debts generally as they mature, or have filed
against it an involuntary petition for bankruptcy relief, all under
federal or state laws as applicable or the Borrower admits in
writing its inability to pay its debts generally as they mature, or
have filed against it an involuntary petition for bankruptcy
relief, all under international, federal or state laws as
applicable.


 


3.9
Delisting of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTC Pink, OTCQB,
Nasdaq National Market, Nasdaq Small Cap Market, New York Stock
Exchange, NYSE MKT, or an equivalent replacement
exchange.


 


3.10
Failure to Comply with the Exchange Act. The Borrower shall fail to
comply with the reporting requirements of the Exchange Act
(including but not limited to becoming delinquent in its filings);
and/or the Borrower shall cease to be subject to the reporting
requirements of the Exchange Act.


 


3.11
Liquidation. Any dissolution, liquidation, or winding up of
Borrower or any substantial portion of its business.


 




 

12








 






3.12
Cessation of Operations. Any cessation of operations by Borrower or
Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of
the Borrower's ability to continue as a "going concern" shall not
be an admission that the Borrower cannot pay its debts as they
become due.


 


3.13
Maintenance of Assets. The failure by Borrower to maintain any
material intellectual property rights, personal, real property or
other assets which are necessary to conduct its business (whether
now or in the future), or any disposition or conveyance of any
material asset of the Borrower.


 


3.14
Financial Statement Restatement. The restatement of any financial
statements filed by the Borrower with the SEC for any date or
period from two years prior to the Issue Date of this Note and
until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the unrestated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase
Agreement.


 


3.15
Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the
Holder.


 


3.16
Replacement of Transfer Agent. In the event that the Borrower
proposes to replace its transfer agent, the Borrower fails to
provide, prior to the effective date of such replacement, a fully
executed Irrevocable Transfer Agent Instructions in a form as
initially delivered pursuant to the Purchase Agreement (including
but not limited to the provision to irrevocably reserve shares of
Common Stock in the Reserved Amount) signed by the successor
transfer agent to Borrower and the Borrower.


 


3.17
Cessation of Trading. Any cessation of trading of the Common Stock
on at least one of the OTC Pink, OTCQB, Nasdaq National Market,
Nasdaq Small Cap Market, New York Stock Exchange, NYSE MKT, or an
equivalent replacement exchange, and such cessation oftrading shall
continue for a period of five consecutive (5) Trading
Days.


 


3.18
Cross-Default. Notwithstanding anything to the contrary contained
in this Note or the other related or companion documents, a breach
or default by the Borrower of any covenant or other term or
condition contained in any of the Other Agreements (as defined
herein), after the passage of all applicable notice and cure or
grace periods, shall, at the option of the Holder, be considered a
default under this Note and the Other Agreements, in which event
the Holder shall be entitled (but in no event required) to apply
all rights and remedies of the Holder under the terms of this Note
and the Other Agreements by reason of a default under said Other
Agreement or hereunder. "Other Agreements" means, collectively, all
agreements and instruments between, among or by: (1) the Borrower,
and, or for the benefit of, (2) the Holder (and any affiliate of
the Holder) or any other third party, including, without
limitation, promissory notes; provided, however, the term "Other
Agreements" shall not include the agreements and instruments
defined as the Documents. Each of the loan transactions will be
cross-defaulted with each other loan transaction and with all other
existing and future debt of Borrower to the Holder.


 


3.19
Bid Price. The Borrower shall lose the "bid" price for its Common
Stock ($0.0001 on the "Ask" with zero market makers on the "Bid"
per Level 2) and/or a market (including the OTC Pink, OTCQB or an
equivalent replacement exchange).


 


3.20
OTC Markets Designation. OTC Markets changes the Borrower's
designation to 'No Information' (Stop Sign), 'Caveat Emptor' (Skull
and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market'
(Exclamation Mark Sign).


 


3.21
Inside Information. Any attempt by the Borrower or its officers,
directors, and/or affiliates to transmit, convey, disclose, or any
actual transmittal, conveyance, or disclosure by the Borrower or
its officers, directors, and/or affiliates of, material non-public
information concerning the Borrower, to the Holder or its
successors and assigns, which is not immediately cured by
Borrower's filing of a Form 8-K pursuant to Regulation FD on that
same date.



