UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
☒
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2019.
OR
☐
TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from ____________ to ____________
Commission file
number: 0-22179
GUIDED
THERAPEUTICS, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
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58-2029543
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(State
or other jurisdiction of incorporation or
organization)
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(I.R.S.
Employer Identification No.)
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5835
Peachtree Corners East, Suite B
Norcross,
Georgia
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30092
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|
(Address of
principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number (including area code):
(770) 242-8723
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered under Section 12(g) of the Act:
Common Stock, $0.001 par
value
(Title
of class)
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes ☐ No
☒
Indicate by check
mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes ☐ No
☒
Indicate by check
mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes
☐ No ☒
Indicate by check
mark whether the registrant has submitted electronically and posted
on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes ☒ No ☐
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. Yes ☒ No
☐
Indicate by check
mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
|
Large
accelerated filer ☐
|
Accelerated filer
☐
|
|
Non-accelerated
filer ☐
|
Smaller
reporting company ☒
|
|
Emerging growth
company ☐
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check
mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes ☐ No ☒
The
aggregate market value of the voting and non-voting common equity
held by non-affiliates was approximately $500,000 as of December
31, 2019 (the last business day of the registrant’s most
recently completed fiscal quarter).
As of
April 17, 2020, the registrant had 11,308,191 shares of common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
None.
TABLE
OF CONTENTS
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PART
I
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3
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3
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10
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20
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20
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20
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20
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PART
II
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21
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21
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21
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22
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29
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30
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62
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62
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62
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PART
III
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63
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63
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65
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67
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68
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69
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PART
IV
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70
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70
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70
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71
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PART
I
Overview
We
are a medical technology company focused on developing innovative
medical devices that have the potential to improve healthcare. Our
primary focus is the sales and marketing of our LuViva®
Advanced Cervical Scan non-invasive cervical cancer detection
device. The underlying technology of LuViva primarily relates to
the use of biophotonics for the non-invasive detection of cancers.
LuViva is designed to identify cervical cancers and precancers
painlessly, non-invasively and at the point of care by scanning the
cervix with light, then analyzing the reflected and fluorescent
light.
LuViva
provides a less invasive and painless alternative to conventional
tests for cervical cancer screening and detection. Additionally,
LuViva improves patient well-being not only because it eliminates
pain, but also because it is convenient to use and provides rapid
results at the point of care. We focus on two primary applications
for LuViva: first, as a cancer screening tool in the developing
world, where infrastructure to support traditional cancer-screening
methods is limited or non-existent, and second, as a triage
following traditional screening in the developed world, where a
high number of false positive results cause a high rate of
unnecessary and ultimately costly follow-up tests.
Screening
for cervical cancer represents one of the most significant demands
on the practice of diagnostic medicine. As cervical cancer is
linked to a sexually transmitted disease—the human
papillomavirus (HPV)—every woman essentially becomes
“at risk” for cervical cancer simply after becoming
sexually active. In the developing world, there are approximately
2.0 billion women aged 15 and older who are potentially eligible
for screening with LuViva. Guidelines for screening intervals vary
across the world, but U.S. guidelines call for screening every
three years. Traditionally, the Pap smear screening test, or Pap
test, is the primary cervical cancer screening methodology in the
developed world. However, in developing countries, cancer screening
using Pap tests is expensive and requires infrastructure and skill
not currently existing, and not likely to be developed in the near
future, in these countries.
We
believe LuViva is the answer to the developing world’s
cervical cancer screening needs. Screening for cervical cancer in
the developing world often requires working directly with foreign
governments or non-governmental agencies (NGOs). By partnering with
governments or NGOs, we can provide immediate access to cervical
cancer detection to large segments of a nation’s population
as part of national or regional governmental healthcare programs,
eliminating the need to develop expensive and resource-intensive
infrastructures.
In
the developed world, we believe LuViva offers a more accurate and
ultimately cost-effective triage medical device, to be used once a
traditional Pap test or HPV test indicates the possibility of
cervical cancer. Due to the high number of false positive results
from Pap tests, traditional follow-on tests entail increased
medical treatment costs. We believe these costs can be minimized by
utilizing LuViva as a triage to determine whether and to what
degree follow-on tests are warranted.
We believe our non-invasive cervical cancer
detection technology can be applied to the early detection of other
cancers as well. In 2013, we announced a license agreement with
Konica Minolta, Inc. allowing us to manufacture and develop
a non-invasive esophageal cancer detection product from Konica
Minolta based on our biophotonic technology platform. Early market analyses of our biophotonic
technology indicated that skin cancer detection was also promising,
but currently we are focused primarily on the large-scale
commercialization of LuViva.
Cancer
Cancer
is a group of many related diseases. All forms of cancer involve
the out-of-control growth and spread of abnormal cells. Normal
cells grow, divide, and die in an orderly fashion. Cancer cells,
however, continue to grow and divide and can spread to other parts
of the body. In America, half of all men and one-third of all women
will develop some form of cancer during their lifetimes. According
to the American Cancer Society, the sooner a cancer is found and
treatment begins, the better a patient’s chances are of being
cured. We began investigating the applications of our biophotonic
technology to cancer detection before 1997, when we initiated a
preliminary market analysis. We concluded that our biophotonic
technology had applications for the detection of a variety of
cancers through the exposure of tissue to light. We selected
detection of cervical cancer and skin cancer from a list of the ten
most promising applications to pursue initially, and ultimately
focused primarily on our LuViva cervical cancer detection
device.
Cervical cancer is
a cancer that begins in the lining of the cervix (which is located
in the lower part of the uterus). Cervical cancer forms over time
and may spread to other parts of the body if left untreated. There
is generally a gradual change from a normal cervix to a cervix with
precancerous cells to cervical cancer. For some women, precancerous
changes may go away without any treatment. While the majority of
precancerous changes in the cervix do not advance to cancer, if
precancers are treated, the risk that they will become cancers can
be greatly reduced.
The Developing World
According to the
most recent data published by the World Health Organization (WHO),
cervical cancer is the fourth most frequent cancer in women
worldwide, with an estimated 570,000 new cases in 2018, an increase
of 40,000 cases from 2012. For women living in less developed
regions, however, cervical cancer is the second most common cancer,
and 9 out of 10 women who die from cervical cancer reside in low-
and middle-income countries. In 2018, GLOBOCAN, the international
cancer tracking agency, estimated that approximately 311,000 women
died from cervical cancer, with 85% to 90% of these deaths
occurring in low- and middle-income countries.
As
noted by the WHO, in developed countries, programs are in place
that enable women to get screened, making most pre-cancerous
lesions identifiable at stages when they can easily be treated.
Early treatment prevents up to 80% of cervical cancers in these
countries. In developing countries, however, limited access to
effective screening means that the disease is often not identified
until it is further advanced and symptoms develop. In addition,
prospects for treatment of such late-stage disease may be poor,
resulting in a higher rate of death from cervical cancer in these
countries.
We
believe that the greatest need and market opportunity for LuViva
lies in screening for cervical cancer in developing countries where
the infrastructure for traditional screening may be limited or
non-existent.
We are
actively working with distributors in the following countries to
implement government-sponsored screening programs: Turkey,
Indonesia, and Nigeria. The number of screening candidates in those
countries is approximately 131 million and Indonesia and Nigeria
represent 2 of the 10 most populous countries in the
world.
The Developed World
The Pap
test, which involves a sample of cervical tissue being placed on a
slide and observed in a laboratory, is currently the most common
form of cervical cancer screening. Since the introduction of
screening and diagnostic methods, the number of cervical cancer
deaths in the developed world has declined dramatically, due mainly
to the increased use of the Pap test. However, the Pap test has a
wide variation in sensitivity, which is the ability to detect the
disease, and specificity, which is the ability to exclude false
positives. A study by Duke University for the U.S. Agency for
Health Care Policy and Research published in 1999 showed Pap test
performance ranging from a 22%-95% sensitivity and 78%-10%
specificity, although new technologies improving the sensitivity
and specificity of the Pap test have recently been introduced and
are finding acceptance in the marketplace. About 60 million Pap
tests are given annually in the United States, at an average price
of approximately $26 per test.
After a
Pap test returns a positive result for cervical cancer, accepted
protocol calls for a visual examination of the cervix using a
colposcope, usually followed by a biopsy, or tissue sampling, at
one or more locations on the cervix. This method looks for visual
changes attributable to cancer. There are about two million
colposcope examinations annually in the United States and Europe.
In 2003, the average cost of a stand-alone colposcope examination
in the United States was $185 and the average cost of a colposcopy
with biopsy was $277.
Given
this landscape, we believe that there is a material need and market
opportunity for LuViva as a triage device in the developed world
where LuViva represents a more cost-effective method of verifying a
positive Pap test than the alternatives.
The
LuViva Advanced Cervical
Scan
LuViva
is designed to identify cervical cancers and precancers painlessly,
non-invasively and at the point of care by scanning the cervix with
light, then analyzing the light reflected from the cervix. The
information presented by the light would be used to indicate the
likelihood of cervical cancer or precancers. Our product, in
addition to detecting the structural changes attributed to cervical
cancer, is also designed to detect the biochemical changes that
precede the development of visual lesions. In this way, cervical
cancer may be detected earlier in its development, which should
increase the chances of effective treatment. In addition to the
device itself, operation of LuViva requires employment of our
single-use, disposable calibration and alignment cervical
guide.
To
date, thousands of women in multiple international clinical
settings have been tested with LuViva. As a result, more than 25
papers and presentations have been published regarding LuViva in a
clinical setting, including at the International Federation of
Gynecology and Obstetrics Congress in London in 2015 and at the
Indonesian National Obstetrics and Gynecology (POGI) Meeting in
Solo in 2016.
Internationally, we
contract with country-specific or regional distributors. We believe
that the international market will be significantly larger than the
U.S. market due to the international demand for cervical cancer
screening. We have executed formal distribution agreements covering
54 countries and still have active contracts in place for countries
that cover roughly half of the world’s population, including
China and Southeast Asia (including Indonesia), Eastern Europe and
Russia as well as the Middle East (including Turkey). In 2020, we
intend to focus on other large markets such as those in the
European Union, India,and certain Latin American countries, such as
Mexico.
We have
previously obtained regulatory approval to sell LuViva in Europe
under our Edition 3 CE Mark. Additionally, LuViva has also obtained
marketing approval from Health Canada, COFEPRIS in Mexico, Ministry
of Health in Kenya and the Singapore Health Sciences Authority. In
addition, in 2018, we were approved for sales and marketing in
India. We currently are seeking regulatory approval to market
LuViva in the United States but have not yet received approval from
the U.S. Food and Drug Administration (FDA). As of December 31,
2019, we have sold 140 LuViva devices and approximately 76,780
single-use-disposable cervical guides to international
distributors.
