gthp_ex1040





 






 


Exhibit
10.40


 SECURITIES
PURCHASE AGREEMENT


This
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
December 17, 2019, by and between GUIDED THERAPEUTICS, INC., a
Delaware corporation, with headquarters located at 5835 Peachtree
Comers East, Suite D, Norcross, Georgia 30092 (the "Company"), and
AUCTUS FUND, LLC, a Delaware limited liability company, with its
address at 545 Boylston Street, 2nd Floor, Boston, MA 02116 (the
"Buyer").


WHEREAS:


A.
The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the rules and regulations as promulgated
by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933
Act");


B.
Buyer desires to purchase and the Company desires to issue. and
sell, upon the terms and conditions set forth in this Agreement the
10% senior secured convertible note of the Company, in the form
attached hereto as Exhibit A, in the aggregate principal amount of
US$700,000.00 (together with any note(s) issued in replacement
thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof, the "Note"), convertible into
shares of common stock, $0.001 par value per share, of the Company
(the "Common Stock"), upon the terms and subject to the limitations
and conditions set forth in such Note.


C.
The Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto;
and


NOW
THEREFORE, the Company and the Buyer severally (and not jointly)
hereby agree as follows:


1.
PURCHASE AND SALE OF NOTE.


a.
Purchase of Note. On the Closing Date (as defined below), the
Company shall issue and sell to the Buyer and the Buyer agrees to
purchase from the Company such principal amount of Note as is set
forth immediately below the Buyer's name on the signature pages
hereto. In connection with the issuance of the Note, the Company
shall issue a common stock purchase warrant to Buyer to purchase
7,500,000 shares of the Company's common stock (the "Warrant") as a
commitment fee upon the terms and subject to the limitations and
conditions set forth in such Warrant.


b.
Form of Payment. On the Closing Date (as defined below), (i) the
Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the "Purchase Price")
by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against
delivery of the Note in the principal amount equal to the Purchase
Price as is set forth immediately below the Buyer's name on the
signature pages hereto, and (ii) the Company shall deliver such
duly executed Note and Warrant on behalf of the Company, to the
Buyer, against delivery of such Purchase Price.


c.
Closing Date. Subject to the satisfaction (or written waiver) of
the conditions thereto set forth in Section 7 and Section 8 below,
the date and time of the issuance and sale of the Note pursuant to
this Agreement (the "Closing Date") shall be 12:00 noon, Eastern
Standard Time on or about December 17, 2019, or such other mutually
agreed upon time. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on the Closing Date at
such location as may be agreed to by the parties.


2.
REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Company that:


a.
Investment Purpose. As of the date hereof, the Buyer is purchasing
the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note (including, without limitation,
such additional shares of Common Stock, if any, as are issuable (i)
on account of interest on the Note (ii) as a result of the events
described in Sections


1.3
and 1.4(g) of the Note or (iii) in payment of the Standard
Liquidated Damages Amount (as defined in Section 2(f) below)
pursuant to this Agreement, such shares of Common Stock being
collectively referred to herein as the "Conversion Shares" and,
collectively with the Note, Warrant, and the shares of Common Stock
issuable upon exercise of the Warrant, the "Securities") for its
own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree
to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act.


b.
Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D (an
"Accredited Investor").


c.
Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.


d.
Information. The Buyer and its advisors, if any, have been, and for
so long as the Note remains outstanding will continue to be,
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by the Buyer or
its advisors. The Buyer and its advisors, if any, have been, and
for so long as the Note remains outstanding will continue to be,
afforded the opportunity to ask questions of the Company.
Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic information and will not disclose such
information unless such information is disclosed to the public
prior to or promptly following such disclosure to the Buyer.
Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The
Buyer understands that its investment in the Securities involves a
significant degree of risk. The Buyer is not aware of any facts
that may constitute a breach of any of the Company's
representations and warranties made herein.


