Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of March 11, 2014, by and between B&G FOODS, INC. (hereinafter the “Corporation”) and MICHAEL SANDS (hereinafter “Sands”).

 

WHEREAS, subject to the terms of this Agreement, Corporation desires to employ Sands as Executive Vice President of Snacks, and Sands desires to accept such employment.

 

NOW THEREFORE, in consideration of the material advantages accruing to the two parties and the mutual covenants contained herein, the Corporation and Sands agree with each other as follows

 

1.                                      Effective Date.  For purposes of this Agreement, the “Effective Date” shall mean March 11, 2014.

 

2.                                      Employment. Sands will render full-time professional services to the Corporation and, as directed by the Corporation, to its subsidiaries or other Affiliates (as defined in Paragraph 3 below), in the capacity of Executive Vice President of Snacks under the terms and conditions of this Agreement.  He will at all times, faithfully, industriously and to the best of his ability, perform all duties that may be required of him by virtue of his position as Executive Vice President of Snacks and in accordance with the directions and mandates of the Board of Directors of the Corporation.  It is understood that these duties shall be substantially the same as those of an executive vice president of snacks of a similar business corporation engaged in a similar enterprise.  Sands is hereby vested with authority to act on behalf of the Corporation in keeping with policies adopted by the Board of Directors, as amended from time to time.  Sands shall report to the President and Chief Executive Officer (hereinafter the “Chief Executive Officer”) and the Board of Directors.

 

3.                                      Services to Subsidiaries or Other Affiliates. The Corporation and Sands understand and agree that if and when the Corporation so directs, Sands shall also provide services to any subsidiary or other Affiliate (as defined below) by virtue of his employment under this Agreement.  If so directed, Sands agrees to serve as Executive Vice President of Snacks of such subsidiary or other Affiliate of the Corporation, as a condition of his employment under this Agreement, and upon the termination of his employment under this Agreement, Sands shall no longer provide such services to the subsidiary or other Affiliate. The parties recognize and agree that Sands shall perform such services as part of his overall professional services to the Corporation but that in certain circumstances approved by the Corporation he may receive additional compensation from such subsidiary or other Affiliate.  For purposes of this Agreement, an “Affiliate” is any corporation or other entity that is controlled by, controlling or under common control with the Corporation. “Control” means the direct or indirect beneficial ownership of at least fifty (50%) percent interest in the income of such corporation or entity, or the power to elect at least fifty (50%) percent of the directors of such corporation or entity, or such other relationship which in fact constitutes actual control.

 

 

4.                                      Term of Agreement. The initial term of Sands’ employment under this Agreement shall commence on the Effective Date and end on December 31, 2014; provided that unless notice of termination has been provided in accordance with Paragraph 7(a) at least sixty (60) days prior to the expiration of the initial term or any additional twelve (12) month term (as provided below), or unless this Agreement is otherwise terminated in accordance with the terms of this Agreement, this Agreement shall automatically be extended for additional twelve (12) month periods (the “Term”).

 

5.                                      Base Compensation. During the Term, in consideration for the services as Executive Vice President of Snacks required under this Agreement, the Corporation agrees to pay Sands an annual base salary of Three Hundred Fifty Thousand Dollars ($350,000), or such higher figure as may be determined at an annual review of his performance and compensation by the Compensation Committee of the Board of Directors.  The annual review of Sands’ base salary shall be conducted by the Compensation Committee of the Board of Directors within a reasonable time after the end of each fiscal year of the Corporation and any increase shall be retroactive to January 1st of the then current Agreement year.  The amount of annual base salary shall be payable in equal installments consistent with the Corporation’s payroll payment schedule for other executive employees of the Corporation. Sands may choose to select a portion of his compensation to be paid as deferred income through qualified plans or other programs consistent with the policy of the Corporation and subject to any and all applicable federal, state or local laws, rules or regulations.

 

6.                                      Other Compensation and Benefits. During the Term, in addition to his base salary, the Corporation shall provide Sands the following:

 

(a)                                 Incentive Compensation. Sands shall participate in the Company’s annual bonus plan (the “Annual Bonus Plan”), as shall be adopted and/or modified from time to time by the Board of Directors or the Compensation Committee.  Annual Bonus Plan awards are calculated as a percentage of Sands’ base salary on the last day of the Annual Bonus Plan performance period.  The percentages of base salary that Sands is currently eligible to receive in accordance with the Annual Bonus Plan based on performance range from 0% at “Threshold” to 35% to 60% at “Target” and to 70% at “Maximum,” as such terms are defined in the Annual Bonus Plan.  Annual Bonus Plan awards are payable no later than the 15th day of the third month following the end of each fiscal year of the Corporation.  In addition, Sands shall be eligible to participate in all other incentive compensation plans, if any, that may be adopted by the Corporation from time to time and with respect to which the other executive employees of the Corporation are eligible to participate.

 

(b)                                 Vacation. Sands shall be entitled to four (4) weeks of compensated vacation time during each year, to be taken at times mutually agreed upon between him and the Chief Executive Officer of the Corporation.  Vacation accrual shall be limited to the amount stated in the Corporation’s policies currently in effect, as amended from time to time.

 

(c)                                  Sick Leave and Disability. Sands shall be entitled to participate in such compensated sick leave and disability benefit programs as are offered to the Corporation’s other executive employees.

 

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(d)                                 Medical and Dental Insurance. Sands, his spouse, and his dependents, shall be entitled to participate in such medical and dental insurance programs as are provided to the Corporation’s other executive employees.

 

(e)                                  Executive Benefits And Perquisites. Sands shall be entitled to receive all other executive benefits and perquisites to which all other executive employees of the Corporation are entitled.

 

(f)                                   Automobile and Cellular Phone.  The Corporation agrees to provide Sands with a monthly automobile allowance of $833.33 and to provide for the use by Sands of a cellular telephone at the Corporation’s expense.

 

(g)                                  Liability Insurance. The Corporation agrees to insure Sands under the appropriate liability insurance policies, in accordance with the Corporation’s policies and procedures, for all acts done by him within the scope of his authority in good faith as Executive Vice President of Snacks throughout the Term.

 

(h)                                 Professional Meetings and Conferences. Sands will be permitted to be absent from the Corporation’s facilities during working days to attend professional meetings and to attend to such outside professional duties as have been mutually agreed upon between him and the Chief Executive Officer of the Corporation.  Attendance at such approved meetings and accomplishment of approved professional duties shall be fully compensated service time and shall not be considered vacation time. The Corporation shall reimburse Sands for all reasonable expenses incurred by him incident to attendance at approved professional meetings, and such reasonable entertainment expenses incurred by Sands in furtherance of the Corporation’s interests; provided, however, that such reimbursement is approved by the Chief Executive Officer of the Corporation.

 

(i)                                     Professional Dues. The Corporation agrees to pay dues and expenses to professional associations and societies and to such community and service organizations of which Sands is a member provided such dues and expenses are approved by the Chief Executive Officer as being in the best interests of the Corporation.

 

(j)                                    Life Insurance. The Corporation shall provide Sands with life insurance coverage on the same terms as such coverage is provided to all other executive employees of the Corporation.

 

(k)                                 Business Expenses. The Corporation shall reimburse Sands for reasonable expenses incurred by him in connection with the conduct of business of the Corporation and its subsidiaries or other Affiliates.

 

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7.                                      Termination Without Cause.

 

(a)                                 By the Corporation. The Corporation may, in its discretion, terminate Sands’ employment hereunder without cause at any time upon sixty (60) days prior written notice or at such later time as may be specified in said notice.  Except as otherwise provided in this Agreement, after such termination, all rights, duties and obligations of both parties shall cease.

 

(i)                                     Upon the termination of employment pursuant to subparagraph (a) above, subject to the terms in subparagraph (ii) and Paragraph 9 below and the requirements of Paragraph 10 below, in addition to all accrued and vested benefits payable under the Corporation’s employment and benefit policies, including, but not limited to, unpaid Annual Bonus Awards and any other incentive compensation awards earned under the Annual Bonus Plan or any other incentive compensation plan for any completed performance periods, Sands shall be provided with the following Salary Continuation and Other Benefits (as defined below) for the duration of the Severance Period (as defined below):  (1) salary continuation payments for each year of the Severance Period in an amount per year equal to 135% of his then current annual base salary (“Salary Continuation”), which Salary Continuation shall be paid in the same manner and pursuant to the same payroll procedures that were in effect prior to the effective date of termination commencing on the Corporation’s first payroll date following the Termination Date; (2) continuation of medical, dental, life insurance and disability insurance for him, his spouse and his dependents, during the Severance Period, as in effect on the effective date of termination (“Other Benefits”), or if the continuation of all or any of the Other Benefits is not available because of his status as a terminated employee, a payment equal to the market value of such excluded Other Benefits; (3) if allowable under the Corporation’s qualified pension plan in effect on the date of termination, credit for additional years of service during the Severance Period; and (4) outplacement services of an independent third party, mutually satisfactory to both parties, until the earlier of one year after the effective date of termination, or until he obtains new employment; the cost for such service will be paid in full by the Corporation.  For purposes of this Agreement (except for Paragraph 9 below), the “Severance Period” shall mean the period from the date of termination of employment to the first (1st) anniversary of the date of such termination.