We believe our non-invasive cervical cancer
detection technology can be applied to the early detection of other
cancers as well. From 2008 to early 2013, we worked with
Konica Minolta to explore the feasibility of adapting our
microporation and biophotonic cancer detection technology to other
areas of medicine and to determine potential markets for these
products in anticipation of a development agreement. In February
2013, we replaced our existing agreements with Konica Minolta with
a new agreement, pursuant to which, subject to the payment of a
nominal license fee due upon FDA approval, Konica Minolta has
granted us a five-year, world-wide, non-transferable and
non-exclusive right and license to manufacture and to develop a
non-invasive esophageal cancer detection product from Konica
Minolta and based on our biophotonic technology platform. The
license permits us to use certain related intellectual property of
Konica Minolta. In return for the license, we have agreed to pay
Konica Minolta a royalty for each licensed product we sell. We
continue to seek new collaborative partners to further develop our
biophotonic technology.
Manufacturing,
Sales Marketing and Distribution
We
manufacture LuViva at our Norcross, Georgia facility. Most of the
components of LuViva are custom made for us by third-party
manufacturers. We adhere to ISO 13485:2003 quality standards in our
manufacturing processes. Our single-use cervical guides are
manufactured by a vendor that specializes in injection molding of
plastic medical products. On January 22, 2017, we entered into a
license agreement with Shandong Yaohua Medical Instrument
Corporation (“SMI”) pursuant to which we granted SMI an
exclusive global license to manufacture the LuViva device and
related disposables (subject to a carve-out for manufacture in
Turkey). On December 18, 2018, we entered into a co-development
agreement with Newmars Technologies, Inc. (“NTI”),
whereby NTI will perform final assembly of the LuViva device for
its contracted distribution countries in Eastern Europe and Russia
at its ISO 13485 facility in Hungary. This additional carve out has
been agreed to by SMI.
We rely
on distributors to sell our products. Distributors can be country
exclusive or cover multiple countries in a region. We manage these
distributors, provide them marketing materials and train them to
demonstrate and operate LuViva. We seek distributors that have
experience in gynecology and in introducing new technology into
their assigned territories.
We
have only limited experience in the production planning, quality
system management, facility development, and production scaling
that will be needed to bring production to increased sustained
commercial levels. We will likely need to develop additional
expertise in order to successfully manufacture, market, and
distribute any future products.
Research,
Development and Engineering
We have
been engaged primarily in the research, development and testing of
our LuViva non-invasive cervical cancer detection product and our
core biophotonic technology. Since 2013, we have incurred
approximately $7.8 million in research and development expenses,
net of about $927,000 reimbursed through collaborative arrangements
and government grants. Research and development costs were
approximately $0.1 and $0.2 million in 2019 and 2018,
respectively.
Since
2013, we have focused our research and development and our
engineering resources almost exclusively on development of our
biophotonic technology, with only limited support of other programs
funded through government contracts or third-party funding. Because
our research and clinical development programs for other cancers
are at a very early stage, substantial additional research and
development and clinical trials will be necessary before we can
produce commercial prototypes of other cancer detection
products.
Several
of the components used in LuViva currently are available from only
one supplier, and substitutes for these components could not be
obtained easily or would require substantial modifications to our
products.
Patents
We have
pursued a course of developing and acquiring patents and patent
rights and licensing technology. Our success depends in large part
on our ability to establish and maintain the proprietary nature of
our technology through the patent process and to license from
other’s patents and patent applications necessary to develop
our products. As of December 31, 2019, we have 16 granted U.S.
patents relating to our biophotonic cancer detection technology
that were developed in-house and are owned by the Company.
Currently we do not own third party patents nor do we make any
outside payments for patents.
As of
April 14, 2020, patents 6,400,875, 6,577,391, and 6,870,620 had
expired.
|
Patent No.
|
Title
|
Ctry
|
Grant Date
|
Expiration Date
|
|
6,400,875
|
Method
for Protecting A Fiber Optic Probe And The Resulting Fiber Optic
Probe
|
US
|
06/04/2002
|
11/01/2019
|
|
6,577,391
|
Apparatus And
Method For Determining Tissue Characteristics
|
US
|
06/10/2003
|
03/24/2020
|
|
6,590,651
|
Apparatus and
Method for Determining Tissue Characteristics
|
US
|
07/08/2003
|
11/16/2020
|
|
6,792,982
|
Vacuum
Source For Harvesting Substances
|
US
|
09/21/2004
|
07/23/2023
|
|
6,870,620
|
Apparatus And
Method For Determining Tissue Characteristics
|
US
|
03/22/2005
|
03/24/2020
|
|
6,975,889
|
Multi-Modal Optical
Cancer Diagnostic System
|
US
|
12/13/2005
|
03/09/2021
|
|
7,006,220
|
Apparatus and
Method for Determining Tissue Characteristics
|
US
|
02/28/2006
|
11/16/2020
|
|
7,174,927
|
Vacuum
Source For Harvesting Substances
|
US
|
02/13/2007
|
09/03/2024
|
|
7,301,629
|
Apparatus and
Method for Determining Tissue Characteristics
|
US
|
11/27/2007
|
07/03/2023
|
|
7,335,166
|
System
And Methods For Fluid Extractions And Monitoring
|
US
|
02/26/2008
|
05/22/2023
|
|
8,644,912
|
Method
and Apparatus For Determining Tissue Characteristics
|
US
|
02/04/2014
|
11/16/2020
|
|
8,781,560
|
Method
and Apparatus For Rapid Detection and Diagnosis of Tissue
Abnormalities
|
US
|
07/15/2014
|
07/14/2031
|
|
9,561,003
|
Method
and Apparatus For Rapid Detection and Diagnosis of Tissue
Abnormalities
|
US
|
02/07/2017
|
07/14/2031
|
|
D714453
|
Mobile
Cart and Hand Held Unit for Diagnostics of Measurement
|
US
|
09/30/2014
|
09/30/2028
|
|
D724199
|
Medical
Diagnostic Stand Off Tube
|
US
|
03/10/2015
|
03/10/2029
|
|
D746475
|
Mobile
Cart and Hand Held Unit for Diagnostics or Measurement
|
US
|
12/29/2015
|
12/29/2029
|
In addition to the patents listed above, the
Company owns four additional corresponding foreign patents and has
applied for two additional US patents, although there is no
assurance that these patents will be granted. The
Company’s strategy is to continue improving its products and
filing new patents to protect those
improvements.
In
the United States, additional years of patent protection may be
added (on a case by case basis) beyond the standard patent
terms under the 1984 Drug Price Competition and Patent Term
Restoration Act, also known as the Hatch-Waxman Act. The
Hatch-Waxman act includes Section 156, which provides for the
extension of the term of a granted patent (PTE) under certain
circumstances. The intent behind Section 156 is to extend patent
life to compensate patent holders for patent term lost while
developing their product and awaiting FDA approval. The
Company’s patents qualify under Section 156 because LuViva
has not yet been commercialized in the United States and it is
being regulated by FDA as a Class III Medical Device.
Competition
The
medical device industry in general and the markets for cervical
cancer detection in particular, are intensely competitive. If
successful in our product development, we will compete with other
providers of cervical cancer detection and prevention
products.
Current
cervical cancer screening and diagnostic tests, primarily the Pap
test, HPV test, and colposcopy, are well established and pervasive.
Improvements and new technologies for cervical cancer detection and
prevention, such as Thin-Prep from Hologic and HPV testing from
Qiagen, have led to other new competitors. In addition, there are
other companies attempting to develop products using forms of
biophotonic technologies in cervical cancer detection, such as
Spectrascience, which has a very limited U.S. FDA approval to
market its device for detection of cervical cancers, but has not
yet entered the market. The approval limits use of the
Spectrascience device only after a colposcopy, as an adjunct. In
addition to the Spectrascience device, there are other technologies
that are seeking to enter the market as adjuncts to colposcopy,
including devices from Dysis and Zedco. While these technologies
are not direct competitors to LuViva, modifications to them or
other new technologies will require us to develop devices that are
more accurate, easier to use or less costly to administer so that
our products have a competitive advantage.
In
April 2014, the U.S. FDA approved the use of the Roche cobas HPV
test as a primary screener for cervical cancer. Using a sample of
cervical cells, the cobas HPV test detects DNA from 14 high-risk
HPV types. The test specifically identifies HPV 16 and HPV 18,
while concurrently detecting 12 other types of high-risk HPVs. This
could make HPV testing a competitor to the Pap test. However, due
to its lower specificity, we believe that screening with HPV will
increase the number of false positive results if widely
adopted.
In June
2006, the U.S. FDA approved the HPV vaccine Gardasil from drug
maker Merck. Gardasil is a prophylactic HPV vaccine, meaning that
it is designed to prevent the initial establishment of HPV
infections. For maximum efficacy, it is recommended that girls
receive the vaccine prior to becoming sexually active. Since
Gardasil will not block infection with all of the HPV types that
can cause cervical cancer, the vaccine should not be considered a
substitute for routine Pap tests. On October 16, 2009,
GlaxoSmithKline PLC was granted approval in the United States for a
similar preventive HPV vaccine, known as Cervarix. Due to the
limited availability and lack of 100% protection against all
potentially cancer-causing strains of HPV, we believe that the
vaccines will have a limited impact on the cervical cancer
screening and diagnostic market for many years.
Government
Regulation
The
medical devices that we manufacture are subject to regulation by
numerous regulatory bodies, including the CFDA, the U.S. FDA, and
comparable international regulatory agencies. These agencies
require manufacturers of medical devices to comply with applicable
laws and regulations governing the development, testing,
manufacturing, labeling, marketing and distribution of medical
devices. Devices are generally subject to varying levels of
regulatory control, the most comprehensive of which requires that a
clinical evaluation program be conducted before a device receives
approval for commercial distribution.
In the
European Union, medical devices are required to comply with the
Medical Devices Directive and obtain CE Mark certification in order
to market medical devices. The CE Mark certification, granted
following approval from an independent “Notified Body,”
is an international symbol of adherence to quality assurance
standards and compliance with applicable European Medical Devices
Directives. From 2017 through 2019, we were unable to pay the
annual registration fees to maintain our ISO 13485:2003
certification and our CE Mark. Once our financing is completed, we
will make the required payments and reobtain both certifications.
In addition, our December 21, 2018 agreement with Newmars,
described above, will allow final assembly at their ISO 13485:2016
accredited facility. Once all inspections have been passed for
LuViva, this will allow an alternative path for obtaining the CE
Mark.
China
has a regulatory regime similar to that of the European Union, but
due to interaction with the U.S. regulatory regime, the CFDA also
shares some similarities with its U.S. counterpart. Devices are
classified by the CFDA’s Center for Medical Device Evaluation
(CMDE) into three categories based on medical risk, with the level
of regulatory oversight determined by degree of risk and
invasiveness. CMDE’s device classifications and definitions
are as follows:
●
Class I device: The
safety and effectiveness of the device can be ensured through
routine administration.
●
Class II device:
Further control is required to ensure the safety and effectiveness
of the device.