 

13







 






 


3.22 Unavailability of Rule 144. If, at any time
on or after the date which is six (6) months after the Issue Date,
the Holder is unable to (i) obtain a standard "144 legal opinion
letter" from an attorney reasonably acceptable to the Holder, the
Holder's brokerage firm
(and respective clearing firm), and
the Borrower's transfer agent in order to facilitate the Holder's
conversion of any portion of the Note into free trading shares of
the Borrower's Common Stock pursuant to Rule 144, and (ii)
thereupon deposit such shares into the Holder's brokerage
account.


 


3.23
Delisting or Suspension of Trading of Common Stock. If, at any time
on or after the Issue Date, the Borrower's Common Stock (i) is
suspended from trading, (ii) halted from trading, and/or (iii)
fails to be quoted or listed (as applicable) on any level of the
OTC Markets, any tier of the NASDAQ Stock Market, the New York
Stock Exchange, or the NYSE American.


 


UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2 AND/OR 3.22 OF TIDS NOTE, THE NOTE
SHALL BECOME IMMEDIATELY AND AUTOMATICALLY DUE AND PAYABLE WITHOUT
DEMAND, PRESENTMENT, OR NOTICE AND THE BORROWER SHALL
PAY
TO THE HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS
HEREUNDER, AN
AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN) MULTIPLIED
BY (Z)
TWO (2). Upon the occurrence of any
Event of Default specified in Sections 3.1, 3.3, 3.4, 3.5, 3.6,
3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15,3.16.3.17, 3.18,
3.19, 3.20, 3.21, and/or 3.23, the Note shall become immediately
and automatically due and payable without demand, presentment or
notice and the Borrower shall pay to the Holder, in full
satisfaction of its obligations hereunder, an amount equal to (i)
130% times the sum of (w) the then outstanding principal amount of
this Note plus (x) accrued and unpaid interest on the unpaid
principal amount of this Note to the date of payment (the
"Mandatory Prepayment Date") plus (y) Default Interest, if any, on
the amounts referred to in clauses (w) and/or (x) plus (z) any
amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g)
hereof (the then outstanding principal amount of this Note to the
date of payment plus the amounts referred to in clauses (x), (y)
and (z) shall collectively be known as the "Default Sum") or (ii)
at the option of the Holder, the "parity value" of the Default Sum
to be prepaid, where parity value means (a) the highest number of
shares of Common Stock issuable upon conversion of or otherwise
pursuant to such Default Sum in accordance with Article
I,
treating the Trading Day immediately
preceding the Mandatory Prepayment Date as the "Conversion Date"
for purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a breach in respect
of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), multiplied by (b) the highest
Trading Price for the Common Stock during the period beginning on
the date of first occurrence of the Event of Default and ending one
day prior to the Mandatory Prepayment Date (the "Default Amount")
and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of
which hereby are expressly waived, together with all costs,
including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. Further, if a
breach of Sections 3.9, 3.10 and/or 3.19 occurs or is continuing
after the six (6) month anniversary of this Note, then the
principal amount of the Note shall increase by Fifteen Thousand and
No/ IOO United States Dollars ($15,000) and the Holder shall be
entitled to use the lowest Trading Price during the delinquency
period as a base price for the conversion with the Variable
Conversion Price shall be redefined to mean forty percent (40%)
multiplied by the Market Price, subject to adjustment as provided
in this Note. For example, if the lowest Trading Price during the
delinquency period is $0.50 per share and the conversion discount
is 50%, then the Holder may elect to convert future conversions at
$0.25 per share. If this Note is not paid at Maturity Date, then
the outstanding principal due under this Note shall increase by
Fifteen Thousand and No/IOO United States Dollars
($15,000).


 




 

14








 






The
Holder shall have the right at any time after an Event of Default
occurs under this Note to require the Borrower, to immediately
issue, in lieu of the Default Amount and/or Default Sum, the number
of shares of Common Stock of the Borrower equal to the Default
Amount and/or Default Sum divided by the Conversion Price then in
effect, pursuant to the terms of this Note (including but not
limited to any beneficial ownership limitations contained herein).
This requirement by the Borrower shall automatically apply upon the
occurrence of an Event of Default without the need for any party to
give any notice or take any other action.