 

(ii)                                  Subject to Paragraph 10 below, in the event Sands accepts other employment during the Severance Period, the Corporation shall continue the Salary Continuation in force until the end of the Severance Period.  All Other Benefits described in subparagraph (i)(2) and the benefit set forth in (i)(3), other than all accrued and vested benefits payable under the Corporation’s employment and benefit policies, shall cease.

 

(iii)                               Sands shall not be required to seek or accept any other employment. Rather, the election of whether to seek or accept other employment shall be solely within Sands’ discretion. If during the Severance Period Sands is receiving all or any part of the benefits set forth in subparagraph (i) above and he should die, then Salary Continuation remaining during the Severance Period shall be paid fully and completely to his spouse or such individual designated by him or if no such person is designated to his estate.

 

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(b)                                 Release. The obligation of the Corporation to provide the Salary Continuation and Other Benefits described in subparagraph (a) above is contingent upon and subject to the execution and delivery by Sands of a general release, in form and substance satisfactory to Sands and the Corporation.  The Corporation will provide Sands with a copy of a general release satisfactory to the Corporation simultaneously with or as soon as administratively practicable following the delivery of the notice of termination provided in Paragraph 7(a), or at or as soon as administratively practicable following the expiration of the Corporation’s right to cure provided in Paragraph 7(d) or Paragraph 9, but not later than twenty-one (21) days before the date payments are required to be begin under Paragraph 7(a).  Sands shall deliver the executed release to the Corporation eight days before the date payments are required to begin under Paragraph 7(a).

 

Without limiting the foregoing, such general release shall provide that for and in consideration of the above Salary Continuation and Other Benefits, Sands releases and gives up any and all claims and rights ensuing from his employment and termination with the Corporation, which he may have against the Corporation, a subsidiary or other Affiliate, their respective trustees, officers, managers, employees and agents, arising from or related to his employment and/or termination.  This releases all claims, whether based upon federal, state, local or common law, rules or regulations.  Such release shall survive the termination or expiration of this Agreement.

 

(c)                                  Voluntary Termination.  Should Sands in his discretion elect to terminate this Agreement, he shall give the Corporation at least sixty (60) days prior written notice of his decision to terminate. Except as otherwise provided in this Agreement, at the end of the sixty (60) day notice period, all rights, duties and obligations of both parties to the Agreement shall cease, except for any and all accrued and vested benefits under the Corporation’s existing employment and benefit policies, including but not limited to, unpaid incentive compensation awards earned under the Annual Bonus Plan or any other incentive compensation plan for any completed performance periods. At any time during the sixty (60) day notice period, the Corporation may pay Sands for the compensation owed for said notice period and in any such event Sands’ employment termination shall be effective as of the date of the payment.

 

(d)                                 Alteration of Duties.  If the Board of Directors or the Chief Executive Officer of the Corporation, in either of their sole discretion, takes action which substantially changes or alters Sands’ authority or duties so as to effectively prevent him from performing the duties of the Executive Vice President of Snacks as defined in this Agreement, or requires that his office be located at and/or principal duties be performed at a location more than forty-five (45) miles from the present Corporation office located in Parsippany, New Jersey, then Sands may, at his option and upon written notice to the Board of Directors within thirty (30) days after the Board’s or Chief Executive Officer’s action, consider himself terminated without cause and entitled to the benefits set forth in Paragraph 7(a), unless within thirty (30) days after delivery of such notice, Sands’ duties have been restored.

 

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(e)                                  Disability.

 

(i)                                     The Corporation, in its sole discretion, may terminate Sands’ employment upon his Total Disability. In the event he is terminated pursuant to this subparagraph, he shall be entitled to the benefits set forth in Paragraph 7(a), provided however, that the annual base salary component of Salary Continuation shall be reduced by any amounts paid to Sands under any disability benefits plan or insurance policy. For purposes of this Agreement, the term “Total Disability” shall mean death or any physical or mental condition which prevents Sands from performing his duties under this contract for at least four (4) consecutive months. The determination of whether or not a physical or mental condition would prevent Sands from the performance of his duties shall be made by the Board of Directors in its discretion. If requested by the Board of Directors, Sands shall submit to a mental or physical examination by an independent physician selected by the Corporation and reasonably acceptable to him to assist the Board of Directors in its determination, and his acceptance of such physician shall not be unreasonably withheld or delayed.  Failure to comply with this request shall prevent him from challenging the Board’s determination.

 

(f)                                   Retirement. The Corporation, in its sole discretion, may establish a retirement policy for its executive employees, including Sands, which includes the age for mandatory retirement from employment with the Corporation. Upon the termination of employment pursuant to such retirement policy, all rights and obligations under this Agreement shall cease, except that Sands shall be entitled to any and all accrued and vested benefits under the Corporation’s existing employment and benefits policies, including but not limited to unpaid incentive compensation awards earned under the Annual Bonus Plan or any other incentive compensation plan for any completed performance periods.

 

(g)                                  Other Payments.  If Sands is liable for the payment of any excise tax (the “Excise Tax”) pursuant to section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), or any successor or like provision, with respect to any payment or property transfers received or to be received under this Agreement or otherwise, the Corporation shall pay Sands an amount (the “Special Reimbursement”) which, after payment of any federal, state and local taxes, including any further excise tax under Code section 4999, with respect to or resulting from the Special Reimbursement, would place Sands in the same economic position that he would have enjoyed if the Excise Tax had not applied to such payments.  The Special Reimbursement shall be paid as soon as practicable following final determination of the amount of the Excise Tax, but in no event later than the last day of Sands’ taxable year following the taxable year for which the Excise Tax is due.

 

8.                                      Termination for Cause. Sands’ employment under this Agreement may be terminated by the Corporation, immediately upon written notice in the event and only in the event of the following conduct:  conviction of a felony or any other crime involving moral turpitude, whether or not relating to Sands’ employment; habitual unexcused absence from the facilities of the Corporation; habitual substance abuse; willful disclosure of material confidential information of the Corporation and/or its subsidiaries or other Affiliates; intentional violation of conflicts of interest policies established by the Board of Directors; wanton or willful failure to comply with the lawful written directions of the Board or other superiors; and willful misconduct

 

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or gross negligence that results in damage to the interests of the Corporation and its subsidiaries or other Affiliates. Should any of these situations occur, the Board of Directors and/or the Chief Executive Officer will provide Sands written notice specifying the effective date of such termination. Upon the effective date of such termination, any and all payments and benefits due Sands under this Agreement shall cease except for any accrued and vested benefits payable under the Corporation’s employment and benefit policies, including any unpaid amounts owed under the Annual Bonus Plan or any other incentive compensation plan.

 

9.                                      Major Transaction. If, during the Term, the Corporation consummates a Major Transaction and Sands is not the Executive Vice President of Snacks with duties and responsibilities substantially equivalent to those described herein and/or is not entitled to substantially the same benefits as set forth in this Agreement, then Sands shall have the right to terminate his employment under this Agreement and shall be entitled to the benefits set forth in Paragraph 7(a), except that the Severance Period shall mean the period from the date of termination of employment to the second (2nd) anniversary of the date of such termination.  Sands shall provide the Corporation with written notice of his desire to terminate his employment under this Agreement pursuant to this Paragraph within ninety (90) days of the effective date of the Major Transaction and the Severance Period shall commence as of the effective date of the termination of this Agreement, provided the Corporation has not corrected the basis for such notice within thirty (30) days after delivery of such notice and further provided that the effective date of termination of this Agreement shall not be more than one year following the effective date of the Major Transaction.  For purposes of this Paragraph, “Major Transaction” shall mean the sale of all or substantially all of the assets of the Corporation, or a merger, consolidation, sale of stock or similar transaction or series of related transactions whereby a third party (including a “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) acquires beneficial ownership, directly or indirectly, of securities of the Corporation representing over fifty percent (50%) of the combined voting power of the Corporation; provided, however, that a Major Transaction shall not in any event include a direct or indirect public offering of securities of the Corporation, its parent or other Affiliates.