 



 

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e.
Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of
the Securities.


f
Transfer or Re-sale. The Buyer understands that (i) the sale or
re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are
sold pursuant to an effective registration statement under the 1933
Act, (b) the Buyer shall have delivered to the Company, at the cost
of the Company, an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the
Company, (c) the Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 promulgated under the 1933 Act
(or a successor rule) ("Rule 144")) of the Buyer who agrees to sell
or otherwise transfer the Securities only in accordance with this
Section 2(t) and who is an Accredited Investor, (d) the Securities
are sold pursuant to Rule 144, or (e) the Securities are sold
pursuant to Regulation S under the 1933 Act (or a successor rule)
("Regulation S"), and the Buyer shall have delivered to the
Company, at the cost of the Company, an opinion of counsel that
shall be in form, substance and scope customary for opinions of
counsel in corporate transactions, which opinion shall be accepted
by the Company; (ii) any sale of such Securities made in reliance
on Rule 144 may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any re-sale of
such Securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder
(in each case). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other
lending arrangement. In the event that the Company does not accept
the opinion of counsel provided by the Buyer with respect to the
transfer of Securities pursuant to an exemption from registration,
such as Rule 144 or Regulation S, within three (3) business days of
delivery of the opinion to the Company, the Company shall pay to
the Buyer liquidated damages of five percent (5%) of the
outstanding amount of the Note per day plus accrued and unpaid
interest on the Note, prorated for partial months, in cash or
shares at the option of the Buyer ("Standard Liquidated Damages
Amount"). If the Buyer elects to be pay the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be
issued at the Conversion Price (as defined in the Note) at the time
of payment.


g.
Legends. The Buyer understands that the Note and, until such time
as the Conversion Shares have been registered under the 1933 Act
may be sold pursuant to Rule 144 or Regulation S without any
restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):


"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY TIDS
CERTIFICATE NOR THE SECURITIES INTO WHICH 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."


The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with 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 Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, at
the Deadline, it will be considered an Event of Default pursuant to
Section 3.2 of the Note.


h.
Authorization: Enforcement. This Agreement has been duly and
validly authorized. This Agreement has been duly executed and
delivered on behalf of the Buyer, and this Agreement constitutes a
valid and binding agreement of the Buyer enforceable in accordance
with its terms.


1.
Residency. The Buyer is a resident of the jurisdiction set forth in
the preamble.


3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer that:


a.
Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect. "Material Adverse Effect" means any
material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. "Subsidiaries" means any
corporation or other organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly,
any equity or other ownership interest.


 



 

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b.
Authorization: Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this
Agreement, the Note and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Note by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including
without limitation, the issuance of the Note and the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion or exercise thereof) have been duly authorized by the
Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.


 


c.
Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of: (i) 3,000,000,000 shares of Common
Stock, of which approximately 3,319,486 shares are issued and
outstanding; (ii) 9,000 shares of Series C preferred stock, of
which 300,000 are issued and outstanding, (iii) 20,300 shares of
Series Cl preferred stock, of which 1,000 are issued and
outstanding, and (iv) 5,000,000 shares of C2 preferred stock, of
which 3,300 are issued and outstanding. Except as disclosed in the
SEC Documents, no shares are reserved for issuance pursuant to the
Company's stock option plans, no shares are reserved for issuance
pursuant to securities (other than the Note and any other
convertible promissory note issued to the Buyer) exercisable for,
or convertible into or exchangeable for shares of Common Stock and
58,187,863 shares are reserved for issuance upon conversion of the
Note. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the
shareholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as
disclosed in the SEC Documents, as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Note or the Conversion Shares. The
Company has filed in its SEC Documents true and correct copies of
the Company's Certificate of Incorporation as in effect on the date
hereof ("Certificate of Incorporation"), the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect
thereto. The Company shall provide the Buyer with a written update
of this representation signed by the Company's Chief Executive on
behalf of the Company as of the Closing Date.


 


d.
Issuance of Shares. The issuance of the Note is duly authorized
and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and free from
all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. The Conversion
Shares are duly authorized and reserved for issuance and, upon
conversion of the Note in accordance with its respective terms,
will be validly issued, fully paid and non-assessable, and 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 Company and will not
impose personal liability upon the holder thereof.


 


e.
Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of the
Note. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Note in accordance with
this Agreement, the Note is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.


 


f.
No Conflicts. The execution, delivery and performance of this
Agreement and the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor
any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under,
and neither the Company nor any of its Subsidiaries has taken any
action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any
of its Subsidiaries is a party or by which any property or assets
of the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Note in accordance with the
terms hereof or thereof or to issue and sell the Note in accordance
with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company is not in violation of
the listing requirements of the OTC Pink (the "OTC Pink"), the
OTCQB or any similar quotation system, and does not reasonably
anticipate that the Common Stock will be delisted by the OTC Pink,
the OTCQB or any similar quotation system, in the foreseeable
future nor are the Company's securities "chilled" by DTC. The
Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.