.



If
the Holder shall commence an action or proceeding to enforce any
provisions of this Note, including, without limitation, engaging an
attorney, then if the Holder prevails in such action, the Holder
shall be reimbursed by the Borrower for its attorneys' fees and
other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.


 


ARTICLE
IV. MISCELLANEOUS


 


4.1
Failure or Indulgence Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or
privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies
otherwise available.


 


4.2
Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, electronic mail, or
facsimile, addressed as set forth below or to such other address as
such party shall have specified most recently by written notice.
Any notice or other communication required or permitted to be given
hereunder shall be deemed effective ( a) upon hand delivery or
delivery by electronic mail or facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at
the address or number designated below (if delivered on a business
day dllling normal business hours where such notice is to be
received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be:


 


If
to the Borrower, to:


Guided
Therapeutics, Inc.


5835
Peachtree Comers East, Suite B


Norcross,
Georgia 30092


Attn:
Gene Cartwright


E-mail:
info@guidedinc.com


 


If
to the Holder:


Auctus
Fund, LLC


545
Boylston Street, 2nd Floor


Boston,
MA 02116


Attn:
Lou Posner


Facsimile:
(617) 532-6420


 


 



 

15







 






 


With
a copy to (which copy shall not constitute notice) :


Chad
Friend, Esq., LL.M.


Anthony
L.G., PLLC


625
N. Flagler Drive, Suite 600


West
Palm Beach, FL 33401


E-mail:
CFriend@AnthonyPLLC.com


 


4.3
Amendments. This Note and any provision hereof may only be amended
by an instrument in writing signed by the Borrower and the Holder.
The term "Note" and all reference thereto, as used throughout this
instrument, shall mean this instrument (and the other Notes issued
pursuant to the Purchase Agreement) as originally executed, or if
later amended or supplemented, then as so amended or
supplemented.


 


4.4
Assignability. This Note shall be binding upon the Borrower and its
successors and assigns, and shall inure to be the benefit of the
Holder and its successors and assigns. Neither the Borrower nor the
Holder shall assign this Note or any rights or obligations
hereunder without the prior written consent of the other.
Notwithstanding the foregoing, the Holder may assign its rights
hereunder to any "accredited investor" (as defmed in Rule 501(a) of
the 1933 Act) in a private transaction from the Holder or to any of
its "affiliates", as that term is defined under the 1934 Act,
without the consent of the Borrower. Notwithstanding anything in
this Note to the contrary, this Note may be pledged as collateral
in connection with a bona fide margin account or other lending
arrangement. The Holder and any assignee, by acceptance of this
Note, acknowledge and agree that following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on
the face hereof.


 


4.5
Cost of Collection. If default is made in the payment of this Note,
the Borrower shall pay the Holder hereof reasonable costs of
collection, including reasonable attorneys' fees .


 


4.6 Governing Law. This Note shall be governed by
and construed in accordance with the laws of the State of Nevada
without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the
transactions contemplated by this Note shall be brought only in the
state courts located in the Commonwealth of Massachusetts or
federal courts located in the Commonwealth of Massachusetts. The
parties to this Note hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or
based upon forum non conveniens.
THE BORROWER HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION WITH OR ARISING OUT OF TIDS NOTE OR ANY
TRANSACTION CONTEMPLATED HEREBY. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs. In
the event that any provision of this Note or any other agreement
delivered in connection herewith is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to lirnit in any
way any right to serve process in any other manner permitted by
law.


 


4.7
Certain Amounts. Whenever pursuant to this Note the Borrower is
required to pay an amount in excess of the outstanding principal
amount (or the portion thereof required to be paid at that time)
plus accrued and unpaid interest plus Default Interest on such
interest, the Borrower and the Holder agree that the actual damages
to the Holder from the receipt of cash payment on this Note may be
difficult to determine and the amount to be so paid by the Borrower
represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to
convert this Note and to earn a return from the sale of shares of
Common Stock acquired upon conversion of this Note at a price in
excess of the price paid for such shares pursuant to this Note. The
Borrower and the Holder hereby agree that such amount of stipulated
damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity
to convert this Note into shares of Common Stock.