 

10.                               Non-Competition.  Sands agrees that during (i) the Term; (ii) the one (1) year period following the effective date of termination of this Agreement by Sands pursuant to Paragraph 7(c) (Voluntary Termination); and (iii) the one (1) year period following the effective date of termination by the Corporation pursuant to Paragraph 8 (Termination For Cause), he shall not, directly or indirectly, be employed or otherwise engaged to provide services to any food manufacturer operating in the United States of America which is directly competitive with any significant activities conducted by the Corporation or its subsidiaries or other Affiliates whose principal business operations are in the United States of America.  Sands agrees that his entitlement to the benefits set forth in Paragraph 7(a) above is contingent upon his compliance with the requirements of this Paragraph.

 

11.                               Confidentiality of Information. Sands recognizes and acknowledges that during his employment by the Corporation, he will acquire certain proprietary and confidential information relating to the business of the Corporation and its subsidiaries or other Affiliates (the “Information”). Sands agrees that during the term of his employment under this Agreement and thereafter, for any reason whatsoever, he shall not, directly or indirectly, except in the proper

 

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course of exercising his duties under this Agreement, use for his or another third party’s benefit, disclose, furnish, or make available to any person, association or entity, the Information. In the event of a breach or threatened breach by Sands of the provisions of this Paragraph, the Corporation shall be entitled to an injunction restraining him from violating the provisions of this Paragraph. Notwithstanding the foregoing, nothing contained herein shall be construed as prohibiting the Corporation from pursuing any other remedies available to it for such breach or threatened breach. For purposes of this Paragraph, “Information” includes any and all verbal or written materials, documents, information, products, recipes, formulas, processes, technologies, programs, trade secrets, customer lists or other data relating to the business, and operations of the Corporation and/or its subsidiaries or other Affiliates.

 

12.                               Superseding Agreement. This Agreement constitutes the entire agreement between the parties and contains all the agreements between them with respect to the subject matter hereof. It also supersedes any and all other agreements or contracts, either oral or written, between the parties with respect to the subject matter hereof.

 

13.                               Agreement Amendments.  Except as otherwise specifically provided, the terms and conditions of this Agreement may be amended at any time by mutual agreement of the parties, provided that before any amendment shall be valid or effective, it shall have been reduced to writing, approved by the Board of Directors or the Compensation Committee of the Board of Directors, and signed by the Chairman of the Board of Directors, the Chairman of the Compensation Committee, the Chief Executive Officer or any officer of the Corporation authorized to do so by the Board of Directors or the Compensation Committee, and Sands.

 

14.                               Invalidity or Unenforceability Provision.  The invalidity or unenforceability of any particular provision of this Agreement shall not affect its other provisions and this Agreement shall be construed in all aspects as if such invalid or unenforceable provision had been omitted.

 

15.                               Binding Agreement; Assignment. This Agreement shall be binding upon and inure to the benefit of the Corporation and Sands, their respective successors and permitted assigns. The parties recognize and acknowledge that this Agreement is a contract for the personal services of Sands and that this Agreement may not be assigned by him nor may the services required of him hereunder be performed by any other person without the prior written consent of the Corporation.

 

16.                               Governing Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties shall be construed and enforced under and in accordance with the laws of the State of New Jersey, without regard to conflicts of law principles.  Anything in this Agreement to the contrary notwithstanding, the terms of this Agreement shall be interpreted and applied in a manner consistent with the requirements of Code section 409A so as not to subject Sands to the payment of any tax penalty or interest under such section.

 

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17.                               Enforcing Compliance. If Sands needs to retain legal counsel to enforce any of the terms of this Agreement either as a result of noncompliance by the Corporation or a legitimate dispute as to the provisions of the Agreement, then any fees incurred in such expense by Sands shall be reimbursed wholly and completely by the Corporation if Sands prevails in such legal proceedings.

 

18.                               Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed effective when delivered, if delivered in person, or upon receipt if mailed by overnight courier or by certified or registered mail, postage prepaid, return receipt requested, to the parties at the addresses set forth below, or at such other addresses as the parties may designate by like written notice:

 

	
To   the Corporation at:
    	
 
    	
B&G   Foods, Inc
    
	
 
    	
 
    	
Four   Gatehall Drive, Suite 110
    
	
 
    	
 
    	
Parsippany,   NJ 07054
    
	
 
    	
 
    	
Attn:   General Counsel
    
	
 
    	
 
    	
 
    
	
To   Sands at:
    	
 
    	
his   then current address included in the employment records of the Corporation
    

 

19.                               Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement.  A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

20.                               Other Terms Relating to Code Section 409A.  Sands’ right to Salary Continuation, right to Other Benefits, and right to reimbursements under this Agreement each shall be treated as a right to a series of separate payments under Treasury Regulation section 1.409A-2(b)(2)(iii).

 

(a)                                 Reimbursements.  Any reimbursements made or in-kind benefits provided under this Agreement shall be subject to the following conditions:

 

(i)                                     The reimbursement of any expense shall be made not later than the last day of Sands’ taxable year following Sands’ taxable year in which the expense was incurred (unless this Agreement specifically provides for reimbursement by an earlier date).  The right to reimbursement of an expense or payment of an in-kind benefit shall not be subject to liquidation or exchange for another benefit.

 

(ii)                                  Any reimbursement made under Paragraph 7(a)(i)(2), 7(d), 7(e) or 9 for expenses for medical coverage purchased by Sands, if made during the period of time Sands would be entitled (or would, but for such reimbursement, be entitled) to continuation coverage under the Corporation’s medical insurance plan pursuant to COBRA if Sands had elected such coverage and paid the applicable premiums, shall be exempt from Code section 409A and the six-month delay in payment described below pursuant to Treasury Regulation section 1.409A-1(b)(9)(v)(B).

 

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(iii)                               Any reimbursement or payment made under Paragraph 7(a)(i)(2), 7(d), 7(e) or 9 for reasonable expenses for outplacement services for Sands shall be exempt from Code section 409A and the six-month delay in payment described below pursuant to Treasury Regulation section 1.409A-1(b)(9)(v)(A).

 

(b)                                 Short-Term Deferrals.  It is intended that payments made under this Agreement due to Sands’ termination of employment that are not otherwise subject to Code section 409A, and which are paid on or before the 15th day of the third month following the end of Sands’ taxable year in which his termination of employment occurs, shall be exempt from compliance with Code section 409A pursuant to the exemption for short-term deferrals set forth in Treasury Regulation section 1.409A-1(b)(4).

 

(c)                                  Separation Pay Upon Involuntary Termination of Employment.  It is intended that payments made under this Agreement due to Sands’ involuntary termination of employment under Paragraph 7(a)(i)(2), 7(d), 7(e) or 9 that are not otherwise exempt from compliance with Code section 409A, and which are separation pay described in Treasury Regulation section 1.409A-1(b)(9)(iii), shall be exempt from compliance with Code section 409A to the extent that the aggregate amount does not exceed two times the lesser of (i) Sands’ annualized compensation for his taxable year preceding the taxable year in which his termination of employment occurs and (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Code section 401(a)(17) for the year in which the termination of employment occurs.

 

(d)                                 Six-Month Delay.  Anything in this Agreement to the contrary notwithstanding, payments to be made under this Agreement upon termination of Sands’ employment that are subject to Code section 409A (“Covered Payment”) shall be delayed for six months following such termination of employment if Sands is a “specified employee” on the date of his termination of employment.  Any Covered Payment due within such six-month period shall be delayed to the end of such six-month period.  The Corporation will increase the Covered Payment to include interest payable on such Covered Payment at the interest rate described below from the date of Sands’ termination of employment to the date of payment.  The interest rate shall be determined as of the date of Sands’ termination of employment and shall be the rate of interest then most recently published in The Wall Street Journal as the “prime rate” at large U.S. money center banks.  The Corporation will pay the adjusted Covered Payment at the beginning of the seventh month following Sands’ termination of employment. Notwithstanding the foregoing, if calculation of the amounts payable by any payment date specified in this subsection is not administratively practicable due to events beyond the control of Sands (or Sands’ beneficiary or estate) and for reasons that are commercially reasonable, payment will be made as soon as administratively practicable in compliance with Code section 409A and the Treasury Regulations thereunder.  In the event of Sands’ death during such six-month period, payment will be made or begin, as the case may be with respect to a particular payment, in the payroll period next following the payroll period in which Sands’ death occurs.