 



 

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g.
SEC Documents; Financial Statements. On or before February 10,
2020, the Company will have filed all reports, schedules, forms,
statements and other documents required to be filed by it with the
SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included
therein and fmancial statements and schedules thereto and documents
(other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC
Documents"). The Company has delivered to the Buyer true and
complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the statements
made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements
as have been amended or updated in subsequent filings prior the
date hereof). As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved and
fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except
as set forth in the financial statements of the Company included in
the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to March 31, 2019, and (ii)
obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company. The Company is subject to the reporting requirements of
the 1934 Act. For the avoidance of doubt, filing of the documents
required in this Section 3(g) via the SEC's Electronic Data
Gathering, Analysis, and Retrieval system ("EDGAR") shall satisfy
all delivery requirements of this Section 3(g).


h.
Absence of Certain Changes. Since March 31, 2019, there has been no
material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial
condition, results of operations, prospects or 1934 Act reporting
status ofthe Company or any of its Subsidiaries.


i.
Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect. Schedule 3(i)
contains a complete list and summary description of any pending or,
to the knowledge of the Company, threatened proceeding against or
affecting the Company or any of its Subsidiaries, without regard to
whether it would have a Material Adverse Effect. The Company and
its Subsidiaries are unaware. of any facts or circumstances which
might give rise to any of the foregoing.


j.
Patents, Copyrights, etc. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights ("Intellectual Property")
necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future).
Except as disclosed in the SEC Documents, there is no claim or
action by any person pertaining to, or proceeding pending, or to
the Company's knowledge threatened, which challenges the right of
the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now
operated (and, as presently contemplated to be operated in the
future); to the best of the Company's knowledge, the Company's or
its Subsidiaries' current and intended products, services and
processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts
or circumstances which might give rise to any of the foregoing. The
Company and each of its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their
Intellectual Property.


k.
No Materially Adverse Contracts, Etc. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or
is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse
Effect.


 


I.
Tax Status. The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company
and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim. The Company has not executed a waiver with respect
to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the
Company's tax returns is presently being audited by any taxing
authority.


 



 

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m.
Certain Transactions. Except for arm's length transactions pursuant
to which the Company or any of its Subsidiaries makes payments in
the ordinary course of business upon terms no less favorable than
the Company or any of its Subsidiaries could obtain from third
parties and other than the grant of stock options disclosed on
Schedule 3( c), none of the officers, directors, or employees of
the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or
partner.


n.
Disclosure. All information relating to or concerning the Company
or any of its Subsidiaries set forth in this Agreement and provided
to the Buyer pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has
occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by
the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports
filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933
Act).


o.
Acknowledgment Regarding Buyer' Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the
capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further
acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any
statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer' purchase of the Securities.
The Company further represents to the Buyer that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its
representatives.


p.
No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its
securities.


q.
No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, transaction
fees or similar payments relating to this Agreement or the
transactions contemplated hereby.


r.
Permits; Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), and there is no
action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict
with, or, in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Since March 31, 2019, neither
the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to
possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse
Effect.


 


 




 

5








 






s.
Environmental Matters.


(i) There are, to the Company's knowledge, with
respect to the Company or any of its Subsidiaries or any
predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may
give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The
term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or
the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals,
pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder. (ii) Other
than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company's or any of its Subsidiaries' business. (iii)
There are no underground storage tanks on or under any real
property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable
law.


t.
Title to Property. Except as disclosed in the SEC Documents the
Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all
personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects or such as would not have a
Material Adverse Effect. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.


u.
Internal Accounting Controls. Except as disclosed in the SEC
Documents the Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment
of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any
differences.


 


v.
Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in
the course of his actions for, or on behalf of, the Company, used
any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.


w.
Solvency. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (i.e., its assets have a
fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute
and matured) and currently the Company has no information that
would lead it to reasonably conclude that the Company would not,
after giving effect to the transaction contemplated by this
Agreement, have the ability to, nor does it intend to take any
action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with
respect to its most recent fiscal year end and, after giving effect
to the transactions contemplated by this Agreement, does not
anticipate or know of any basis upon which its auditors might issue
a qualified opinion in respect of its current fiscal year. For the
avoidance of doubt any disclosure of the Borrower's ability to
continue as a "going concern" shall not, by itself, be a violation
of this Section 3(w).


x.
No Investment Company. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will
not be an "investment company" required to be registered under the
Investment Company Act of 1940 (an "Investment Company"). The
Company is not controlled by an Investment Company.


y.
Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have
a Material Adverse Effect. Upon written request the Company will
provide to the Buyer true and correct copies of all policies
relating to directors' and officers' liability coverage, errors and
omissions coverage, and commercial general liability
coverage.