●
Class III device:
The device is implanted into the human body; used for life support
or sustenance; or poses potential risk to the human body, and thus
must be strictly controlled in respect to safety and
effectiveness.
Based
on the above definitions and several discussions with regulatory
consultants and potential partners, we believe that LuViva is most
likely to be classified as a Class II device, however, this is not
certain and the CFDA may determine that LuViva requires a Class III
registration. Class III registrations are granted by the national
CFDA office while Class I and II registrations occur at the
provincial level. Typically, registration granted at the provincial
level allows a medical device to be marketed in all of
China’s provinces.
While
Class I devices usually do not require clinical trial data from
Chinese patients and Class III devices almost always do, Class II
medical devices sometimes do and sometimes do not require Chinese
clinical trials, and this determination may depend on the claim for
the device and quality of clinical trials conducted outside of
China. If clinical trials conducted in China are required, they
usually are less burdensome for Class II devices than Class III
devices.
CFDA
labs also conduct electrical, mechanical and electromagnetic
emission safety testing for medical devices similar to those
required for the CE Mark. As is the case with the U.S. FDA,
manufacturers in China undergo periodic inspections and must comply
with international quality standards such as ISO 13485 for medical
devices. As part of our agreement with SMI, SMI will underwrite the
cost of securing approval of LuViva with the CFDA.
In the
United States, permission to distribute a new device generally can
be met in one of two ways. The first process requires that a
pre-market notification (510(k) Submission) be made to the U.S. FDA
to demonstrate that the device is as safe and effective as, or
substantially equivalent to, a legally marketed device that is not
subject to premarket approval (PMA). A legally marketed device is a
device that (1) was legally marketed prior to May 28, 1976, (2) has
been reclassified from Class III to Class II or I, or (3) has been
found to be substantially equivalent to another legally marketed
device following a 510(k) Submission. The legally marketed device
to which equivalence is drawn is known as the
“predicate” device. Applicants must submit descriptive
data and, when necessary, performance data to establish that the
device is substantially equivalent to a predicate device. In some
instances, data from human clinical studies must also be submitted
in support of a 510(k) Submission. If so, these data must be
collected in a manner that conforms with specific requirements in
accordance with federal regulations. The U.S. FDA must issue an
order finding substantial equivalence before commercial
distribution can occur. Changes to existing devices covered by a
510(k) Submission which do not significantly affect safety or
effectiveness can generally be made by us without additional 510(k)
Submissions.
The
second process requires that an application for premarket approval
(PMA) be made to the U.S. FDA to demonstrate that the device is
safe and effective for its intended use as manufactured. This
approval process applies to most Class III devices, including
LuViva. In this case, two steps of U.S. FDA approval are generally
required before marketing in the United States can begin. First,
investigational device exemption (IDE) regulations must be complied
with in connection with any human clinical investigation of the
device in the United States. Second, the U.S. FDA must review the
PMA application, which contains, among other things, clinical
information acquired under the IDE. The U.S. FDA will approve the
PMA application if it finds that there is a reasonable assurance
that the device is safe and effective for its intended
purpose.
We
completed enrollment in our U.S. FDA pivotal trial of LuViva in
2008 and, after the U.S. FDA requested two-years of follow-up data
for patients enrolled in the study, the U.S. FDA accepted our
completed PMA application on November 18, 2010, effective September
23, 2010, for substantive review. On March 7, 2011, we announced
that the U.S. FDA had inspected two clinical trial sites and
audited our clinical trial data base systems as part of its review
process and raised no formal compliance issues. On January 20,
2012, we announced our intent to seek an independent panel review
of our PMA application after receiving a
“not-approvable” letter from the U.S. FDA. On November
14, 2012 we filed an amended PMA with the U.S. FDA. On September 6,
2013, we received a letter from the U.S. FDA with additional
questions and met with the U.S. FDA on May 8, 2014 to discuss our
response. On July 25, 2014, we announced that we had responded to
the U.S. FDA’s most recent questions.
We
received a “not-approvable” letter from the U.S. FDA on
May 15, 2015. We had a follow up meeting with the U.S. FDA to
discuss a path forward on November 30, 2015, at which we agreed to
submit a detailed clinical protocol for U.S. FDA review so that
additional studies can be completed. We held a follow up
teleconference with FDA on January 28, 2020 and filed a
pre-submission document to the Agency on February 17, 2020 that
summarized the clinical protocol to be submitted for FDA review.
These studies may not be completed in 2020, although we intend to
pursue FDA approval and start studies in 2020 once funds are
available. We remain committed to obtaining U.S. FDA approval, but
at the same time we are focused on international sales growth,
where we believe the commercial opportunities are larger and the
clinical need is more significant.
The
process of obtaining clearance to market products is costly and
time-consuming in virtually all of the major markets in which we
sell, or expect to sell, our products and may delay the marketing
and sale of our products. Countries around the world have recently
adopted more stringent regulatory requirements, which are expected
to add to the delays and uncertainties associated with new product
releases, as well as the clinical and regulatory costs of
supporting those releases. No assurance can be given that our
products will be approved on a timely basis in any particular
jurisdiction, if at all. In addition, regulations regarding the
development, manufacture and sale of medical devices are subject to
future change. We cannot predict what impact, if any, those changes
might have on our business. Failure to comply with regulatory
requirements could have a material adverse effect on our business,
financial condition and results of operations.
Noncompliance with
applicable requirements can result in import detentions, fines,
civil penalties, injunctions, suspensions or losses of regulatory
approvals or clearances, recall or seizure of products, operating
restrictions, denial of export applications, governmental
prohibitions on entering into supply contracts, and criminal
prosecution. Failure to obtain regulatory approvals or the
restriction, suspension or revocation of regulatory approvals or
clearances, as well as any other failure to comply with regulatory
requirements, would have a material adverse effect on our business,
financial condition and results of operations.
Regulatory
approvals and clearances, if granted, may include significant
labeling limitations and limitations on the indicated uses for
which the product may be marketed. In addition, to obtain
regulatory approvals and clearances, the U.S. FDA and some foreign
regulatory authorities impose numerous other requirements with
which medical device manufacturers must comply. U.S. FDA
enforcement policy strictly prohibits the marketing of approved
medical devices for unapproved uses. Any products we manufacture or
distribute under U.S. FDA clearances or approvals are subject to
pervasive and continuing regulation by the U.S. FDA. The U.S. FDA
also requires us to provide it with information on death and
serious injuries alleged to have been associated with the use of
our products, as well as any malfunctions that would likely cause
or contribute to death or serious injury.
The
U.S. FDA requires us to register as a medical device manufacturer
and list our products. We are also subject to inspections by the
U.S. FDA and state agencies acting under contract with the U.S. FDA
to confirm compliance with good manufacturing practice. These
regulations require that we manufacture our products and maintain
documents in a prescribed manner with respect to manufacturing,
testing, quality assurance and quality control activities. The U.S.
FDA also has promulgated final regulatory changes to these
regulations that require, among other things, design controls and
maintenance of service records. These changes will increase the
cost of complying with good manufacturing practice
requirements.
Distributors of
medical devices may also be required to comply with other foreign
regulatory agencies, and we or our distributors currently have
marketing approval for LuViva from Health Canada, COFEPRIS in
Mexico, the Ministry of Health in Kenya, and the Singapore Health
Sciences Authority. The time required to obtain these foreign
approvals to market our products may be longer or shorter than that
required in China or the United States, and requirements for those
approvals may differ from those required by the CFDA or the U.S.
FDA.
We are
also subject to a variety of other controls that affect our
business. Labeling and promotional activities are subject to
scrutiny by the U.S. FDA and, in some instances, by the U.S.
Federal Trade Commission. The U.S. FDA actively enforces
regulations prohibiting marketing of products for unapproved users.
We are also subject, as are our products, to a variety of state and
local laws and regulations in those states and localities where our
products are or will be marketed. Any applicable state or local
regulations may hinder our ability to market our products in those
regions. Manufacturers are also subject to numerous federal, state
and local laws relating to matters such as safe working conditions,
manufacturing practices, environmental protection, fire hazard
control and disposal of hazardous or potentially hazardous
substances. We may be required to incur significant costs to comply
with these laws and regulations now or in the future. These laws or
regulations may have a material adverse effect on our ability to do
business.
Although our
marketing and distribution partners around the world assist in the
regulatory approval process, ultimately, we are be responsible for
obtaining and maintaining regulatory approvals for our products.
The inability or failure to comply with the varying regulations or
the imposition of new regulations would materially adversely affect
our business, financial condition and results of
operations.
Employees
and Consultants
As of
December 31, 2019, we had five regular employees and three
consultants to provide services to us on a full- or part-time
basis. Of the eight people employed or engaged by us, two are
engaged in engineering, manufacturing and development, two are
engaged in sales and marketing activities, one is engaged in
clinical testing and regulatory affairs, and three are engaged in
administration and accounting. No employees are covered by
collective bargaining agreements, and we believe we maintain good
relations with our employees.
Our
ability to operate successfully and manage our potential future
growth depends in significant part upon the continued service of
key scientific, technical, managerial and finance personnel, and
our ability to attract and retain additional highly qualified
personnel in these fields. Two of these key employees have an
employment contract with us; none are covered by key person or
similar insurance. In addition, if we are able to successfully
develop and commercialize our products, we likely will need to hire
additional scientific, technical, marketing, managerial and finance
personnel. We face intense competition for qualified personnel in
these areas, many of whom are often subject to competing employment
offers. The loss of key personnel or our inability to hire and
retain additional qualified personnel in the future could have a
material adverse effect on our business, financial condition and
results of operations.
Corporate
History
We are
a Delaware corporation, originally incorporated in 1992 under the
name “SpectRx, Inc.,” and, on February 22, 2008,
changed our name to Guided Therapeutics, Inc. At the same time, we
renamed our wholly owned subsidiary, InterScan, which originally
had been incorporated as “Guided
Therapeutics.”
Our
principal executive and operations facility is located at 5835
Peachtree Corners East, Suite B, Norcross, Georgia 30092, and our
telephone number is (770) 242-8723.
In addition to the other information in this annual report on Form
10-K, the following risk factors should be considered carefully in
evaluating us.
Risks
Related to Our Business
Although we will be required to raise additional funds in 2020,
there is no assurance that such funds can be raised on terms that
we would find acceptable, on a timely basis, or at
all.
Additional debt or
equity financing will be required for us to continue as a going
concern. We may seek to obtain additional funds for the financing
of our cervical cancer detection business through additional debt
or equity financings and/or new collaborative arrangements.
Management believes that additional financing, if obtainable, will
be sufficient to support planned operations only for a limited
period. Management has implemented operating actions to reduce cash
requirements. Any required additional funding may not be available
on terms attractive to us, on a timely basis, or at all. If we
cannot obtain additional funds or achieve profitability, we may not
be able to continue as a going concern.