 

For purposes of this Agreement, “specified employee” means an employee of the Corporation who satisfies the requirements for being designated a “key employee” under Code section 416(i)(1)(A)(i), (ii) or (iii), without regard to Code section 416(i)(5), at any time during a

 

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calendar year, in which case such employee shall be considered a specified employee for the twelve-month period beginning on the next succeeding April 1.

 

[Signatures on Next Page]

 

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IN WITNESS WHEREOF, the Corporation and Sands have executed this Agreement as of the day and year first above written.

 

	
 
    	
B&G   FOODS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   David L. Wenner
    
	
 
    	
 
    	
Name:   David L. Wenner
    
	
 
    	
 
    	
Title:   President and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
MICHAEL   SANDS
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Michael Sands
    

 

12Exhibit 4.1 

 

Form of

SENIOR CONVERTIBLE
NOTE

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 TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE
TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE 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. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE
TERMS OF THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 17(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY,
THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii)
OF THIS NOTE.

Guided
Therapeutics, Inc.

Senior
Convertible Note

	Issuance Date:  [___________]	Original Principal Amount: U.S. [__________]

 

FOR VALUE RECEIVED,
Guided Therapeutics, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order
of HANOVER HOLDINGS I, LLC or its registered assigns (“Holder”) the amount set out above as the Original
Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”)
when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance
with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal (as defined below)
(as such interest on any outstanding Principal may be reduced pursuant to the terms hereof pursuant to redemption, conversion or
otherwise) at the applicable Interest Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance
Date”) until the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption
or otherwise (in each case in accordance with the terms hereof). This Senior Convertible Note (this “Note”,
including all Senior Convertible Notes issued in exchange, transfer or replacement hereof, collectively, the “Notes”)
is one of a series of Senior Convertible Notes issued pursuant to the pursuant to the Securities Purchase Agreement (as defined
below) either on the Initial Closing Date (as defined below) or, if applicable, on the Additional Closing Date (as defined below)
(collectively, the “Notes” and such other Senior Convertible Notes, the “Other
Notes”). Certain capitalized terms used herein

    	1

    	 

    

are defined in Section 28.

1.                 
PAYMENTS OF PRINCIPAL. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all
outstanding Principal, accrued and unpaid Interest and accrued and unpaid Late Charges (as defined in Section 23(c)) on such Principal
and Interest (as adjusted with respect to any Note Reduction (as defined in Section 12)). Other than as specifically permitted
by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
Late Charges on Principal and Interest, if any.

2.                 
INTEREST; INTEREST RATE.

(a)               
Interest on this Note shall commence accruing on the Issuance Date and shall be computed on the basis of a 360-day year
and twelve 30-day months and shall be payable in cash on the Maturity Date or any applicable Redemption Date, subject to adjustment
with respect to any Note Reduction.

(b)              
Prior to the payment of Interest on the Maturity Date or any applicable Redemption Date, Interest on this Note shall accrue
at the Interest Rate and be payable by way of inclusion of the Interest in the Conversion Amount on each Conversion Date
in accordance with Section 3(b)(i). From and after the occurrence and during the continuance of any Event of Default, the Interest
Rate shall automatically be increased to sixteen percent (16.0%) per annum (the “Default Rate”). In the
event that such Event of Default is subsequently cured, the adjustment referred to in the preceding sentence shall cease to be
effective as of the calendar day immediately following the date of such cure; provided that the Interest as calculated and unpaid
at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days
after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.

3.                 
CONVERSION OF NOTES. This Note shall be convertible into validly issued, fully paid and non-assessable shares of
Common Stock (as defined below), on the terms and conditions set forth in this Section 3.

(a)                Conversion
Right. Subject to the provisions of Section 3(d), at any time or times on or after [INSERT IN INITIAL NOTES ONLY the
earlier to occur of (x) the date that the Initial Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the SEC and (y) October 23, 2014] [INSERT IN ADDITIONAL NOTES the Issuance Date], the Holder shall be
entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into validly issued, fully
paid and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below).
The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the
issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the
nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable with
respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

    	2

    	 

    

(b)              
 Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant
to Section 3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion
Rate”).

(i)                
“Conversion Amount” means the portion of the Principal to be converted, redeemed or otherwise
with respect to which this determination is being made, plus all accrued and unpaid Interest with respect to such portion of the
Principal amount and accrued and unpaid Late Charges with respect to such portion of such Principal and such Interest.

(ii)              
“Conversion Price” means, for any date of determination, the lesser of (A) the product of (x)
the lowest VWAP of the Common Stock during the five (5) consecutive Trading Days ending and including the Trading Day immediately
preceding the applicable Conversion Date (the “Variable Conversion Base Price”) and (y) the applicable
Variable Percentage, and (B) $0.55 (as adjusted for stock splits, stock dividends, stock combinations or other similar transactions).
All such determinations to be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction
during any such measuring period.

(iii)            
“Variable Percentage” means, for any date of determination, (A) if such date of determination is on or
prior to December 19, 2014, twenty percent (20%) or (y) if such date of determination is after December 19, 2014, twenty-five percent
(25%).

(c)               
Mechanics of Conversion.

(i)                
Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion
Date”), the Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New
York time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion
Notice”) to the Company. If required by Section 3(c)(iii), the Holder shall surrender this Note to a nationally recognized
overnight delivery service for delivery to the Company (or an indemnification undertaking with respect to this Note in the case
of its loss, theft or destruction as contemplated by Section 17(b)). On or before the first (1st) Trading Day following
the date of receipt of a Conversion Notice, the Company shall transmit by facsimile an acknowledgment of confirmation, in the form
attached hereto as Exhibit II, of receipt of such Conversion Notice to the Holder and the Company’s transfer agent
(the “Transfer Agent”) . On or before the second (2nd) Trading Day following the date of receipt
of a Conversion Notice, the Company shall (1) provided that the Transfer Agent is participating in The Depository Trust Company’s
(“DTC”) Fast Automated Securities Transfer Program and such shares of Common Stock may be issued without
restrictive legend in accordance with Section 4.4 of the Securities Purchase Agreement, credit such aggregate number of shares
of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through
its Deposit/Withdrawal at Custodian system or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program or such

    	3

    	 

    

shares of Common Stock may not
be issued without restrictive legend in accordance with Section 4.4 of the Securities Purchase Agreement, issue and deliver (via
reputable overnight courier) to the address as specified in the Conversion Notice, a certificate, registered in the name of the
Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled. If this Note is physically
surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note is greater than the Principal
portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three
(3) Trading Days after receipt of this Note and at its own expense, issue and deliver to the Holder (or its designee) a new Note
(in accordance with Section 17(d)) representing the outstanding Principal not converted. The Person or Persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date.

(ii)              
Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to
the Holder within three (3) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise)
(the “Share Delivery Deadline”), a certificate for the number of shares of Common Stock to which the
Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s
or its designee’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon
the Holder’s conversion of any Conversion Amount (as the case may be) (a “Conversion Failure”)
then, in addition to all other remedies available to the Holder, (1) the Company shall pay in cash to the Holder on each day after
such Share Delivery Deadline that the issuance of such shares of Common Stock is not timely effected an amount equal to 2% of the
product of (A) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder
is entitled multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last possible
date which the Company could have issued such shares of Common Stock to the Holder without violating Section 3(c)(i) and (2) the
Holder, upon written notice to the Company delivered at any time after the earlier of (x) twenty (20) Trading Days after the Conversion
Date or (y) any date on or after the Conversion Date that an Event of Default (other than an Event of Default under Section 4(a)(xii)
below) has occurred or is continuing (each, a “Voidable Notice Eligibility Date”), may void its Conversion Notice
with respect to, and retain or have returned (as the case may be) any portion of this Note that has not been converted pursuant
to such Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to
make any payments which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition
to the foregoing, if on or prior to the Share Delivery Deadline, the Company shall fail to issue and deliver a certificate to the
Holder and register such shares of Common Stock on the Company’s share register or credit the Holder’s or its designee’s
balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion
hereunder (as the case may be), and if on or after such Share Delivery Deadline the Holder purchases (in an open market transaction
or otherwise)

    	4

    	 