 

16







 






 


4.8
Purchase Agreement. By its acceptance of this Note, each party
agrees to be bound by the applicable terms of the Purchase
Agreement.


 


4.9 Notice of Corporate Events. Except as
otherwise provided below, the Holder of this Note shall have no
rights as a Holder of Common Stock unless and only to the extent
that it converts this Note into Common Stock. The Borrower shall
provide the Holder with prior notification of any meeting of the
Borrower's shareholders (and copies of proxy materials and other
information sent to shareholders). In
the event of any taking by the
Borrower of a record of its shareholders for the purpose of
determining shareholders who are entitled to receive payment of any
dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of
any class or any other securities or property, or to receive any
other right, or for the purpose of determining shareholders who are
entitled to vote in connection with any proposed sale, lease or
conveyance of all or substantially all of the assets of the
Borrower or any proposed liquidation, dissolution or winding up of
the Borrower, the Borrower shall mail a notice to the Holder, at
least twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to the consummation of the transaction
or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding
the amount and character of such dividend, distribution, right or
other event to the extent known at such time. The Borrower shall
make a public announcement of any event requiring notification to
the Holder hereunder substantially simultaneously with the
notification to the Holder in accordance with the terms of this
Section 4.9 including, but not limited to, name changes,
recapitalizations, etc. as soon as possible under
law.


 


4.10 Usury. If it shall be found that any interest or other
amount deemed interest due hereunder violates the applicable law
governing usury, the applicable provision shall automatically be
revised to equal the maximum rate of interest or other amount
deemed interest permitted under applicable law. The Borrower
covenants (to the extent that it may lawfully do so) that it will
not seek to claim or take advantage of any law that would prohibit
or forgive the Borrower from paying all or a portion of the
principal or interest on this Note.


 


4.11
Remedies. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Borrower acknowledges that the remedy at
law for a breach of its obligations under this Note will be
inadequate and agrees, in the event of a breach or threatened
breach by the Borrower of the provisions ofthis Note, that the
Holder shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Note and to enforce
specifically the terms and provisions thereof, without the
necessity of showing economic loss and without any bond or other
security being required. No provision of this Note shall alter or
impair the obligation of the Borrower, which is absolute and
unconditional, to pay the principal of, and interest on, this Note
at the time, place, and rate, and in the form, herein
prescribed.


 


4.12 Severability. In
the event that any provision of this
Note is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified
to conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision
hereof.



 

17







 






 


4.13 Dispute Resolution. In
the case of a dispute as to the
determination of the Conversion Price, Conversion Amount, any
prepayment amount or Default Amount, Default Sum, Closing or
Maturity Date, the closing bid price, or fair market value (as the
case may be) or the arithmetic calculation of the Conversion Price
or the applicable prepayment amount(s) (as the case may be), the
Borrower or the Holder shall submit the disputed determinations or
arithmetic calculations via facsimile (i) within two (2) Business
Days after receipt of the applicable notice giving rise to such
dispute to the Borrower or the Holder or (ii) if no notice gave
rise to such dispute, at any time after the Holder learned of the
circumstances giving rise to such dispute. If the Holder and the
Borrower are unable to agree upon such determination or calculation
within two (2) Business Days of such disputed determination or
arithmetic calculation (as the case may be) being submitted to the
Borrower or the Holder, then the Borrower shall, within two (2)
Business Days, submit via facsimile (a) the disputed determination
of the Conversion Price, the closing bid price, the or fair market
value (as the case may be) to an independent, reputable investment
bank selected by the Borrower and approved by the Holder or (b) the
disputed arithmetic calculation of the Conversion Price, Conversion
Amount, any prepayment amount or Default Amount, Default Sum to an
independent, outside accountant selected by the Holder that is
reasonably acceptable to the Borrower. The Borrower shall cause at
its expense the investment bank or the accountant to perform the
determinations or calculations and notify the Borrower and the
Holder of the results no later than ten (10) Business Days from the
time it receives such disputed determinations or calculations. Such
investment bank' s or accountant's determination or calculation
shall be binding upon all parties absent demonstrable
error.