Because
we must obtain additional funds through financing transactions or
through new collaborative arrangements in order to grow the
revenues of our cervical cancer detection product line, there
exists substantial doubt about our ability to continue as a going
concern. Therefore, it will be necessary to raise additional funds.
There can be no assurance that we will be able to raise these
additional funds. If we do not secure additional funding when
needed, we will be unable to conduct all of our product development
efforts as planned, which may cause us to alter our business plan
in relation to the development of our products. Even if we obtain
additional funding, we will need to achieve profitability
thereafter.
Our
independent registered public accountants’ report on our
consolidated financial statements as of and for the year ended
December 31, 2019, indicated that there was substantial doubt about
our ability to continue as a going concern because we had suffered
recurring losses from operations and had an accumulated deficit of
$139.6 million at December 31, 2019 summarized as
follows:
|
Accumulated
deficit, from inception to 12/31/2017
|
$138.6
million
|
|
Preferred
dividends
|
$ 0.1
million
|
|
Net
Profit for fiscal year 2018, ended 12/31/2018
|
$ (1.0)
million
|
|
Accumulated
deficit, from inception to 12/31/2018
|
$137.7
million
|
|
Net
Loss for year to date ended 12/31/2019
|
$ 1.9
million
|
|
Accumulated
deficit, from inception to 12/31/2019
|
$139.6
million
|
Our
management has implemented reductions in operating expenditures and
reductions in some development activities. We have determined to
make cervical cancer detection the focus of our business. We are
managing the development of our other programs only when funds are
made available to us via grants or contracts with government
entities or strategic partners. However, there can be no assurance
that we will be able to successfully implement or continue these
plans.
If we cannot obtain additional funds when needed, we will not be
able to implement our business plan.
We
require substantial additional capital to develop our products,
including completing product testing and clinical trials, obtaining
all required regulatory approvals and clearances, beginning and
scaling up manufacturing, and marketing our products. We have
historically financed our operations though the public and private
sale of debt and equity, funding from collaborative arrangements,
and grants. Any failure to achieve adequate funding in a timely
fashion would delay our development programs and could lead to
abandonment of our business plan. To the extent we cannot obtain
additional funding, our ability to continue to manufacture and sell
our current products, or develop and introduce new products to
market, will be limited. Further, financing our operations through
the public or private sale of debt or equity may involve
restrictive covenants or other provisions that could limit how we
conduct our business or finance our operations. Financing our
operations through collaborative arrangements generally means that
the obligations of the collaborative partner to fund our
expenditures are largely discretionary and depend on a number of
factors, including our ability to meet specified milestones in the
development and testing of the relevant product. We may not be able
to obtain an acceptable collaboration partner, and even if we do,
we may not be able to meet these milestones, or the collaborative
partner may not continue to fund our expenditures.
We do not have a long operating history, especially in the cancer
detection field, which makes it difficult to evaluate our
business.
Although we have
been in existence since 1992, we have only recently begun to
commercialize our cervical cancer detection technology. Because
limited historical information is available on our revenue trends
and manufacturing costs, it is difficult to evaluate our
business. Our prospects must be considered in light of the
substantial risks, expenses, uncertainties and difficulties
encountered by entrants into the medical device industry, which is
characterized by increasing intense competition and a high failure
rate.
We have a history of losses, and we expect losses to
continue.
We have
never been profitable and we have had operating losses since our
inception. We expect our operating losses to continue as we
continue to expend substantial resources to complete
commercialization of our products, obtain regulatory clearances or
approvals; build our marketing, sales, manufacturing and finance
capabilities, and conduct further research and development. The
further development and commercialization of our products will
require substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. We have only generated
limited revenues from product sales. Our accumulated deficit was
approximately $139.6 million at December 31, 2019.
We file federal taxes that may be subject to audit and adjustments
from time to time.
Although we have
been experiencing recurring losses, we are obligated to file tax
returns for compliance with IRS regulations and that of applicable
state jurisdictions. We have filed our 2018 federal and state
corporate tax returns. At December 31, 2019 and 2018, we have
approximately $75.8 and $77.2 million of net operating losses,
respectively. This net operating loss will be eligible to be
carried forward for tax purposes at federal and applicable states
level, but the use of such net operating losses may be subject to
restrictions under applicable tax law. A full valuation allowance
has been recorded related to the deferred tax assets generated from
the net operating losses.
We are currently delinquent with some of our federal payroll and
unemployment taxes and applicable state payroll and unemployment
tax filings
In
prior years we have been delinquent in filing our payroll and
unemployment taxes. We are currently working with both the IRS and
the State of Georgia to establish a payment plan. We have been able
to abate some of the penalties associated with the late filings. We
will attempt to file on time and to make payments to federal state
agencies on time, but we cannot guarantee that we will have
adequate funds or the personnel necessary to make these payments
and filings.
Our ability to sell our products is controlled by government
regulations, and we may not be able to obtain any necessary
clearances or approvals.
The
design, manufacturing, labeling, distribution and marketing of
medical device products are subject to extensive and rigorous
government regulation in most of the markets in which we sell, or
plan to sell, our products, which can be expensive and uncertain
and can cause lengthy delays before we can begin selling our
products in those markets.
In foreign countries, including European countries, we are subject
to government regulation, which could delay or prevent our ability
to sell our products in those jurisdictions.
In
order for us to market our products in Europe and some other
international jurisdictions, we and our distributors and agents
must obtain required regulatory registrations or approvals. We must
also comply with extensive regulations regarding safety, efficacy
and quality in those jurisdictions. We may not be able to obtain
the required regulatory registrations or approvals, or we may be
required to incur significant costs in obtaining or maintaining any
regulatory registrations or approvals we receive. Delays in
obtaining any registrations or approvals required for marketing our
products, failure to receive these registrations or approvals, or
future loss of previously obtained registrations or approvals would
limit our ability to sell our products internationally. For
example, international regulatory bodies have adopted various
regulations governing product standards, packaging requirements,
labeling requirements, import restrictions, tariff regulations,
duties and tax requirements. These regulations vary from country to
country. In order to sell our products in Europe, in 2018 we
or our assigns must undergo an inspection and re-file for ISO
13485:2016 and the CE Mark, which is an international symbol of
quality and compliance with applicable European medical device
directives. Failure to maintain ISO 13485:2016 certification or CE
mark certification or other international regulatory approvals
would prevent us from selling in some countries in the European
Union.
In the United States, we are subject to regulation by the U.S. FDA,
which could prevent us from selling our products
domestically.
In
order for us to market our products in the United States, we must
obtain clearance or approval from the U.S. Food and Drug
Administration, or U.S. FDA. We cannot be sure that:
●
we, or any
collaborative partner, will make timely filings with the U.S.
FDA;
●
the U.S. FDA will
act favorably or quickly on these submissions;
●
we will not be
required to submit additional information or perform additional
clinical studies; or
●
we will not face
other significant difficulties and costs necessary to obtain U.S.
FDA clearance or approval.
It can
take several years from initial filing of a PMA application and
require the submission of extensive supporting data and clinical
information. The U.S. FDA may impose strict labeling or other
requirements as a condition of its clearance or approval, any of
which could limit our ability to market our products domestically.
Further, if we wish to modify a product after U.S. FDA approval of
a PMA application, including changes in indications or other
modifications that could affect safety and efficacy, additional
clearances or approvals will be required from the U.S. FDA. Any
request by the U.S. FDA for additional data, or any requirement by
the U.S. FDA that we conduct additional clinical studies, could
result in a significant delay in bringing our products to market
domestically and require substantial additional research and other
expenditures. Similarly, any labeling or other conditions or
restrictions imposed by the U.S. FDA could hinder our ability to
effectively market our products domestically. Further, there may be
new U.S. FDA policies or changes in U.S. FDA policies that could be
adverse to us.
Even if we obtain clearance or approval to sell our products, we
are subject to ongoing requirements and inspections that could lead
to the restriction, suspension or revocation of our
clearance.
We, as
well as any potential collaborative partners, will be required to
adhere to applicable regulations in the markets in which we operate
and sell our products, regarding good manufacturing practice, which
include testing, control, and documentation requirements. Ongoing
compliance with good manufacturing practice and other applicable
regulatory requirements will be strictly enforced applicable
regulatory agencies. Failure to comply with these regulatory
requirements could result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, failure to obtain
premarket clearance or premarket approval for devices, withdrawal
of approvals previously obtained, and criminal prosecution. The
restriction, suspension or revocation of regulatory approvals or
any other failure to comply with regulatory requirements would
limit our ability to operate and could increase our
costs.
We depend on a limited number of distributors and any reduction,
delay or cancellation of an order from these distributors or the
loss of any of these distributors could cause our revenue to
decline.
Each
year we have had one or a few distributors that have accounted for
substantially all of our limited revenues. As a result, the
termination of a purchase order with any one of these distributors
may result in the loss of substantially all of our revenues. We are
constantly working to develop new relationships with existing or
new distributors, but despite these efforts we may not be
successful at generating new orders to maintain similar revenues as
current purchase orders are filled. In addition, since a
significant portion of our revenues is derived from a relatively
few distributors, any financial difficulties experienced by any one
of these distributors, or any delay in receiving payments from any
one of these distributors, could have a material adverse effect on
our business, results of operations, financial condition and cash
flows.
To successfully market and sell our products internationally, we
must address many issues with which we have limited
experience.
All of
our sales of LuViva to date have been to distributors outside of
the United States. We expect that substantially all of our business
will continue to come from sales in foreign markets, through
increased penetration in countries where we currently sell LuViva,
combined with expansion into new international markets. However,
international sales are subject to a number of risks,
including:
●
difficulties in
staffing and managing international operations;
●
difficulties in
penetrating markets in which our competitors’ products may be
more established;
●
reduced or no
protection for intellectual property rights in some
countries;
●
export
restrictions, trade regulations and foreign tax laws;
●
fluctuating foreign
currency exchange rates;
●
foreign
certification and regulatory clearance or approval
requirements;
●
difficulties in
developing effective marketing campaigns for unfamiliar, foreign
countries;
●
customs clearance
and shipping delays;
●
political and
economic instability; and
●
preference for
locally produced products.
If one
or more of these risks were realized, it could require us to
dedicate significant resources to remedy the situation, and even if
we are able to find a solution, our revenues may still
decline.
To market and sell LuViva internationally, we depend on
distributors and they may not be successful.
We
currently depend almost exclusively on third-party distributors to
sell and service LuViva internationally and to train our
international distributors, and if these distributors terminate
their relationships with us or under-perform, we may be unable to
maintain or increase our level of international revenue. We will
also need to engage additional international distributors to grow
our business and expand the territories in which we sell LuViva.
Distributors may not commit the necessary resources to market, sell
and service LuViva to the level of our expectations. If current or
future distributors do not perform adequately, or if we are unable
to engage distributors in particular geographic areas, our revenue
from international operations will be adversely
affected.
The coronavirus outbreak could adversely impact our
business.