 



 

6







 






 


z.
Bad Actor. No officer or director of the Company would be
disqualified under Rule 506( d) of the Securities Act as amended on
the basis of being a "bad actor" as that term is established in the
September 19, 2013 Small Entity Compliance Guide published by the
SEC.


aa.
Shell Status. The Company represents that it is not a "shell"
issuer and has never been a "shell" issuer, or that if it
previously has been a "shell" issuer, that at least twelve (12)
months have passed since the Company has reported Form 10 type
information indicating that it is no longer a "shell" issuer.
Further, the Company will instruct its counsel to either (i) write
a 144-3(a)(9) opinion to allow for salability of the Conversion
Shares or (ii) accept such opinion from Holder's
counsel.


bb.
No-Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of
its Subsidiaries and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Company in its 1934
Act filings and is not so disclosed or that otherwise could be
reasonably likely to have a Material Adverse Effect.


cc.
Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has: (i) taken, directly or indirectly,
any action designed to cause or to result, or that could reasonably
be expected to cause or result, in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase
any other securities of the Company.


dd.
Sarbanes-Oxley Act. The Company and each Subsidiary is in material
compliance with all applicable requirements of the Sarbanes-Oxley
Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.


ee.
Employee Relations. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any
member of a union. The Company believes that its and its
Subsidiaries' relations with their respective employees are good.
No executive officer (as defined in Rule 501(f) promulgated under
the 1933 Act) or other key employee of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that
such officer intends to leave the Company or any such Subsidiary or
otherwise terminate such officer's employment with the Company or
any such Subsidiary. To the knowledge of the Company, no executive
officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject
the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. ff.
Breach of Representations and Warranties by the Company. The
Company agrees that if the Company breaches any of the
representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement and it being considered an Event of Default under
Section 3.5 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Company, until such breach is cured. If
the Company elects to pay the Standard Liquidated Damages Amounts
in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.


4.
COVENANTS.


a.
Best Efforts. The parties shall use their commercially reasonable
best efforts to satisfy timely each of the conditions described in
Section 7 and 8 of this Agreement.


b.
Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the
Securities for sale to the Buyer at the applicable closing pursuant
to this Agreement under applicable securities or "blue sky" laws of
the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action
so taken to the Buyer on or prior to the Closing Date.


c.
Use of Proceeds. The Company shall use the proceeds from the sale
of the Note for working capital and other general corporate
purposes and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with
its currently existing direct or indirect
Subsidiaries).


d.
Right of First Refusal Unless it shall have first delivered to the
Buyer, at least seventy two (72) hours prior to the closing of such
Future Offering (as defined herein), written notice describing the
proposed Future Offering, including the terms and conditions
thereof, and providing the Buyer an option during the seventy two
(72) hour period following delivery of such notice to purchase the
securities being offered in the Future Offering on the same terms
as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively
referred to as the "Right of First Refusal") (and subject to .the
exceptions described below), the Company will not conduct any
equity financing (including debt with an equity component) ("Future
Offerings") during the period beginning on the Closing Date and
ending twelve (12) months following the Closing Date. In the event
the terms and conditions of a proposed Future Offering are amended
in any respect after delivery of the notice to the Buyer concerning
the proposed Future Offering, the Company shall deliver a new
notice to the Buyer describing the amended terms and conditions of
the proposed Future Offering and the Buyer thereafter shall have an
option during the seventy two (72) hour period following delivery
of such new notice to purchase its pro rata share of the securities
being offered on the same terms as contemplated by such proposed
Future Offering, as amended. The foregoing sentence shall apply to
successive amendments to the terms and conditions of any proposed
Future Offering. The Right of First Refusal shall not apply to any
transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous
offering pursuant to Rule 415 under the 1933 Act), (ii) issuances
to employees, officers, directors, contractors, consultants or
other advisors approved by the Board, (iii) issuances to strategic
partners or other parties in connection with a commercial
relationship, or providing the Company with equipment leases, real
property leases or similar transactions approved by the Board (iv)
issuances of securities as consideration for a merger,
consolidation or purchase of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of
which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the
Company. The Right of First Refusal also shall not apply to the
issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of
the date hereof or to the grant of additional options or warrants,
or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by the shareholders of the
Company.