    

shares of Common Stock to deliver
in satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of
shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such conversion that
the Holder so anticipated receiving from the Company, then, in addition to all other remedies available to the Holder, the Company
shall, within three (3) Business Days after receipt of the Holder’s written request and in the Holder’s discretion,
either: (I) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions
and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (including, without limitation, by any other
Person in respect, or on behalf, of the Holder) (the “Buy-In Price”), at which point the Company’s
obligation to so issue and deliver such certificate or credit the Holder’s balance account with DTC for the number of shares
of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) (and to issue
such shares of Common Stock) shall terminate, the Conversion Failure shall be deemed cured, and the outstanding Principal shall
be adjusted to reflect the conversion, or (II) solely if on or after the third (3rd) Trading Day following the Share
Delivery Deadline, promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (x) such number of shares of Common Stock multiplied by (y)
the lowest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable
Conversion Notice and ending on the date of such issuance and payment under this clause (II), at which point the Covnersion Failure
shall be deemd cured, and the outsanding Principal shall be adjusted to reflect the conversion (the remedies set forth in clauses
(I) and (II), collectively, the “Buy-In Remedies”). Notwithstanding the foregoing, to the extent the
Holder voids the applicable Conversion Notice on or after the applicable Voidable Notice Eligibility Date and if on or after such
Share Delivery Deadline the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of shares
of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such conversion that the Holder
so anticipated receiving from the Company prior to voiding such Conversion Notice and the Company has not satisfied any of the
Buy-In Remedies with respect to such Conversion Notice, then, in addition to all other remedies available to the Holder, but in
lieu of the Company’s obligation to satisfy the Buy-In Remedies above with respect to such Conversion Notice, the Company
shall, within three (3) Business Days after receipt of the Holder’s written request, pay cash to the Holder in an amount
equal to the difference of (x) Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses,
if any) for the shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf,
of the Holder), less (y) the Conversion Amount with respect to such Conversion Notice.

    	5

    	 

    

(iii)            
 Book-Entry. Notwithstanding anything to the contrary set forth in this Section 3, following conversion of any
portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to
the Company unless (A) the full Conversion Amount represented by this Note is being converted (in which event this Note shall be
delivered to the Company following conversion thereof as contemplated by Section 3(c)(i)) or (B) the Holder has provided the Company
with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical
surrender of this Note or (C) no more than once in any six month period, the Company elects to issue a New Note pursuant to Section
17(d). The Holder and the Company shall maintain records showing the Principal, Interest and Late Charges converted and/or paid
and/or adjusted (as the case may be) and the dates of such conversions and/or payments and/or adjustments (as the case may be)
or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender
of this Note upon conversion.

(iv)            
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 Company shall issue to the Holder the number of shares of Common Stock
not in dispute and resolve such dispute in accordance with Section 22.

(d)              
Limitations on Conversions. Notwithstanding anything to the contrary contained in this Note, this Note shall not
be convertible by the Holder hereof, and the Company shall not effect any conversion of this Note or otherwise issue any shares
of Common Stock pursuant hereto, to the extent (but only to the extent) that after giving effect to such conversion or other share
issuance hereunder the Holder (together with its affiliates) would beneficially own in excess of 9.99% (the “Maximum
Percentage”) of the Common Stock. To the extent the above limitation applies, the determination of whether this
Note shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by the Holder or any
of its affiliates) and of which such securities shall be convertible, exercisable or exchangeable (as among all such securities
owned by the Holder and its affiliates) shall, subject to such Maximum Percentage limitation, be determined on the basis of the
first submission to the Company for conversion, exercise or exchange (as the case may be). No prior inability to convert this Note,
or to issue shares of Common Stock, pursuant to this paragraph shall have any effect on the applicability of the provisions of
this paragraph with respect to any subsequent determination of convertibility. For purposes of this paragraph, beneficial ownership
and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall
be determined in accordance with Section 13(d) of the 1934 Act (as defined in the Securities Purchase Agreement) and the rules
and regulations promulgated thereunder. The provisions of this paragraph shall be implemented in a manner otherwise than in strict
conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent
with the intended Maximum Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary
or desirable to properly give effect to such Maximum Percentage limitation. The limitations contained in this paragraph shall apply
to a successor Holder of this Note. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Company
may not waive this paragraph

    	6

    	 

    

without the consent of holders of a
majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company shall within
one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding, including
by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including, without limitation,
pursuant to this Note or securities issued pursuant to the Securities Purchase Agreement.

4.                 
RIGHTS UPON EVENT OF DEFAULT.

(a)               
Event of Default. Each of the following events shall constitute an “Event of Default”:

(i)                
the suspension from trading or the failure of the Common Stock to be trading or listed (as applicable) on an Eligible Market
for a period of ten (10) consecutive days or for more than an aggregate of thirty (30) days in any 365-day period;

(ii)              
the Company’s or any Subsidiary’s (as defined in the Securities Purchase Agreement) failure to pay to the Holder
any amount of Principal, Interest, Late Charges or other amounts when and as due under this Note (including, without limitation,
the Company’s or any Subsidiary’s failure to pay any redemption payments or amounts hereunder) or any other Transaction
Document (as defined in the Securities Purchase Agreement) or any other agreement, document, certificate or other instrument delivered
in connection with the transactions contemplated hereby and thereby, except, in the case of a failure to pay Interest and Late
Charges when and as due, in which case only if such failure remains uncured for a period of at least five (5) days;

(iii)            
the occurrence of any default under, redemption of or acceleration prior to maturity of an aggregate of any Indebtedness
(as defined in the Securities Purchase Agreement) of the Company or any of its Subsidiaries;

(iv)            
bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be
instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party,
shall not be dismissed within sixty (60) days of their initiation;

(v)              
the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state
or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company
or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the
consent by it to the filing of such

    	7

    	 

    

petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors,
or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the
admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the
Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial
Code foreclosure sale or any other similar action under federal, state or foreign law;

(vi)            
the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary
of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization
or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt
or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition
of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order,
judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation
of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order,
judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days;

(vii)          
a final judgment or judgments for the payment of money aggregating in excess of $300,000 are rendered against the Company
and/or any of its Subsidiaries and which judgments are not, within forty-five (45) days after the entry thereof, bonded, discharged
or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, any
judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $300,000
amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which
written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within
thirty (30) days of the issuance of such judgment;

(viii)        
the Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay, when due, or within any applicable
grace period, any payment with respect to any Indebtedness in excess of $300,000 due to any third party (other than, with respect
to unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary (as the case may be) in good faith by
proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof in accordance with GAAP)
or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess of $300,000, which

    	8

    	 

    

breach or violation permits the
other party thereto to declare a default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist any other circumstance
or event that would, with or without the passage of time or the giving of notice, result in a default or event of default under
any agreement binding the Company or any Subsidiary, which default or event of default would or is likely to have a material adverse
effect on the business, assets, operations (including results thereof), liabilities, properties, condition (including financial
condition) or prospects of the Company or any of its Subsidiaries, individually or in the aggregate;

(ix)            
any breach or failure in any respect by the Company or any Subsidiary to comply with any provision of Section 13 of this
Note;

(x)              
other than as specifically set forth in another clause of this Section 4(a), the Company
or any of its Subsidiaries breaches any representation or warranty in any material respect (except with respect to any representation
or warranty qualified by material or material adverse effect, in any respect) or breaches in any material respect any covenant
or other term or condition of any Transaction Document, except, in the case of a breach of a covenant or other term or condition
of any Transaction Document which is curable, only if such breach continues for a period of at least an aggregate of five (5) consecutive
Trading Days after the earlier of (A) the date the Company initially becomes aware of such breach and (B) the earliest date the
Company should have become aware of such breach (or a Person in a smilar business to the Company exercising due prudence would
reasonably be expected to become aware of such breach);

(xi)            
any Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes;

(xii)          
the Company's (A) failure to cure a Conversion Failure by delivery of the required number of shares of Common Stock within
ten (10) Trading Days after the applicable Conversion Date or (B) written notice or public announcement, at any time, of its intention
not to comply in the future with a request for conversion of this Note or any Other Notes into shares of Common Stock that may
be tendered in accordance with the provisions of this Note or the Other Notes, other than pursuant to Section 3(d) (and analogous
provisions under the Other Notes);

(xiii)        
the Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder
(or its designee) via DTC for transfer to a transferee in connection with the resale of such shares of Common Stock to a transferee
following the conversion or exercise (as the case may be) of any Securities (as defined in the Securities Purchase Agreement) acquired
by the Holder under the Securities Purchase Agreement (including this Note) as and when required by such Securities or the Securities
Purchase Agreement, unless otherwise then prohibited by applicable federal securities laws, and any such failure remains uncured
for at least ten (10) Trading Days; or

(xiv)        
any Change of Control or Going-Private Event occurs.