In
December 2019, it was first reported that there had been an
outbreak of a novel strain of coronavirus, SARS-CoV-2, in China. As
the coronavirus continues to spread outside of China, including
throughout the United States, we may experience disruptions that
could severely impact our business and regulatory filings,
including:
●
impact to the
financial markets;
●
disruption in our
ability to sell our product in foreign markets;
●
disruption on our
ability to source materials;
●
disruption in our
ability to manufacture our devices and disposables;
●
delays or
difficulties in completing our regulatory work;
●
limitations on our
employee resources ability to work, including because of sickness
of employees or their families or the desire of employees to avoid
contact with large groups of people; and
●
additional
repercussions on our ability to operate our business.
The
global outbreak of coronavirus continues to rapidly evolve. The
extent to which the coronavirus impacts our results will depend on
future developments, which are highly uncertain and cannot be
predicted, including new information which may emerge concerning
the severity of the coronavirus, the ultimate geographic spread of
the coronavirus, the duration of the outbreak, travel restrictions
imposed by countries we conduct our business, business closures or
business disruption in the world, a reduction in time spent out of
home and the actions taken throughout the world, including in our
markets, to contain the coronavirus or treat its impact. The future
impact of the outbreak is highly uncertain and cannot be predicted,
and we cannot provide any assurance that the outbreak will not have
a material adverse impact on our operations or future results or
filings with regulatory health authorities. The extent of the
impact to us, if any, will depend on future developments, including
actions taken to contain the coronavirus.
Risks Related to Our Intellectual Property
Our success largely depends on our ability to maintain and protect
the proprietary information on which we base our
products.
Our
success depends in large part upon our ability to maintain and
protect the proprietary nature of our technology through the patent
process, as well as our ability to license from other’s
patents and patent applications necessary to develop our products.
If any of our patents are successfully challenged, invalidated or
circumvented, or our right or ability to manufacture our products
was to be limited, our ability to continue to manufacture and
market our products could be adversely affected. In addition to
patents, we rely on trade secrets and proprietary know-how, which
we seek to protect, in part, through confidentiality and
proprietary information agreements. The other parties to these
agreements may breach these provisions, and we may not have
adequate remedies for any breach. Additionally, our trade secrets
could otherwise become known to or be independently developed by
competitors.
As of
December 31, 2019, we have been issued, or have rights to, 16 U.S.
patents (including those under license). In addition, we have filed
for, or have rights to, two U.S. patents (including those under
license) that are still pending. We also have three granted patents
that apply to our interstitial fluid analysis system as well as
seven international patents that apply to our noninvasive
technologies. There are additional international patents and
pending applications. One or more of the patents we hold directly
or license from third parties, including those for our cervical
cancer detection products, may be successfully challenged,
invalidated or circumvented, or we may otherwise be unable to rely
on these patents. These risks are also present for the process we
use or will use for manufacturing our products. In addition, our
competitors, many of whom have substantial resources and have made
substantial investments in competing technologies, may apply for
and obtain patents that prevent, limit or interfere with our
ability to make, use and sell our products, either in the United
States or in international markets.
The
medical device industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights. In addition, the U.S. Patent and Trademark Office, or
USPTO, may institute interference proceedings. The defense and
prosecution of intellectual property suits, USPTO proceedings and
related legal and administrative proceedings are both costly and
time consuming. Moreover, we may need to litigate to enforce our
patents, to protect our trade secrets or know-how, or to determine
the enforceability, scope and validity of the proprietary rights of
others. Any litigation or interference proceedings involving us may
require us to incur substantial legal and other fees and expenses
and may require some of our employees to devote all or a
substantial portion of their time to the proceedings. An adverse
determination in the proceedings could subject us to significant
liabilities to third parties, require us to seek licenses from
third parties or prevent us from selling our products in some or
all markets. We may not be able to reach a satisfactory settlement
of any dispute by licensing necessary patents or other intellectual
property. Even if we reached a settlement, the settlement process
may be expensive and time consuming, and the terms of the
settlement may require us to pay substantial royalties. An adverse
determination in a judicial or administrative proceeding or the
failure to obtain a necessary license could prevent us from
manufacturing and selling our products.
We may be unable to commercialize our products if we are unable to
protect our proprietary rights, and we may be liable for
significant costs and damages if we face a claim of intellectual
property infringement by a third party.
Our
near and long-term prospects depend in part on our ability to
obtain and maintain patents, protect trade secrets and operate
without infringing upon the proprietary rights of others. In the
absence of patent and trade secret protection, competitors may
adversely affect our business by independently developing and
marketing substantially equivalent or superior products and
technology, possibly at lower prices. We could also incur
substantial costs in litigation and suffer diversion of attention
of technical and management personnel if we are required to defend
ourselves in intellectual property infringement suits brought by
third parties, with or without merit, or if we are required to
initiate litigation against others to protect or assert our
intellectual property rights. Moreover, any such litigation may not
be resolved in our favor.
Although
we and our licensors have filed various patent applications
covering the uses of our product candidates, patents may not be
issued from the patent applications already filed or from
applications that we might file in the future. Moreover, the patent
position of companies in the pharmaceutical industry generally
involves complex legal and factual questions and has been the
subject of much litigation. Any patents we own or license, now or
in the future, may be challenged, invalidated or circumvented. To
date, no consistent policy has been developed in the U.S. Patent
and Trademark Office (the “PTO”) regarding the breadth
of claims allowed in biotechnology patents.
In
addition, because patent applications in the U.S. are maintained in
secrecy until patent applications publish or patents issue, and
because publication of discoveries in the scientific or patent
literature often lags behind actual discoveries, we cannot be
certain that we and our licensors are the first creators of
inventions covered by any licensed patent applications or patents
or that we or they are the first to file. The PTO may commence
interference proceedings involving patents or patent applications,
in which the question of first inventorship is contested.
Accordingly, the patents owned or licensed to us may not be valid
or may not afford us protection against competitors with similar
technology, and the patent applications licensed to us may not
result in the issuance of patents.
It
is also possible that our owned and licensed technologies may
infringe on patents or other rights owned by others, and licenses
to which may not be available to us. We may be unable to obtain a
license under such patent on terms favorable to us, if at all. We
may have to alter our products or processes, pay licensing fees or
cease activities altogether because of patent rights of third
parties.
In
addition to the products for which we have patents or have filed
patent applications, we rely upon unpatented proprietary technology
and may not be able to meaningfully protect our rights with regard
to that unpatented proprietary technology. Furthermore, to the
extent that consultants, key employees or other third parties apply
technological information developed by them or by others to any of
our proposed projects, disputes may arise as to the proprietary
rights to this information, which may not be resolved in our
favor.
We may be involved in lawsuits to protect or enforce our patents,
which could be expensive and time consuming.
The
pharmaceutical industry has been characterized by extensive
litigation regarding patents and other intellectual property
rights, and companies have employed intellectual property
litigation to gain a competitive advantage. We may become subject
to infringement claims or litigation arising out of patents and
pending applications of our competitors, or additional interference
proceedings declared by the PTO to determine the priority of
inventions. The defense and prosecution of intellectual property
suits, PTO proceedings, and related legal and administrative
proceedings are costly and time-consuming to pursue, and their
outcome is uncertain. Litigation may be necessary to enforce our
issued patents, to protect our trade secrets and know-how, or to
determine the enforceability, scope, and validity of the
proprietary rights of others. An adverse determination in
litigation or interference proceedings to which we may become a
party could subject us to significant liabilities, require us to
obtain licenses from third parties, or restrict or prevent us from
selling our products in certain markets. Although patent and
intellectual property disputes might be settled through licensing
or similar arrangements, the costs associated with such
arrangements may be substantial and could include our paying large
fixed payments and ongoing royalties. Furthermore, the necessary
licenses may not be available on satisfactory terms or at
all.
Competitors
may infringe our patents, and we may file infringement claims to
counter infringement or unauthorized use. This can be expensive,
particularly for a company of our size, and time-consuming. In
addition, in an infringement proceeding, a court may decide that a
patent of ours is not valid or is unenforceable or may refuse to
stop the other party from using the technology at issue on the
grounds that our patents do not cover its technology. An adverse
determination of any litigation or defense proceedings could put
one or more of our patents at risk of being invalidated or
interpreted narrowly.
Also,
a third party may assert that our patents are invalid and/or
unenforceable. There are no unresolved communications, allegations,
complaints or threats of litigation related to the possibility that
our patents are invalid or unenforceable. Any litigation or claims
against us, whether or not merited, may result in substantial
costs, place a significant strain on our financial resources,
divert the attention of management and harm our reputation. An
adverse decision in litigation could result in inadequate
protection for our product candidates and/or reduce the value of
any license agreements we have with third parties.
Interference
proceedings brought before the PTO may be necessary to determine
priority of invention with respect to our patents or patent
applications. During an interference proceeding, it may be
determined that we do not have priority of invention for one or
more aspects in our patents or patent applications and could result
in the invalidation in part or whole of a patent or could put a
patent application at risk of not issuing. Even if successful, an
interference proceeding may result in substantial costs and
distraction to our management.
Furthermore,
because of the substantial amount of discovery required in
connection with intellectual property litigation or interference
proceedings, there is a risk that some of our confidential
information could be compromised by disclosure. In addition, there
could be public announcements of the results of hearings, motions
or other interim proceedings or developments. If investors perceive
these results to be negative, the price of our common stock could
be adversely affected.
If we infringe the rights of third parties, we could be prevented
from selling products, forced to pay damages, and defend against
litigation.
If
our products, methods, processes and other technologies infringe
the proprietary rights of other parties, we could incur substantial
costs and we may have to: obtain licenses, which may not be
available on commercially reasonable terms, if at all; abandon an
infringing product candidate; redesign our products or processes to
avoid infringement; stop using the subject matter claimed in the
patents held by others; pay damages; and/or defend litigation or
administrative proceedings which may be costly whether we win or
lose, and which could result in a substantial diversion of our
financial and management resources.
Risks
Related to Our Sales Strategy
We may not be able to generate sufficient sales revenues to sustain
our growth and strategy plans.
Our
cervical cancer diagnostic activities have been financed to date
through a combination of government grants, strategic partners and
direct investment. Growing revenues for this product are the main
focus of our business. In order to effectively market the cervical
cancer detection product, additional capital will be
needed.
Additional product
lines involve the modification of the cervical cancer detection
technology for use in other cancers. These product lines are only
in the earliest stages of research and development and are
currently not projected to reach market for several years. Our goal
is to receive enough funding from government grants and contracts,
as well as payments from strategic partners, to fund development of
these product lines without diverting funds or other necessary
resources from the cervical cancer program.
Because our products, which use different technology or apply
technology in different ways than other medical devices, are or
will be new to the market, we may not be successful in launching
our products and our operations and growth would be adversely
affected.
Our
products are based on new methods of cancer detection. If our
products do not achieve significant market acceptance, our sales
will be limited and our financial condition may suffer. Physicians
and individuals may not recommend or use our products unless they
determine that these products are an attractive alternative to
current tests that have a long history of safe and effective use.