 



 

7







 






 


e.
Expenses. The Company shall reimburse Buyer for any and all
expenses incurred by them in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith
("Documents"), including, without limitation, reasonable attorneys'
and consultants' fees and expenses, transfer agent fees, fees for
stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions
of counsel, escrow fees, and costs of restructuring the
transactions contemplated by the Documents. When possible, the
Company must pay these fees directly, including, but not limited
to, any and all wire fees, otherwise the Company must make
immediate payment for reimbursement to the Buyer for all fees and
expenses immediately upon written notice by the Buyer or the
submission of an invoice by the Buyer. At Closing, the Company's
initial obligation with respect to this transaction is to reimburse
Buyer's legal expenses shall be $10,000.00 plus the cost of wire
fees.


f.
Financial Information. The Company agrees to send or make available
the following reports to the Buyer until the Buyer transfers,
assigns, or sells all of the Securities:


(i)
within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form l0-K its Quarterly Reports on Form l0-Q and
any Current Reports on Form 8-K; (ii) within one (I) day after
release, copies of all press releases issued by the Company or any
of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of
any notices or other information the Company makes available or
gives to such shareholders. For the avoidance of doubt, filing the
documents required in (i) above via EDGAR or releasing any
documents set forth in (ii) above via a recognized wire service
shall satisfy the delivery requirements of this Section
4(f).


g.
Listing. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and,
so long as the Buyer owns any of the Securities, shall maintain, so
long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable upon
conversion of the Note. The Company will obtain and, so long as the
Buyer owns any of the Securities, maintain the listing and trading
of its Common Stock on the OTC Pink, OTCQB or any equivalent
replacement exchange, the Nasdaq National Market ("Nasdaq"), the
Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock
Exchange ("NYSE"), or the NYSE American and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Financial Industry Regulatory
Authority ("FINRA") and such exchanges, as applicable. The Company
shall promptly provide to the Buyer copies of any material notices
it receives from the OTC Pink, OTCQB and any other exchanges or
quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing
on such exchanges and quotation systems. The Company shall pay any
and all fees and expenses in connection with satisfying its
obligation under this Section 4(g).


h.
Corporate Existence. So long as the Buyer beneficially owns any
Note, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except
in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTC
Pink, OTCQB, Nasdaq, NasdaqSmallCap, NYSE or AMEX.


i.
No Integration. The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.


j.
Failure to Comply with the 1934 Act. So long as the Buyer
beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall
continue to be subject to the reporting requirements of the 1934
Act.


 


 




 

8








 






k.
[Intentionally Omitted].


L
Restriction on Activities. Commencing as of the date first above
written, and until the payment of the Note in full or full
conversion of the Note, the Company shall not, directly or
indirectly, without the Buyer's prior written consent, which
consent shall not be unreasonably withheld: (a) change the nature
of its business; (b) sell, divest, acquire, change the structure of
any material assets other than in the ordinary course of business;
or (c) solicit any offers for, respond to any unsolicited offers
for, or conduct any negotiations with any other person or entity in
respect of any variable rate debt transactions (except with respect
to the Notes (as defined below» (i.e., transactions were the
conversion or exercise price of the security issued by the Company
varies based on the market price of the Common Stock), whether a
transaction similar to the one contemplated hereby or any other
investment (unless the proceeds are sufficient to repay the Notes
in the entirety pursuant to the provisions of the Notes and the
Company repays the Notes in the entirety within one (1) business
day of the closing of the variable rate debt transaction); or (d)
file any registration statements with the SEC (except with respect
to the Equity Raise (as defined in this Agreement) and as provided
in the RRA (as defined in this Agreement».