 


4.14
Terms of Future Financings. So long as this Note is outstanding,
upon any issuance by the Borrower or any of its subsidiaries of any
security with any term more favorable to the holder of such
security or with a term in favor of the holder of such security
that was not similarly provided to the Holder in this Note, then
the Borrower shall notify the Holder of such additional or more
favorable term and such term, at Holder's option, shall become a
part of the transaction documents with the Holder. The types of
terms contained in another security that may be more favorable to
the holder of such security include, but are not limited to, terms
addressing conversion discounts, prepayment rate, conversion
lookback periods, interest rates, original issue discounts, stock
sale price, private placement price per share, and
warrant


coverage.


4.15 Piggyback Registration Rights. The Borrower
shall include on each registration statement that the Borrower
files with SEC all shares issuable upon conversion of this Note and
exercise of the Warrant (as defined in the Purchase Agreement). The
Borrower's failure to comply with this Section 4.15 shall result in
liquidated damages of 25% of the outstanding principal balance of
this Note, but not less than Fifteen Thousand and
No/100 United States Dollars ($15,000), being
immediately due and payable to the Holder at its election in the
form of cash payment or addition to the balance of this
Note.


 


4.16 Future Raises; Repayment from Proceeds. Until
the Note is satisfied in full, if the Borrower receives cash
proceeds from any source or series of related or unrelated sources,
including but not limited to, from the issuance of equity and/or
debt securities, the conversion of outstanding warrants of the
Borrower, the issuance of securities pursuant to an equity line of
credit of the Borrower or the sale of assets, the Borrower shall,
within one (I)
business day of Borrower's receipt of
such proceeds, inform the Holder of such receipt, following which
the Holder shall have the right in its sole discretion to require
the Borrower to immediately apply all or any portion of such
proceeds to repay all or any portion of this Note. Failure of the
Borrower to comply with this provision shall constitute an Event of
Default under Section 3.4 of the Note. In
the event that such proceeds are
received by the Holder prior to the Maturity Date, the required
prepayment shall be subject to the terms of Section 1.9
herein.



[signature page follows]


 




 

18








 






IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the date first above
written.


 



GUIDED THERAPEUTICS, INC.


By:
/Gene S. Cartwright/


Name:
Gene S. Cartwright


Title:
Chief Executive Officer


 




 

19








 







EXHIBIT A



NOTICE OF CONVERSION


 


The undersigned hereby elects to convert
$_______
principal amount of the Note (defined
below) together with $____________ of accrued and unpaid interest
thereto, totaling $ _________into that number of shares of Common Stock to be
issued pursuant to the conversion of the Note ("Common Stock") as
set forth below, of Guided Therapeutics, Inc., a Delaware
corporation (the "Borrower"), according to the conditions of the
convertible promissory note of the Borrower dated as of March 31,
2020 (the "Note"), as of the date written below. No fee will be
charged to the Holder for any conversion, except for transfer
taxes, if any.


Box
Checked as to applicable instructions:


 


 


[ ]
The Borrower shall electronically transmit the Common Stock
issuable pursuant to this Notice of Conversion to the account of
the undersigned or its nominee with DTC through its Deposit
Withdrawal At Custodian system ("DWAC Transfer").


Name
of DTC Prime Broker:


Account
Number:


 


[ ]
The undersigned hereby requests that the Borrower issue a
certificate or certificates for the number of shares of Common
Stock set forth below (which numbers are based on the Holder's
calculation attached hereto) in the name(s) specified immediately
below or, if additional space is necessary, on an attachment
hereto:


Name: [NAME]


Address:
[ADDRESS]


Date
of Conversion:


Applicable
Conversion Price: $_________


Number
of Shares of Common Stock to be Issued Pursuant to Conversion of
the Notes:___________


Amount
of Principal Balance Due remaining Under the Note after this
conversion:_______________


Accrued
and unpaid interest remaining:
_________________________________________________


 


[HOLDER]


By:
_______


Name: [NAME]


Title:
[TITLE]


Date:
[DATE]