To date, our products have been used by only a limited number of
people, and few independent studies regarding our products have
been published. The lack of independent studies limits the ability
of doctors or consumers to compare our products to conventional
products.
If we are unable to compete effectively in the highly competitive
medical device industry, our future growth and operating results
will suffer.
The
medical device industry in general and the markets in which we
expect to offer products in particular, are intensely competitive.
Many of our competitors have substantially greater financial,
research, technical, manufacturing, marketing and distribution
resources than we do and have greater name recognition and
lengthier operating histories in the health care industry. We may
not be able to effectively compete against these and other
competitors. A number of competitors are currently marketing
traditional laboratory-based tests for cervical cancer screening
and diagnosis. These tests are widely accepted in the health care
industry and have a long history of accurate and effective use.
Further, if our products are not available at competitive prices,
health care administrators who are subject to increasing pressures
to reduce costs may not elect to purchase them. Also, a number of
companies have announced that they are developing, or have
introduced, products that permit non-invasive and less invasive
cancer detection. Accordingly, competition in this area is expected
to increase.
Furthermore, our
competitors may succeed in developing, either before or after the
development and commercialization of our products, devices and
technologies that permit more efficient, less expensive
non-invasive and less invasive cancer detection. It is also
possible that one or more pharmaceutical or other health care
companies will develop therapeutic drugs, treatments or other
products that will substantially reduce the prevalence of cancers
or otherwise render our products obsolete.
We have limited manufacturing experience, which could limit our
growth.
We do
not have manufacturing experience that would enable us to make
products in the volumes that would be necessary for us to achieve
significant commercial sales, and we rely upon our suppliers. In
addition, we may not be able to establish and maintain reliable,
efficient, full scale manufacturing at commercially reasonable
costs in a timely fashion. Difficulties we encounter in
manufacturing scale-up, or our failure to implement and maintain
our manufacturing facilities in accordance with good manufacturing
practice regulations, international quality standards or other
regulatory requirements, could result in a delay or termination of
production. In the past, we have had substantial difficulties in
establishing and maintaining manufacturing for our products and
those difficulties impacted our ability to increase sales.
Companies often encounter difficulties in scaling up production,
including problems involving production yield, quality control and
assurance, and shortages of qualified personnel.
Since we rely on sole source suppliers for several of the
components used in our products, any failure of those suppliers to
perform would hurt our operations.
Several
of the components used in our products or planned products, are
available from only one supplier, and substitutes for these
components could not be obtained easily or would require
substantial modifications to our products. Any significant problem
experienced by one of our sole source suppliers may result in a
delay or interruption in the supply of components to us until that
supplier cures the problem or an alternative source of the
component is located and qualified. Any delay or interruption would
likely lead to a delay or interruption in our manufacturing
operations. For our products that require premarket approval, the
inclusion of substitute components could require us to qualify the
new supplier with the appropriate government regulatory
authorities. Alternatively, for our products that qualify for
premarket notification, the substitute components must meet our
product specifications.
Because we operate in an industry with significant product
liability risk, and we have not specifically insured against this
risk, we may be subject to substantial claims against our
products.
The
development, manufacture and sale of medical products entail
significant risks of product liability claims. We currently have no
product liability insurance coverage beyond that provided by our
general liability insurance. Accordingly, we may not be adequately
protected from any liabilities, including any adverse judgments or
settlements, we might incur in connection with the development,
clinical testing, manufacture and sale of our products. A
successful product liability claim, or series of claims brought
against us that result in an adverse judgment against or settlement
by us in excess of any insurance coverage could seriously harm our
financial condition or reputation. In addition, product liability
insurance is expensive and may not be available to us on acceptable
terms, if at all.
The availability of third party reimbursement for our products is
uncertain, which may limit consumer use and the market for our
products.
In the
United States and elsewhere, sales of medical products are
dependent, in part, on the ability of consumers of these products
to obtain reimbursement for all or a portion of their cost from
third-party payors, such as government and private insurance plans.
Any inability of patients, hospitals, physicians and other users of
our products to obtain sufficient reimbursement from third-party
payors for our products, or adverse changes in relevant
governmental policies or the policies of private third-party payors
regarding reimbursement for these products, could limit our ability
to sell our products on a competitive basis. We are unable to
predict what changes will be made in the reimbursement methods used
by third-party health care payors. Moreover, third-party payors are
increasingly challenging the prices charged for medical products
and services, and some health care providers are gradually adopting
a managed care system in which the providers contract to provide
comprehensive health care services for a fixed cost per person.
Patients, hospitals and physicians may not be able to justify the
use of our products by the attendant cost savings and clinical
benefits that we believe will be derived from the use of our
products, and therefore may not be able to obtain third-party
reimbursement.
Reimbursement and
health care payment systems in international markets vary
significantly by country and include both government-sponsored
health care and private insurance. We may not be able to obtain
approvals for reimbursement from these international third-party
payors in a timely manner, if at all. Any failure to receive
international reimbursement approvals could have an adverse effect
on market acceptance of our products in the international markets
in which approvals are sought.
We have a substantial amount of indebtedness, which may adversely
affect our cash flow and our ability to operate our
business.
Our
outstanding indebtedness, which is considered ordinary course
payables and accrued payroll liabilities, was $4.2 million at
December 31, 2019.
The
terms of our indebtedness could have negative consequences to us,
such as:
●
we may be unable to
obtain additional financing to fund working capital, operating
losses, capital expenditures or acquisitions on terms acceptable to
us, or at all;
●
the amount of our
interest expense may increase if we are unable to make payments
when due;
●
our assets might be
subject to foreclosure if we default on our secured debt (see
“—We have outstanding
debt that is collateralized by a general security interest in all
of our assets, including our intellectual property. If we were to
fail to repay the debt when due, the holders would have the right
to foreclose on these assets.”);
●
our vendors or
employees may, and some have, instituted proceedings to collect on
amounts owed them;
●
we have to use a
substantial portion of our cash flows from operations to repay our
indebtedness, including ordinary course accounts payable and
accrued payroll liabilities, which reduces the amount of money we
have for future operations, working capital, inventory, expansion,
or general corporate or other business activities; and
●
we may be unable to
refinance our indebtedness on terms acceptable to us, or at
all.
Our
ability to meet our expenses and debt obligations will depend on
our future performance, which will be affected by financial,
business, economic, regulatory and other factors. We will be unable
to control many of these factors, such as economic conditions. We
cannot be certain that our earnings will be sufficient to allow us
to pay the principal and interest on our debt and meet any other
obligations. If we do not have enough money to service our debt, we
may be required, but unable, to refinance all or part of our
existing debt, sell assets, borrow money or raise equity on terms
acceptable to us, if at all.
We have outstanding debt that is collateralized by a general
security interest in all of our assets, including our intellectual
property. If we were to fail to repay the debt when due, the
holders would have the right to foreclose on these
assets.
At
April 7, 2020, we had notes outstanding that are collateralized by
a security interest in our current and future inventory and
accounts receivable. We also had a note outstanding that is
collateralized by a security interest in all of our assets,
including our intellectual property. When the debt is repaid, the
holders’ security interests on our assets will be
extinguished. However, if an event of default occurs under the
notes prior to their repayment, the holders may exercise their
rights to foreclose on these secured assets for the payment of
these obligations. Under “cross-default” provisions in
each of the notes, an event of default under one note is
automatically an event of default under the other notes. Any such
default and resulting foreclosure would have a material adverse
effect on our business, financial condition and results of
operations.
We are subject to restrictive covenants under the terms of our
outstanding secured debt. If we were to default under the terms of
these covenants, the holders would have the right to foreclose on
the assets that secure the debt.
The
instruments governing our outstanding secured debt contain
restrictive covenants. For example, our senior secured convertible
note prohibits us from incurring additional indebtedness for
borrowed money, repurchasing any outstanding shares of our common
stock, or paying any dividends on our capital stock, in each case
without the note holder's prior written consent, If we were to
breach any of these covenants, the holder could declare an event of
default on the note, and exercise its rights to foreclose on the
assets securing the note.
Our success depends on our ability to attract and retain
scientific, technical, managerial and finance
personnel.
Our
ability to operate successfully and manage our future growth
depends in significant part upon the continued service of key
scientific, technical, managerial and finance personnel, as well as
our ability to attract and retain additional highly qualified
personnel in these fields. We may not be able to attract and retain
key employees when necessary, which would limit our operations and
growth. In addition, if we are able to successfully develop and
commercialize our products, we will need to hire additional
scientific, technical, marketing, managerial and finance personnel.
We face intense competition for qualified personnel in these areas,
many of whom are often subject to competing employment
offers.
Certain provisions of our certificate of incorporation that
authorize the issuance of additional shares of preferred stock may
make it more difficult for a third party to effect a change in
control.
Our
certificate of incorporation authorizes our board of directors to
issue up to 5.0 million shares of preferred stock. Our undesignated
shares of preferred stock may be issued in one or more series, the
terms of which may be determined by the board without further
stockholder action. These terms may include, among other terms,
voting rights, including the right to vote as a series on
particular matters, preferences as to liquidation and dividends,
repurchase rights, conversion rights, redemption rights and sinking
fund provisions. The issuance of any preferred stock could diminish
the rights of holders of our common stock, and therefore could
reduce the value of our common stock. In addition, specific rights
granted to future holders of preferred stock could be used to
restrict our ability to merge with or sell assets to a third party.
The ability of our board to issue preferred stock could make it
more difficult, delay, discourage, prevent or make it more costly
to acquire or effect a change in control, which in turn could
prevent our stockholders from recognizing a gain in the event that
a favorable offer is extended and could materially and negatively
affect the market price of our common stock.
Risks
Related to Our Common Stock
On March 29, 2019, a 1:800 reverse stock split of all of our issued
and outstanding common stock was implemented. There are risks
associated with a reverse stock split.
On
March 29, 2019, a 1:800 reverse stock
split of all of our issued and outstanding common stock was
implemented. As a result of the reverse stock split, every 800
shares of issued and outstanding common stock were converted into 1
share of common stock. All fractional shares created by the reverse
stock split were rounded to the nearest whole share. The number of
authorized shares of common stock did not
change.
There
are certain risks associated with the reverse stock split,
including the following:
●
We have additional
authorized shares of common stock that the board could issue in
future without stockholder approval, and such additional shares
could be issued, among other purposes, in financing transactions or
to resist or frustrate a third-party transaction that is favored by
a majority of the independent stockholders. This could have an
anti-takeover effect, in that additional shares could be issued,
within the limits imposed by applicable law, in one or more
transactions that could make a change in control or takeover of us
more difficult.
●
There can be no
assurance that the reverse stock split will achieve the benefits
that we hope it will achieve. The total market capitalization of
our common stock after the reverse stock split may be lower than
the total market capitalization before the reverse stock
split.