m.
Legal Counsel Opinions. Upon the request of the Buyer from to time
to time, the Company shall be responsible (at its cost) for
promptly supplying to the Company's transfer agent and the Buyer a
customary legal opinion letter of its counsel (the "Legal Counsel
Opinion") to the effect that the sale of Conversion Shares by the
Buyer or its affiliates, successors and assigns is exempt from the
registration requirements of the 1933 Act pursuant to Rule 144
(provided the requirements of Rule 144 are satisfied and provided
the Conversion Shares are not then registered under the 1933 Act
for resale pursuant to an effective registration statement). Should
the Company's legal counsel fail for any reason to issue the Legal
Counsel Opinion, the Buyer may (at the Company's cost) secure
another legal counsel to issue the Legal Counsel Opinion, and the
Company will instruct its transfer agent to accept such
opinion.


n.
Par Value. If the closing bid price at any time the Note is
outstanding falls below $0.001, the Company shall cause the par
value of its Common Stock to be reduced to $0.00001 or
less.


o.
Breach of Covenants. The Company agrees that if the Company
breaches any of the covenants set forth in this Section 4,and in
addition to any other remedies available to the Buyer pursuant to
this Agreement, it will be considered an Event of Default under
Section 3.4 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Buyer, until such breach is cured, or
with respect to Section 4( d) above, the Company shall pay to the
Buyer the Standard Liquidated Damages Amount in cash or shares of
Common Stock:, at the option of the Buyer, upon each violation of
such provision. If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock:, such shares
shall be issued at the Conversion Price at the time of
payment.


 




1.

Transaction
Expense Amount. Upon Closing, the Company shall pay Fifty Five
Thousand and 00/100 United States Dollars (US$55,000.00) to Auctus
Fund Management, LLC ("Auctus Management") to cover the Holder's
due diligence, monitoring, and other transaction costs incurred for
services rendered in connection herewith (the "Transaction Expense
Amount"). The Transaction Expense Amount shall be offset against
the proceeds of the Note and shall be paid to Auctus Management
upon the execution hereof.






 




 

9








 








2.

Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the
Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance
with the terms thereof (the "Irrevocable Transfer Agent
Instructions"). In the event that the Borrower proposes to replace
its transfer agent, the Borrower shall 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. Prior to registration of the Conversion Shares
under the 1933 Act or the date on which the Conversion Shares 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, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company
warrants that: (i) no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section, and stop
transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act or the date on which the
Conversion Shares 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), will be given by the Company to
its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Note; (ii) it will
not direct its transfer agent not to transfer or delay, impair,
and/or hinder its transfer agent in transferring (or issuing)(
electronically or in certificated form) any certificate for
Conversion Shares to be issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note and
this Agreement; and (iii) it will not fail 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 Conversion Shares issued to the Buyer upon
conversion of or otherwise pursuant to the Note as and when
required by the Note and this Agreement. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Buyer provides the Company, at the cost of the
Company, with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the
effect that a public sale or transfer of such Securities may be
made without registration under the 1933 Act and such sale or
transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144,
the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates, free from restrictive legend, in such
name and in such denominations as specified by the Buyer. The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section may be inadequate and
agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyer shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond
or other security being required.






7.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS TO SELL. The
obligation of the Company hereunder to issue and sell the Note to
the Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole
discretion:


a.
The Buyer shall have executed this Agreement and delivered the same
to the Company.


b.
The Buyer shall have delivered the Purchase Price in accordance
with Section 1 (b) above.


c.
The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.


d.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.


 


8.
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO PURCHASE. The
obligation of the Buyer hereunder to purchase the Note at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these
conditions are for the Buyer's sole benefit and may be waived by
the Buyer at any time in its sole discretion:


a.
The Company shall have executed this Agreement and delivered the
same to the Buyer.


b.
The Company shall have delivered to the Buyer the duly executed
Note (in such denominations as the Buyer shall request) and in
accordance with Section 1 (b) above as well as the duly executed
Warrant.


c.
The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the Company's
Transfer Agent.


d.
The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or·
complied with by the Company at or prior to the Closing Date. The
Buyer shall have received a certificate or certificates, executed
by the chief executive officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by the Buyer including, but not
limited to certificates with respect to the Company's Certificate
of Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.


 



 

10







 






 


e.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.


f.
No event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.


g.
The Conversion Shares shall have been authorized for quotation on
the OTC Pink, OTCQB or any similar quotation system and trading in
the Common Stock on the OTC Pink, OTCQB or any similar quotation
system shall not have been suspended by the SEC or the OTC Pink,
OTCQB or any similar quotation system.


h.
The Buyer shall have received an officer's certificate described in
Section 3(c) above, dated as of the Closing Date.