    	9

    	 

    

(b)              
 Notice of an Event of Default; Redemption Right. Upon the occurrence of an Event of Default with respect to this
Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next
day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of
the Holder’s receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require
the Company to redeem, at any time during the period commencing on the date the Holder first becomes aware of such Event of Default
through and including the twentieth Trading Day after the later of (x) the date the Holder receives the applicable Event of Default
Notice with respect thereto and (y) the date such Event of Default has been cured, all or any portion of this Note by delivering
written notice thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default
Redemption Notice shall indicate the portion of this Note the Holder is electing to redeem. Each portion of this Note subject to
redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i)
the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption Premium and (ii) the product of (X) the
Conversion Rate with respect to the Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption
Notice multiplied by (Y) the product of (1) the Redemption Premium multiplied by (2) the greatest Closing Sale Price of the Common
Stock on any Trading Day during the period commencing on the date immediately preceding such Event of Default and ending on the
date the Company makes the entire payment required to be made under this Section 4(b) (the “Event of Default
Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions
of Section 10. To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction
to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything
to the contrary in this Section 4, but subject to Section 3(d), until the Event of Default Redemption Price (together with any
Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 4(b) (together with any
Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to the terms of this Note.
In the event of the Company’s redemption of any portion of this Note under this Section 4(b), the Holder’s damages
would be uncertain and difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty
of the availability of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under
this Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss
of its investment opportunity and not as a penalty.

5.                 
RIGHTS UPON FUNDAMENTAL TRANSACTION; OTHER CORPORATE EVENTS.

(a)               
Assumption. The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity
assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance with
the provisions of this Section 5(a) pursuant to written agreements in form and substance reasonably satisfactory to the Holder
and approved by the Holder without unreasonable delay prior to such Fundamental Transaction, including agreements to deliver to
each holder of Notes in exchange for such Notes a security of the Successor Entity evidenced by a written instrument substantially
similar in form and substance to the Notes, including, without limitation, having a principal

    	10

    	 

    

amount and interest rate equal to the
principal amounts then outstanding and the interest rates of the Notes held by such holder, having similar conversion rights as
the Notes and having similar ranking to the Notes, and satisfactory to the Holder. Upon the occurrence of any Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company
under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there
shall be issued upon conversion or redemption of this Note at any time after the consummation of such Fundamental Transaction,
in lieu of the shares of the Company’s Common Stock (or other securities, cash, assets or other property (except such items
still issuable under Section 14, which shall continue to be receivable thereafter) issuable upon the conversion or redemption of
the Notes prior to such Fundamental Transaction, such shares of the common stock (or their equivalent) of the Successor Entity
(including its Parent Entity) or other consideration received by the holders of Common Stock which the Holder would have been entitled
to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental
Transaction (without regard to any limitations on the conversion of this Note), as adjusted in accordance with the provisions of
this Note. Notwithstanding the foregoing, the Holder may elect, at its sole option, by delivery of written notice to the Company
to waive this Section 5(a) to permit the Fundamental Transaction without the assumption of this Note.

(b)              
Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation
of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other
assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall
make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this Note (i)
in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder
would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon
the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of
this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets
received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as
the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such
consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion
Rate. Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Holder.

(c)               
The provisions of this Section 5 shall apply similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the conversion of this Note.

6.                 
[Intentionally Omitted]

    	11

    	 

    

7.                 
 NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate
of Incorporation (as defined in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) 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 of the provisions of this Note and take all action as may be required to protect the rights
of the Holder of this Note. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value
of any shares of Common Stock receivable upon conversion of this Note above the Conversion Price then in effect, (ii) shall
take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the conversion of this Note, and (iii) shall, so long as any of the Notes are outstanding,
take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the Notes, the maximum number of shares of Common Stock as shall from time to time be necessary
to effect the conversion of the Notes then outstanding (without regard to any limitations on conversion).

8.                 
RESERVATION OF AUTHORIZED SHARES.

(a)               
Reservation. So long as any of the Notes are outstanding, the Company shall take all action necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes,
a number of shares of Common Stock, as of any date of determination, for each of the Notes in accordance with the following formula:

P

------------------ x 2.5 = Share Reserve

(T x B)

P = The aggregate
Purchase Price (as defined the Securities Purchase Agreement) of the Notes issued on or prior to such date of determination;

T = The applicable
Conversion Price as of such date of determination;

B = 0.85;

provided, that, the
Share Reserve shall in no event be less than 150% of the number of shares of Common Stock as shall from time to time be necessary
to effect the conversion of all of the Notes then outstanding (without regard to any limitations on conversions) (the “Required
Reserve Amount”).

(b)              
Insufficient Authorized Shares. If, notwithstanding Section 8(a), and not in limitation thereof, at any time while
any of the Notes remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common
Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock
equal to the Required Reserve Amount (an “Authorized Share Failure”), then

    	12

    	 

    

the Company shall immediately take all
action reasonably necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient to allow
the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than seventy-five
(75) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval
of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit its stockholders’ approval of such increase
in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such
proposal. In the event that the Company is prohibited from issuing shares of Common Stock upon any conversion due to the failure
by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such
unavailable number of shares of Common Stock, the “Authorization Failure Shares”), in lieu of delivering
such Authorization Failure Shares to the Holder, the Company shall pay cash in exchange for the redemption of such portion of the
Conversion Amount convertible into such Authorized Failure Shares at a price equal to the sum of (i) the product of (x) such number
of Authorization Failure Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period
commencing on the date the Holder delivers the applicable Conversion Notice with respect to such Authorization Failure Shares to
the Company and ending on the date of such issuance and payment under this Section 8(b) and (ii) to the extent the Holder purchases
(in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization
Failure Shares, any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith.
Nothing contained in Section 8(a) or this Section 8(b) shall limit any obligations of the Company under any provision of the
Securities Purchase Agreement.

9.                 
Company Optional Redemption. At any time after the Issuance Date,
the Company shall have the right to redeem all, or any part, of the Conversion Amount then remaining under this Note (the “Company
Optional Redemption Amount”) on the Company Optional Redemption Date (as defined below) (a “Company Optional
Redemption”). The portion of this Note subject to redemption pursuant to this Section 9 shall be redeemed by the
Company in cash at a price (the “Company Optional Redemption Price”) equal to 125% of the Company Optional
Redemption Amount of this Note then outstanding. The Company may exercise its right to require redemption under this Section 9
by delivering an irrevocable written notice thereof by facsimile and overnight courier to the Holder (the “Company
Optional Redemption Notice” and the date the Holder receives such notice is referred to as the “Company
Optional Redemption Notice Date”). The Company may deliver only one Company Optional Redemption Notice in any ninety
(90) day period, unless the Holder consents otherwise in its sole discretion. The Company Optional Redemption Notice shall (x)
state the date on which the Company Optional Redemption shall occur (the “Company Optional Redemption Date”)
which date, unless the Holder consents otherwise in its sole discretion, shall not be less than sixty (60) calendar days nor more
than ninety (90) calendar days following the Company Optional Redemption Notice Date, and (y) state the aggregate Conversion Amount
of the Notes which is being redeemed in such Company Optional Redemption from the Holder pursuant to this Section 9 on the Company
Optional Redemption Date. Notwithstanding anything herein to the contrary, at any time prior to the date the Company Optional Redemption
Price is paid, in full, the

    	13

    	 

    

Company Optional Redemption Amount may
be converted, in whole or in part, by the Holder into shares of Common Stock pursuant to Section 3. All Conversion Amounts converted
by the Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Note
required to be redeemed on the Company Optional Redemption Date. Redemptions made pursuant to this Section 9 shall be made in accordance
with Section 10.

10.             
REDEMPTIONS.

(a)               
Mechanics. The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within
five (5) Business Days after the Company’s receipt of the Holder’s Event of Default Redemption Notice. The Company
shall deliver the applicable Company Optional Redemption Price to the Holder in cash on the applicable Company Optional Redemption
Date. In the event of a redemption of less than all of the Conversion Amount of this Note, the Company shall promptly cause to
be issued and delivered to the Holder a new Note (in accordance with Section 17(d)) representing the outstanding Principal which
has not been redeemed. The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following
such notice shall not affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the
date of such notice with respect to the Conversion Amount subject to such notice.

11.             
VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law (including,
without limitation, the Delaware General Corporation Law) and as expressly provided in this Note.

12.             
[INSERT IN INITIAL NOTE ONLY: NOTE REDUCTIONS.

(a)                Filing
Date Reduction. As of May 23, 2014, if (i) the
Company has properly filed a registration statement with the SEC on or prior to the Filing Deadline covering the resale by
the Holder of all of the shares of Common Stock issued or issuable upon conversion of this Note or otherwise pursuant to
the terms of this Note in accordance with the 1933 Act and the Registration Rights Agreement and (ii) no Event of Default or
an event that with the passage of time or giving of notice would constitute an Event of Default has occurred on or prior to
such date, then $200,000 of the outstanding Principal hereunder (together with any accrued and unpaid Interest with respect
to such portion of the Principal amount and accrued and unpaid Late Charges with respect to such portion of such Principal
and such Interest) shall be automatically extinguished and shall no longer remain outstanding hereunder without any payment
thereof by the Company.