The reverse stock split may decrease the liquidity of the shares of
our common stock.
The
liquidity of the shares of our common stock may be affected
adversely by the reverse stock split given the reduced number of
shares that were outstanding immediately following the reverse
stock split, especially if the market price of our common stock
does not increase as a result of the reverse stock split. In
addition, the reverse stock split may have increased the number of
stockholders who own odd lots of our common stock, creating the
potential for such stockholders to experience an increase in the
cost of selling their shares and greater difficulty effecting such
sales.
Following the reverse stock split, the resulting market price of
our common stock may not attract new investors, including
institutional investors, and may not satisfy the investing
requirements of those investors. Consequently, the trading
liquidity of our common stock may not improve.
Although we believe
that a higher market price of our common stock may help generate
greater or broader investor interest, there can be no assurance
that the reverse stock split will result in a share price that will
attract new investors, including institutional investors. In
addition, there can be no assurance that the market price of our
common stock will satisfy the investing requirements of those
investors. As a result, the trading liquidity of our common stock
may not necessarily improve.
The number of shares of our common stock issuable upon the
conversion of our outstanding convertible debt and preferred stock
or exercise of outstanding warrants and options is
substantial.
As of
April 14, 2020, our outstanding convertible debt was convertible
into an aggregate of 108,900,837 shares of our common stock, and
the outstanding shares of our Series C, Series C1 and Series C2
preferred stock were convertible into an aggregate of 9,267,770
shares of common stock. Also, as of that date we had warrants
outstanding that were exercisable for an aggregate of 66,615,856
shares, contractual obligations to issue 2,132 shares, and
outstanding options to purchase 50 shares. The shares of common
stock issuable upon conversion or exercise of these securities
would have constituted approximately 97.0% of the total number of
shares of common stock then issued and outstanding. However, please
refer to Footnote 11 - CONVERTIBLE
DEBT IN DEFAULT in the paragraph: Debt Restructuring for
more information regarding our warrants.
Further, under the
terms of our convertible debt and preferred stock, as well as
certain of our outstanding warrants, the conversion price or
exercise price, as the case may be, could be adjusted downward,
causing substantial dilution. See “—Adjustments to the conversion price for our
convertible debt and preferred stock, and the exercise price for
certain of our warrants, will dilute the ownership interests of our
existing stockholders.”
Adjustments to the conversion price of our convertible debt and
preferred stock, and the exercise price for certain of our
warrants, will dilute the ownership interests of our existing
stockholders.
Under
the terms of a portion of our convertible debt, the conversion
price fluctuates with the market price of our common stock.
Additionally, under the terms of our Series C preferred stock, any
dividends we choose to pay in shares of our common stock will be
calculated based on the then-current market price of our common
stock. Accordingly, if the market price of our common stock
decreases, the number of shares of our common stock issuable upon
conversion of the convertible debt or upon payment of dividends on
our outstanding Series C preferred stock will increase, and may
result in the issuance of a significant number of additional shares
of our common stock.
Under
the terms of our preferred stock and certain of our convertible
notes and outstanding warrants, the conversion price or exercise
price will be lowered if we issue common stock at a per share price
below the then-conversion price or then-exercise price for those
securities. Reductions in the conversion price or exercise price
would result in the issuance of a significant number of additional
shares of our common stock upon conversion or exercise, which would
result in dilution in the value of the shares of our outstanding
common stock and the voting power represented thereby.
Our stock is thinly traded, so you may be unable to sell at or near
ask prices or at all.
The
shares of our common stock are only quoted in the OTC pink sheet
marketplace. Shares of our common stock are thinly traded, meaning
that the number of persons interested in purchasing our common
shares at or near ask prices at any given time may be relatively
small or non-existent. This situation is attributable to a number
of factors, including:
●
we
are a small company that is relatively unknown to stock analysts,
stock brokers, institutional investors and others in the investment
community that generate or influence sales volume; and
●
stock
analysts, stock brokers and institutional investors may be
risk-averse and be reluctant to follow a company such as ours that
faces substantial doubt about its ability to continue as a going
concern or to purchase or recommend the purchase of our shares
until such time as we became more viable.
As a
consequence, our stock price may not reflect an actual or perceived
value. Also, there may be periods of several days or more when
trading activity in our shares is minimal or non-existent, as
compared to a seasoned issuer that has a large and steady volume of
trading activity that will generally support continuous sales
without an adverse effect on share price. A broader or more active
public trading market for our common shares may not develop or if
developed, may not be sustained. Due to these conditions, you may
not be able to sell your shares at or near ask prices or at all if
you need money or otherwise desire to liquidate your
shares.
Trading in our common stock is subject to special sales practices
and may be difficult to sell.
Our
common stock is subject to the Securities and Exchange
Commission’s “penny stock” rule, which imposes
special sales practice requirements upon broker-dealers who sell
such securities to persons other than established distributors or
accredited investors. Penny stocks are generally defined to be an
equity security that has a market price of less than $5.00 per
share. For transactions covered by the rule, the broker-dealer must
make a special suitability determination for the purchaser and
receive the purchaser’s written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell our securities and also may affect the
ability of our stockholders to sell their securities in any market
that might develop.
Stockholders should
be aware that, according to Securities and Exchange Commission, the
market for penny stocks has suffered from patterns of fraud and
abuse. Such patterns include:
●
control
of the market for the security by one or a few broker-dealers that
are often related to the promoter or issuer;
●
manipulation
of prices through prearranged matching of purchases and sales and
false and misleading press releases;
●
“boiler
room” practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales
persons;
●
excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
●
the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices
and with consequent investor losses.
Our
management is aware of the abuses that have occurred historically
in the penny stock market. Although we do not expect to be in a
position to dictate the behavior of the market or of broker-dealers
who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns
from being established with respect to our common
stock.
Our need to raise additional capital in the near future or to use
our equity securities for payments could have a dilutive effect on
your investment.
In
order to continue operations, we will need to raise additional
capital. We may attempt to raise capital through the public or
private sale of our common stock or securities convertible into or
exercisable for our common stock. In addition, from time to time we
have issued our common stock or warrants in lieu of cash payments.
If we sell additional shares of our common stock or other equity
securities or issue such securities in respect of other claims or
indebtedness, such sales or issuances will further dilute the
percentage of our equity that you own. Depending upon the price per
share of securities that we sell or issue in the future, if any,
your interest in us could be further diluted by any adjustments to
the number of shares and the applicable exercise price required
pursuant to the terms of the agreements under which we previously
issued convertible securities.
FORWARD LOOKING STATEMENTS
Statements
in this report, which express “belief,”
“anticipation” or “expectation,” as well as
other statements that are not historical facts, are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, or Securities Act, and Section 21E of the Securities
Exchange Act of 1934, or Exchange Act. These forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from historical results or
anticipated results, including those identified in the foregoing
“Risk Factors” and elsewhere in this report. Examples
of these uncertainties and risks include, but are not limited
to:
●
access to
sufficient debt or equity capital to meet our operating and
financial needs;
●
the effectiveness
and ultimate market acceptance of our products;
●
whether our
products in development will prove safe, feasible and
effective;
●
whether and when we
or any potential strategic partners will obtain required regulatory
approvals in the markets in which we plan to operate;
●
our need to achieve
manufacturing scale-up in a timely manner, and our need to provide
for the efficient manufacturing of sufficient quantities of our
products;
●
the lack of
immediate alternate sources of supply for some critical components
of our products;
●
our patent and
intellectual property position;
●
the need to fully
develop the marketing, distribution, customer service and technical
support and other functions critical to the success of our product
lines;
●
the dependence on
potential strategic partners or outside investors for funding,
development assistance, clinical trials, distribution and marketing
of some of our products; and
●
other risks and
uncertainties described from time to time in our reports filed with
the SEC.
Forward-looking
statements should not be read as a guarantee of future performance
or results and will not necessarily be accurate indications of the
times at, or by which, such performance or results will be
achieved. Forward-looking information is based on information
available at the time and/or management’s good faith belief
with respect to future events and is subject to risks and
uncertainties that could cause actual performance or results to
differ materially from those expressed in the
statements.
Forward-looking
statements speak only as of the date the statements are made. We
assume no obligation to update forward-looking statements to
reflect actual results, changes in assumptions or changes in other
factors affecting forward-looking information except to the extent
required by applicable securities laws. If we update one or more
forward-looking statements, no inference should be drawn that we
will make additional updates with respect thereto or with respect
to other forward-looking statements.
Item 1B. Unresolved Staff Comments
Not
applicable.
Our
corporate offices, which also comprise our administrative, research
and development, marketing and production facilities, are located
at 5835 Peachtree Corners East, Suite B, Norcross, Georgia 30092,
where we lease approximately 12,800 square feet under a lease that
expires in March 2021.
Item 3. Legal Proceedings
We are
subject to claims and legal actions that arise in the ordinary
course of business. However, we are not currently subject to any
claims or actions that we believe would have a material adverse
effect on our financial position or results of
operations.
Item 4. Mine Safety Disclosures
Not
applicable.
PART
II
Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market
for Common Stock; Holders
Our
common stock is dually listed on the OTC pink sheets under the
ticker symbol “GTHP.” The number of record holders of
our common stock at April 7, 2020 was 215.
A 1:800
reverse stock split of all of our issued and outstanding common
stock was implemented on March 29, 2019. As a result of the reverse
stock split, every 800 shares of issued and outstanding common
stock were converted into 1 share of common stock. All fractional
shares created by the reverse stock split were rounded to the
nearest whole share. The number of authorized shares of common
stock did not change.
The
high and low common stock share prices for the first and second quarter of 2020 and
calendar years 2019 and 2018, as reported by the OTCBB, are as set
forth in the following table. All share prices set forth in the
table have been retroactively adjusted to reflect the reverse stock
split (as discussed above) for all periods presented.
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|
|
|
|
|
First
Quarter
|
$0.23
|
$0.11
|
$1.45
|
$0.02
|
$26.00
|
$4.48
|
|
Second
Quarter*
|
$0.16
|
$0.10
|
$0.26
|
$0.10
|
$12.80
|
$2.40
|
|
Third
Quarter
|
|
|
$0.25
|
$0.16
|
$3.20
|
$0.64
|
|
Fourth
Quarter
|
|
|
$0.24
|
$0.10
|
$3.04
|
$0.08
|
*
Through April 14, 2020.
Dividend
Policy
We have
not paid any dividends on our common stock since our inception and
do not intend to pay any dividends in the foreseeable
future.
Securities
Authorized for Issuance Under Equity Compensation
Plans
All the
securities we have provided our employees, directors and
consultants have been issued under our stock option plans, which
are approved by our stockholders. We have issued common stock to
other individuals that are not employees or directors, in lieu of
cash payments, that are not part of any plan approved by our
stockholders.