9.
GOVERNING LAW; MISCELLANEOUS.


a. Governing Law. This Agreement 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 Agreement, the Note or any other
agreement, certificate, instrument or document contemplated hereby
shall be brought only in the state courts located in the
Commonwealth of Massachusetts or in the federal courts located in
the Commonwealth of Massachusetts. The parties to this Agreement
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. EACH PARTY 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 UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR
ARISING OUT OF TIDS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. 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 Agreement 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 limit in any
way any right to serve process in any other manner permitted by
law.


b.
Counterparts; Signatures by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This
Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this
Agreement.


c.
Construction; Headings. This Agreement shall be deemed to be
jointly drafted by the Company and the Buyer and shall not be
construed against any person as the drafter hereof. The headings of
this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this
Agreement.


d.
Severability. In the event that any provision of this Agreement 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.


e.
Entire Agreement; Amendments. This Agreement, the Note and the
instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither
the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by an
instrument in writing signed by the majority in interest of the
Buyer.


 


f
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, email, 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
email or facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during 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 Company, to:


Guided
Therapeutics, Inc.


5835
Peachtree Comers East, Suite D


Norcross,
Georgia 30092


Attn:
Gene Cartwright


E-mail:
info@guidedinc.com


 




 

11








 






If
to the Buyer:


Auctus
Fund, LLC


545
Boylston Street, 2nd Floor


Boston,
MA 02116


Attn:
Lou Posner


Facsimile:
(617) 532-6420


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


Each
party shall provide notice to the other party of any change in
address.


g.
Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and
assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing,
subject to Section 2(f), the Buyer may assign its rights hereunder
to any person that purchases Securities in a private transaction
from the Buyer or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of the
Company.


h.
Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.


i.
Survival. The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder not withstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.


j.
Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.


 


k.
No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.


l.
Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the
Buyer 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 Agreement and to enforce
specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security
being required.


m.
Publicity. The Company, and the Buyer shall have the right to
review a reasonable period of time before issuance of any press
releases, SEC, OTCQB or FINRA filings, or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the
prior approval of the Buyer, to make any press release or SEC,
OTCQB (or other applicable trading market) or FINRA filings with
respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company
in connection with any such press release prior to its release and
shall be provided with a copy thereof and be given an opportunity
to comment thereon).


 



 

12







 






 


n.
Indemnification. In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Securities hereunder,
and in addition to all of the Company's other obligations under
this Agreement or the Note, the Company shall defend, protect,
indemnify and hold harmless the Buyer and its stockholders,
partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or
other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a
result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made
by the Company in this Agreement or the Note or any other
agreement, certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement or the Note or any other
agreement, certificate, instrument or document contemplated hereby
or thereby or (c) any cause of action, suit or claim brought or
made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from (i) the execution, delivery,
performance or enforcement of this Agreement or the Note or any
other agreement, certificate, instrument or document contemplated
hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, or (iii) the status of the Buyer or
holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by this Agreement. To the extent that
the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
that is permissible under applicable law.


 


o.
Additional Funding.


(i)
Tranche II Funding (Second Note). So long as the Company has not
breached the material terms of this Agreement, the Company's Common
Stock is trading on the OTCQB as of the Filing Date (as defined
below), the Company has consummated a capital raise of at least
$\,000,000.00 from the sale of equity securities (which does not
include any debt component) of the Company during the period
beginning on the date of this Agreement and ending on the Filing
Date (the "Equity Raise"), an Event of Default (as defined in the
Note) has not occurred under the Note or any convertible promissory
note issued by the Company to the Buyer, the Company files the
Registration Statement (as defined in the Note) (the "Registration
Statement") pursuant to the terms of the Note and registration
rights agreement entered into between the Company and Buyer on the
date of this Agreement (the "RRA"), the Registration Statement
contains all of the material information required by such form, the
Registration Statement is filed with the SEC pursuant to the terms
of the Note and RRA, the average closing price for the Company's
common stock during the ten (10) trading day period prior to the
date that the Registration Statement is filed with the SEC (the
"Filing Date") is greater than $0.15, and the Average Daily Trading
Value (as defined below) for the Company's common stock during the
twenty (20) trading day period prior to the Filing Date is greater
than $5,000.00, then the Buyer shall fund within three (3) business
days after the Filing Date an additional senior secured convertible
promissory note in the face amount of . $400,000.00 (the "Second
Note") to be issued by the Company on the same terms and conditions
as the Note and transaction documents entered into in connection
with the Note (except as provided in Section 9(0)(v) of this
Agreement) (subject to the Buyer's receipt of all of the
transaction documentation signed by the Company and the Company's
transfer agent as applicable).