(b)              
Effective Date Reduction. As of the Trading Day immediately following the Effectiveness Deadline (as such term is
defined in the Registration Rights Agreement), if (i) the Company has filed a registration statement with the SEC that has been
declared effective by the SEC on or prior to the Effectiveness Deadline and the prospectus contained therein is available for use
by the Holder for the resale by the Holder of all of the shares of Common Stock

    	14

    	 

    

issued or issuable upon conversion of
this Note or otherwise pursuant to the terms of this Note and (ii) no Event of Default or an event that with the passage of time
or giving of notice would constitute an Event of Default has occurred on or prior to such date, then $300,000 of the outstanding
Principal hereunder (together with any accrued and unpaid Interest with respect to such portion of the Principal amount and accrued
and unpaid Late Charges with respect to such portion of such Principal and such Interest) shall be automatically extinguished and
shall no longer remain outstanding hereunder without any payment thereof by the Company.

(c)               
Disputes. In the event of a dispute as to the arithmetic calculation of any Note Reduction, the Company and the Holder
shall resolve such dispute in accordance with Section 22.][INSERT IN ADDITIONAL NOTE: [INTENTIONALLY OMITTED]]

13.             
COVENANTS. Until all of the Notes have been converted, redeemed or otherwise satisfied in accordance with their terms:

(a)               
Rank. All payments due under this Note shall rank pari passu with all Other Notes.

(b)              
Restricted Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents
(in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion
of any Indebtedness, whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness
if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event
of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute
an Event of Default has occurred and is continuing.

(c)               
Restricted Issuances. The Company shall not, directly or indirectly, without the prior written consent of the holders
of a majority in aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the
Securities Purchase Agreement and the Notes) or (ii) issue any other securities that would cause a breach or default under the
Notes.

(d)              
Restriction on Redemption and Cash Dividends. Other than in accordance with the terms in effect as of the Initial
Closing Date with respect to preferred stock of the Company outstanding as of the Initial Closing Date, the Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem, repurchase or declare or pay any cash
dividend or distribution on any of its capital stock.

(e)               
Restriction on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to
not, directly or indirectly, sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of
any assets or rights of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of
related transactions, other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such
assets or rights by the Company and its Subsidiaries

    	15

    	 

    

in the ordinary course of business,
(ii) sales of inventory in the ordinary course of business, or (iii) assets directly related to the Company’s interstitial
fluid analysis system.

(f)               
Transactions with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into,
renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase,
sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate,
except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable
for the prudent operation of its business, for fair consideration and on terms no less favorable to it or its Subsidiaries than
would be obtainable in a comparable arm’s length transaction with a Person that is not an affiliate thereof.

14.             
PARTICIPATION. Upon any conversion of this Note, the Holder shall be entitled to receive such dividends paid and
distributions made to the holders of Common Stock from and after the initial Issuance Date to the same extent as if the Holder
had effected such conversion and had held such shares of Common Stock (issued or to be issued in such conversion) on the record
date for such dividends and distributions. Payments under the preceding sentence shall be made on or prior to the applicable Share
Delivery Deadline with respect to such conversion.

15.             
AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment
to this Note.

16.             
TRANSFER. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned
or transferred by the Holder without the consent of the Company, subject only to the provisions of Section 4.4 of the Securities
Purchase Agreement.

17.             
REISSUANCE OF THIS NOTE.

(a)               
Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 17(d)), registered as the
Holder may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding
Principal is being transferred, a new Note (in accordance with Section 17(d)) to the Holder representing the outstanding Principal
not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions
of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this
Note may be less than the Principal stated on the face of this Note.

(b)              
Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated
below shall suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the
Holder to the Company in customary and reasonable form and, in the case of mutilation,

    	16

    	 

    

upon surrender and cancellation of this
Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section 17(d)) representing the outstanding
Principal.

(c)               
Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder
at the principal office of the Company, for a new Note or Notes (in accordance with Section 17(d) and in principal amounts of at
least $1,000) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time of such surrender.

(d)              
Issuance of New Notes. Whenever the Company is required or, at the option of the Company exercised no more than once
in any six month period, elects to issue a new Note pursuant to the terms of this Note to reflect the reduction in Principal of
this Note then outstanding, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the
face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 17(a)
or Section 17(c), the Principal designated by the Holder which, when added to the principal represented by the other new Notes
issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior
to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same
as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued
and unpaid Interest and Late Charges on the Principal and Interest of this Note, from the Issuance Date. Upon recipt of such new
Note, the Holder shall physically surrender this Note to the Company.

18.             
REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note
shall be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents
at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit
the Holder’s right to pursue actual and consequential damages for any failure by the Company to comply with the terms of
this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject
to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other
available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing
economic loss and without any bond or other security being required. The Company shall provide all information and documentation
to the Holder that is requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and
conditions of this Note.

19.             
PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts

    	17

    	 

    

due under this Note or to enforce the
provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting
Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder
for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding,
including, without limitation, attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts
due under this Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less than the original
Principal amount hereof.

20.             
CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not
be construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not
form part of, or affect the interpretation of, this Note. Terms used in this Note but defined in the other Transaction Documents
shall have the meanings ascribed to such terms on the Initial Closing Date in such other Transaction Documents unless otherwise
consented to in writing by the Holder.

21.             
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 privilege. No waiver shall be effective unless
it is in writing and signed by an authorized representative of the waiving party.

22.             
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Conversion Price (including, without
limitation, any disputed adjustment thereto), the Company Conversion Price, any Redemption Price, the Closing Bid Price, the Closing
Sale Price or fair market value (as the case may be) or the arithmetic calculation of the Conversion Rate, any Note Reduction or
the applicable Redemption Price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed
determinations or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of
the applicable notice giving rise to such dispute to the Company or the Holder (as the case may be) 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 Company
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 Company or the Holder (as the case may be), then the Company shall, within
two (2) Business Days, submit via facsimile (a) the disputed determination of the Conversion Price, the Company Conversion Price,
any Redemption Price, the Closing Bid Price, the Closing Sale Price or fair market value (as the case may be) to an independent,
reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the
Conversion Rate, any Note Reduction or any Redemption Price (as the case may be) to an independent, outside accountant selected
by the Holder that is reasonably acceptable to the Company. The Company shall cause at its expense the investment bank or the accountant
(as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of
the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the
case may be). Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding
upon all parties absent demonstrable error.

    	18

    	 

    

23.             
 NOTICES; CURRENCY; PAYMENTS.

(a)               
Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall
be given in accordance with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt
written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the
reason therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately
upon any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment
and (ii) at least five (5) Trading Days prior to the date on which the Company closes its books or takes a record (A) with respect
to any dividend or distribution upon the Common Stock or (B) for determining rights to vote with respect to any Fundamental Transaction,
dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.

(b)              
Currency. All dollar amounts referred to in this Note are in United States Dollars (“U.S. Dollars”),
and all amounts owing under this Note shall be paid in U.S. Dollars. All amounts denominated in other currencies (if any) shall
be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation. “Exchange
Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to this Note,
the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation (it being understood
and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation shall be the
final date of such period of time).

(c)   
Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise
expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn
on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the
Company in writing (which address, in the case of the Investor, shall initially be as set forth on the Schedule I attached
to the Securities Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately
available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer
instructions. 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. Any amount of Principal or other amounts due
under the Transaction Documents which is not paid when due (solely to the extent such amount is not then accruing interest at the
Default Rate) shall result in a late charge being incurred and payable by the Company in an amount equal to interest on such amount
at the rate of sixteen percent (16%) per annum from the date such amount was due until the same is paid in full (“Late
Charge”).

24.             
CANCELLATION. After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note
have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation
and shall not be reissued.

25.             
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby

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irrevocably waives demand, notice, presentment,
protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this
Note and the Securities Purchase Agreement.

26.             
GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the State of Illinois. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in Chicago, Illinois, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action
or proceeding is improper. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner
permitted by law. 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 such provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate
to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect
on the Company’s obligations to the Holder, to realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court ruling in favor of the Holder. THE COMPANY 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 THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

27.             
MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest
or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid
or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against
amounts owed by the Company to the Holder and thus refunded to the Company.