(ii)
Tranche ill Funding (Third Note). So long as the Company has not
breached the material terms of this Agreement, the Company's Common
Stock is trading on the OTCQB as of the Filing Date and the
Post-Effective Date (as defined below), the Company has consummated
the Equity Raise, an Event of Default (as defined in the Note) has
not occurred under the Note or any convertible promissory note
issued by the


 




 

13








 






Company
to the Buyer, the Company files the Registration Statement pursuant
to the terms of the Note and the RRA, the Registration Statement
contains all of the material information required by such form, the
Registration Statement is declared effective by the SEC pursuant to
the terms of the Note and RRA, the average closing price for the
Company's common stock during the ten (10) trading day period prior
to the date that is sixty (60) calendar days after the date that
the Registration Statement is declared effective by the SEC (the
"Post-Effective Date") is greater than $0.30, the Buyer and GPB
Debt Holdings II LLC (the "Existing Senior Creditor") shall have
entered into an inter creditor agreement granting the Buyer senior
priority over the Existing Senior Creditor with respect to the
assets of the Company, and the Average Daily Trading Value (as
defined below) for the Company's common stock during the twenty
(20) trading day period prior to the Post-Effective Date is greater
than $15,000.00, then the Buyer shall fund within five (5) business
days after the Post-Effective Date an additional senior secured
convertible promissory note in the face amount of $1,300,000.00
(the "Third Note") to be issued by the Company on the same terms
and conditions as the Note and transaction documents entered into
in connection with the Note (except as provided in Section 9(0
)(vi) of this Agreement) (subject to the Buyer's receipt of all of
the transaction documentation signed by the Company and the
Company's transfer agent as applicable).


(iii)
The Note, Second Note, and Third Note shall be collectively
referred to in this Agreement as the "Notes".


(iv)
The "Average Daily Trading Value" shall mean the average trading
volume of the Company's Common Stock during the applicable
measurement period multiplied by the lowest closing price of the
Company's Common Stock during the applicable measurement
period.


(v)
The Transaction Expense Amount with respect to the Second Note
shall be $73,333.33. Section 9(0) of this Agreement shall not be
included in the securities purchase agreement with respect to the
Second Note. The definition of "Variable Conversion Price" in the
Second Note shall mean the 75% of the average of the five (5) day
volume weighted average price of the Common Stock immediately prior
to the Issue Date (as defined in the Second Note) of the Second
Note (provided, however, that if the Common Stock is trading on a
public market at a price greater than $0.50 per share on the Issue
Date (as defined in the Second Note) of the Second Note, then 75%
shall be replaced with 80%).


(vi)
The Transaction Expense Amount with respect to the Third Note shall
be $78,928.00. Section 9(0) of this Agreement shall not be included
in the securities purchase agreement with respect to the Third
Note. The definition of "Variable Conversion Price" in the Third
Note shall mean the 75% of the average of the five (5) day volume
weighted average price of the Common Stock immediately prior to the
Issue Date (as defined in the Third Note) of the Third Note
(provided, however, that if the Common Stock is trading on a public
market at a price greater than $0.50 per share on the Issue Date
(as defined in the Third Note) of the Third Note, then 75% shall be
replaced with 80%). In connection with the issuance of the Third
Note, the Company shall issue a common stock purchase warrant to
Buyer to purchase 4,000,000 shares of the Company's common stock in
the same form as the Warrant (the "Second Warrant"), with an
initial exercise price of $0.25 per share, as a commitment fee upon
the terms and subject to the limitations and conditions set forth
in such Second Warrant.


 


[signature
page follows]



 

14







 






  





 


IN
WITNESS THEREOF, the undersigned Buyer and the Company have caused
this agreement to be duly executed as of date first above
written.


 


 


 


 


 



GUIDED THERAPEUTICS, INC.


/s/
Gene S. Cartwright


Gene
S. Cartwright


Chef
Executive Officer


 


 


 



AUCTUS FUND, LLC


/s/
Lou Posner


Lou
Posner


Managing
Director


 


 


 


 


 




 

15