28.             
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:

(a)               
“Additional Closing Date” shall have the meaning ascribed to such term in the Securities Purchase
Agreement, which date is the date the Company initially issued Additional Notes (as defined in the Securities Purchase Agreement)
pursuant to the terms of the Securities Purchase Agreement.

(b)              
 “Bloomberg” means Bloomberg, L.P.

    	20

    	 

    

(c)               
 “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks
in The City of New York are authorized or required by law to remain closed.

(d)              
 “Change of Control” means any Fundamental Transaction other than (i) any merger of the Company
or any of its, direct or indirect, wholly-owned Subsidiaries with or into any of the foregoing Persons, (ii) any reorganization,
recapitalization or reclassification of the shares of Common Stock in which holders of the Company’s voting power immediately
prior to such reorganization, recapitalization or reclassification continue after such reorganization, recapitalization or reclassification
to hold publicly traded securities and, directly or indirectly, are, in all material respects, the holders of the voting power
of the surviving entity (or entities with the authority or voting power to elect the members of the board of directors (or
their equivalent if other than a corporation) of such entity or entities) after such reorganization, recapitalization or reclassification,
or (iii) pursuant to a migratory merger effected solely for the purpose of changing the jurisdiction of incorporation of the Company
or any of its Subsidiaries).

(e)               
 “Closing Bid Price” and “Closing Sale Price” means, for any security
as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market,
as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing
bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively, of such security
prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal
securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively,
is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers
for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).

(f)               
“Closing Date” shall have the meaning set forth in the Securities Purchase Agreement, which date
is the date the Company initially issued the Note pursuant to the terms of the Securities Purchase Agreement.

(g)              
“Common Stock” means (i) the Company’s common stock, $0.001 par value per share, and (ii)
any capital stock into which such common stock shall have been changed or any share capital resulting from a reclassification of
such common stock.

(h)              
 “Eligible Market” means the OTC Bulletin Board, The NASDAQ Global Market, The NASDAQ Global Select
Market, The NASDAQ Capital Market, the New York Stock Exchange, NYSE Arca, the NYSE MKT, the OTCQX Marketplace or the OTCQB Marketplace
operated by OTC Markets Group Inc. (or any successor to any of the foregoing).

(i)                
 “Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly
or indirectly, in one or more related transactions, (1) consolidate or

    	21

    	 

    

merge with or into (whether or not the
Company or any of its Subsidiaries is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer,
convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow
any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding
shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making
or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4)
consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of
the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other
Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or
share purchase agreement or other business combination), or (ii) any “person” or “group” (as these terms
are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the
aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

(j)                
“GAAP” means United States generally accepted accounting principles, consistently applied.

(k)              
“Going-Private Event” means any Fundamental Transaction or other event or occurrence after which
the Common Stock of the Company (or its successor) ceases to be registered under the 1934 Act or otherwise a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market.

(l)                
“Initial Closing Date” shall have the meaning ascribed to such term in the Securities Purchase
Agreement, which date is the date the Company initially issued Initial Notes (as defined in the Securities Purchase Agreement)
pursuant to the terms of the Securities Purchase Agreement.

(m)            
 “Interest Rate” means six percent (6%) per annum, as may be adjusted from time
to time in accordance with Section 2.

(n)               
“Maturity Date” shall mean [18 month anniversary of applicable closing date (as
defined in the Securities Purchase Agreement)]; provided, however, the Maturity Date may be extended at the option of
the Holder (i) in the event that, and for so long as, an Event of Default shall have occurred and be continuing or any event
shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event of
Default or (ii) through the date that is twenty (20) Business Days after the consummation of a Fundamental Transaction in the
event that a Fundamental Transaction is publicly announced or a Fundamental Transaction Notice is delivered prior to the
Maturity Date, provided further that if a Holder elects to convert some or all of this Note pursuant to Section 3 hereof, and
the Conversion Amount would be limited pursuant to Section 3(d) hereunder, the Maturity Date shall automatically be extended
until such time as such provision shall not limit the conversion of this Note.

    	22

    	 

    

(o)              
 “Parent Entity” of a Person means an entity that, directly or indirectly, controls the applicable
Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than
one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation
of the Fundamental Transaction.

(p)              
“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation,
a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

(q)              
 “Principal Market” means, as of any date of determination, the principal securities exchange
or securities market on which the Common Stock is then traded.

(r)                
“Redemption Notices” means, collectively, the Event of Default Redemption Notices and the Company
Optional Redemption Notices, and each of the foregoing, individually, a “Redemption Notice.”

(s)               
“Redemption Premium” means (i) in the case of the Events of Default described in Section 4(a)
(other than Sections 4(a)(iv) through 4(a)(vi)), 135% or (ii) in the case of the Events of Default described in Sections 4(a)(iv)
through 4(a)(vi), 100%.

(t)                
“Redemption Prices” means, collectively, Event of Default Redemption Prices, and the Company Optional
Redemption Prices and each of the foregoing, individually, a “Redemption Price.”

(u)              
“Registration Rights Agreement” means that certain registration rights agreement, dated as of
the Initial Closing Date, by and between the Company and the Holder relating to, among other things, the registration of the resale
of the Common Stock issuable upon conversion of the Notes or otherwise pursuant to the terms of the Notes, as may be amended from
time to time.

(v)              
 “SEC” means the United States Securities and Exchange Commission or the successor thereto.

(w)            
“Securities Purchase Agreement” means that certain Securities Purchase Agreement, dated as of
the April 23, 2014, by and between the Company and the Holder pursuant to which the Company issued this Note, as may be amended
from time to time.

(x)              
 “Subsidiaries” shall have the meaning as set forth in the Securities Purchase Agreement.

(y)              
“Successor Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed
by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity)
with which such Fundamental Transaction shall have been entered into.

(z)               
“Trading Day” means any day on which the Common Stock is traded on the Principal Market, or, if
the Principal Market is not the principal trading market for the

    	23

    	 

    

Common Stock, then on the principal
securities exchange or securities market on which the Common Stock is then traded, provided that “Trading Day”
shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or
any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending
at 4:00:00 p.m., New York time) unless such day is otherwise designated as a Trading Day in writing by the Holder.

(aa)           
 “Voting Stock” of a Person means capital stock of such Person of the class or classes pursuant
to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the
board of directors, managers, trustees or other similar governing body of such Person (irrespective of whether or not at the time
capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

29.             
DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless
the Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information
relating to the Company or any of its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company
believes that a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company
so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the
Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information
relating to the Company or its Subsidiaries. Nothing contained in this Section 29 shall limit any obligations of the Company, or
any rights of the Holder, under Section 4.3 of the Securities Purchase Agreement.

[signature page follows]

    	24

    	 

    

 

IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed as of the Issuance Date set out above.

 

	
        Guided
        Therapeutics, Inc.

         

	By:_________________________________
	Name:
	Title:

 

    	25

    	 

    

EXHIBIT
I

GUIDED THERAPEUTICS, INC.

CONVERSION NOTICE

Reference is made
to the Senior Convertible Note (the “Note”) issued to the undersigned by Guided Therapeutics, Inc., a
Delaware corporation (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby
elects to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.001
par value per share (the “Common Stock”), of the Company, as of the date specified below Capitalized
terms not defined herein shall have the meaning as set forth in the Note.

	Date of Conversion:	 
	Aggregate Principal to be converted:	 
	Aggregate accrued and unpaid Interest and accrued and unpaid Late Charges with respect to such portion of the Aggregate Principal and such Aggregate Interest to be converted:	 
	AGGREGATE CONVERSION AMOUNT

 TO BE CONVERTED:	 
	Please confirm the following information:
	Conversion Price:	 
	Number of shares of Common Stock to be issued:	 
	Please issue the Common Stock into which the Note is being converted in the following name and to the following address:
	Issue to:	 
	 	 
	 	 
	Facsimile Number:	 
	Holder:	 
	By:	 
	Title:	 
	 	 	 	 	 	 	 	 	 

    	26

    	 

    

 

	Dated:	 
	Account Number:	 
	  (if electronic book entry transfer)	 
	Transaction Code Number:	 
	
        (if electronic
        book entry transfer)

         
	 
	 	 
	 	 	 	 	 

    	27

    	 

    

ACKNOWLEDGMENT

The Company hereby
acknowledges this Conversion Notice and hereby directs _________________ to issue the above indicated number of shares of Common
Stock in accordance with the Transfer Agent Instructions dated _____________, 20__ from the Company and acknowledged and agreed
to by ________________________.

 

	Guided Therapeutics, Inc.
	By:_________________________________
	Name:
	Title:

 

[1]
Insert date that is 30 calendar days after the Initial Closing Date

 

    	28

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