Securities
authorized for issuance under equity compensation plans as of
December 31, 2019:
|
Plan
category
|
Number of
securities to be issued upon exercise of outstanding options,
warrants and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number of
securities
remaining
available for future issuance under equity compensation plans
(excluding securities reflected in column(a))
|
|
|
|
|
|
|
Equity compensation
plans approved by security holders
|
47
|
$58,083
|
-
|
|
Equity compensation
plans not approved by security holders
|
-
|
-
|
-
|
|
TOTAL
|
47
|
$58,083
|
-
|
Item 6. Selected Financial Data
Not
applicable.
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The
following discussion should be read in conjunction with our
financial statements and notes thereto included elsewhere in this
report.
Overview
We are
a medical technology company focused on developing innovative
medical devices that have the potential to improve healthcare. Our
primary focus is the sales and marketing of our LuViva®
Advanced Cervical Scan non-invasive cervical cancer detection
device. The underlying technology of LuViva primarily relates to
the use of biophotonics for the non-invasive detection of cancers.
LuViva is designed to identify cervical cancers and precancers
painlessly, non-invasively and at the point of care by scanning the
cervix with light, then analyzing the reflected and fluorescent
light.
LuViva
provides a less invasive and painless alternative to conventional
tests for cervical cancer screening and detection. Additionally,
LuViva improves patient well-being not only because it eliminates
pain, but also because it is convenient to use and provides rapid
results at the point of care. We focus on two primary applications
for LuViva: first, as a cancer screening tool in the developing
world, where infrastructure to support traditional cancer-screening
methods is limited or non-existent, and second, as a triage
following traditional screening in the developed world, where a
high number of false positive results cause a high rate of
unnecessary and ultimately costly follow-up tests.
We are
a Delaware corporation, originally incorporated in 1992 under the
name “SpectRx, Inc.,” and, on February 22, 2008,
changed our name to Guided Therapeutics, Inc. At the same time, we
renamed our wholly owned subsidiary, InterScan, which originally
had been incorporated as “Guided
Therapeutics.”
Since
our inception, we have raised capital through the public and
private sale of debt and equity, funding from collaborative
arrangements, and grants.
Our
prospects must be considered in light of the substantial risks,
expenses and difficulties encountered by entrants into the medical
device industry. This industry is characterized by an increasing
number of participants, intense competition and a high failure
rate. We have experienced operating losses since our inception and,
as of December 31, 2019 we have an accumulated deficit of
approximately $139.6 million. To date, we have engaged primarily in
research and development efforts and the early stages of marketing
our products. We do not have significant experience in
manufacturing, marketing or selling our products. We may not be
successful in growing sales for our products. Moreover, required
regulatory clearances or approvals may not be obtained in a timely
manner, or at all. Our products may not ever gain market acceptance
and we may not ever generate significant revenues or achieve
profitability. The development and commercialization of our
products requires substantial development, regulatory, sales and
marketing, manufacturing and other expenditures. We expect our
operating losses to continue for the foreseeable future as we
continue to expend substantial resources to complete
commercialization of our products, obtain regulatory clearances or
approvals, build our marketing, sales, manufacturing and finance
capabilities, and conduct further research and
development.
Our
product revenues to date have been limited. In 2019, the majority
of our revenues were from the sale of LuViva devices and
disposables. We expect that the majority of our revenue in 2020
will be derived from revenue from the sale of LuViva devices and
disposables.
Current
Demand for LuViva
Based
on discussions with our distributors, we expect to generate
purchase orders for approximately $1.0 to $2.0 million in LuViva
devices and disposables in 2020 and expect those purchase orders to
result in actual sales of $0.5 to $1.0 million in 2020,
representing what we view as current demand for our products. We
cannot be assured that we will generate all or any of these
additional purchase orders, or that existing orders will not be
canceled by the distributors or that parts to build product will be
available to meet demand, such that existing orders will result in
actual sales. Because we have a short history of sales of our
products, we cannot confidently predict future sales of our
products beyond this time frame and cannot be assured of any
particular amount of sales. Accordingly, we have not identified any
particular trends with regard to sales of our
products.
Recent
Developments
On
December 18, 2018, we entered into a co-development agreement with
Newmars Technologies, Inc. (“NTI”), whereby NTI will
perform final assembly of the LuViva device for its contracted
distribution countries in Eastern Europe and Russia at its ISO
13485 facility in Hungary. The agreement enables
Newmars to manufacture LuViva® Advance Cervical Scan devices
in Hungary for distribution in the nine Central and Eastern
European countries for which Newmars has distribution rights.
Guided Therapeutics will manufacture sub-assemblies and sell these
and other parts to Newmars and will receive an additional $2,000
royalty for each device sold in those countries, which include
Russia, Ukraine, Poland, Romania, Hungary, Moldova, Kazakhstan,
Belarus and Armenia, subject to certain minimum royalty payments
and parts orders. The additional carve out for these
territories has been agreed to by SMI. The Agreement with Newmars
does not allow them to manufacture single use Cervical Guides,
which the Company will continue to supply.
We received Regulatory Approval from the Indian Ministry of Health
& Family Welfare to allow commercialization of the LuViva
device and disposables. The Ministry concluded that the LuViva
device is “Non Invasive” and as such is “not
regulated under the Drugs and Cosmetics Act 1940 and Medical Device
Rules 2017 thereunder.” As a result, LuViva can now be
commercialized in India.
On
August 31, 2018, we entered into agreements with certain holders of
the our Series C1 preferred stock, par value $0.001 per share (the
“Series C1 Preferred Stock”), including John Imhoff,
the chairman of our board of directors, and Mark Faupel, the Chief
Operating Officer and a director of our company (the
“Exchange Agreements”), pursuant to which those holders
separately agreed to exchange each share of the Series C1 Preferred
Stock held for one (1) share of our newly created Series C2
preferred stock, par value $0.001 per share (the “Series C2
Preferred Stock”). In total, for 3,262 shares of Series C1
Preferred Stock to be surrendered, we issued 3,262 shares of Series
C2 Preferred Stock.
On
October 19, 2018, we held our 2018 Annual Meeting of Stockholders
(the “Annual Meeting”). As described in the our
Definitive Proxy Statement on Schedule 14A, as amended, originally
filed with the Securities and Exchange Commission on October 11,
2018, at the Annual Meeting, stockholders voted and approved the
following proposals: (1) the election of the director-nominees (the
“Directors”) of our board of directors (the
“Board”), with the five Directors receiving the highest
number of affirmative votes cast by holders of shares of common
stock and holders of Series C2 Preferred Stock, voting as a single
class; (2) the ratification of the appointment of UHY LLP as our
independent registered public accounting firm by a majority of the
votes cast by the holders of common stock and of Series C2
Preferred Stock, voting as a single class; (3) an amendment to the
Restated Certificate of Incorporation, as amended (the
“Certificate of Incorporation”), to enable a potential
reverse split of the issued and outstanding shares of common stock
at a ratio of between 1-for-25 and 1-for-800, with such ratio to be
determined at the sole discretion of the Board and with such
reverse split to be effected at such time and date on or before
March 31, 2019, if at all, as determined by the Board in its sole
discretion (the “Reverse Split Amendment”) by a
majority of the issued and outstanding common stock and Series C2
Preferred Stock voting as a single class; (4) the adoption of an
amendment to the Certificate of Incorporation, to, among other
things, increase our authorized common stock from 1,000,000,000
shares to 3,000,000,000 shares; and (5) the adoption of our 2018
Stock Option Plan and the material terms thereunder (the
“Plan”) by a majority of the votes cast by the holders
of common stock and of Series C2 Preferred Stock, voting as a
single class.
On
November 7, 2018, we increased the number of common stock shares
authorized from one billion to three billion.
A 1:800
reverse stock split of all of our issued and outstanding common
stock was implemented on March 29, 2019. As a result of the reverse
stock split, every 800 shares of issued and outstanding common
stock were converted into 1 share of common stock. All fractional
shares created by the reverse stock split were rounded to the
nearest whole share. The number of authorized shares of common
stock did not change.
Critical
Accounting Policies
Our
material accounting policies, which we believe are the most
critical to investors understanding of our financial results and
condition, are discussed below. Because we are still early in our
enterprise development, the number of these policies requiring
explanation is limited. As we begin to generate increased revenue
from different sources, we expect that the number of applicable
policies and complexity of the judgments required will
increase.
Revenue
Recognition: ASC 606
Revenue from Contracts with Customers establishes a single and
comprehensive framework which sets out how much revenue is to be
recognized, and when. The core principle is that a vendor should
recognize revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration
to which the vendor expects to be entitled in exchange for those
goods or services. Revenue will now be recognized by a vendor when
control over the goods or services is transferred to the customer.
In contrast, Revenue based revenue recognition around an analysis
of the transfer of risks and rewards; this now forms one of a
number of criteria that are assessed in determining whether control
has been transferred. The application of the core principle in ASC
606 is carried out in five steps: Step 1 – Identify the
contract with a customer: a contract is defined as an agreement
(including oral and implied), between two or more parties, that
creates enforceable rights and obligations and sets out the
criteria for each of those rights and obligations. The contract
needs to have commercial substance and it is probable that the
entity will collect the consideration to which it will be entitled.
Step 2 – Identify the performance obligations in the
contract: a performance obligation in a contract is a promise
(including implicit) to transfer a good or service to the customer.
Each performance obligation should be capable of being distinct and
is separately identifiable in the contract. Step 3 –
Determine the transaction price: transaction price is the amount of
consideration that the entity can be entitled to, in exchange for
transferring the promised goods and services to a customer,
excluding amounts collected on behalf of third parties. Step 4
– Allocate the transaction price to the performance
obligations in the contract: for a contract that has more than one
performance obligation, the entity will allocate the transaction
price to each performance obligation separately, in exchange for
satisfying each performance obligation. The acceptable methods of
allocating the transaction price include adjusted market assessment
approach, expected cost plus a margin approach, and, the residual
approach in limited circumstances. Discounts given should be
allocated proportionately to all performance obligations unless
certain criteria are met and reallocation of changes in standalone
selling prices after inception is not permitted. Step 5 –
Recognize revenue as and when the entity satisfies a performance
obligation: the entity should recognize revenue at a point in time,
except if it meets any of the three criteria, which will require
recognition of revenue over time: the entity’s performance
creates or enhances an asset controlled by the customer, the
customer simultaneously receives and consumes the benefit of the
entity’s performance as the entity performs, and the entity
does not create an asset that has an alternative use to the entity
and the entity has the right to be paid for performance to
date.
Valuation of Deferred
Taxes: We account for
income taxes in accordance with the liability method. Under the
liability method, we recognize deferred assets and liabilities
based upon anticipated future tax consequences attributable to
differences between financial statement carrying amounts of assets
and liabilities and their respective tax bases. We establish a
valuation allowance to the extent that it is more likely than not
that deferred tax assets will not be utilized against future
taxable income.
Valuation of Equity Instruments
Granted to Employee, Service Providers and
Investors: On the date of
issuance, the instruments are recorded at their fair value as
determined using either the Black-Scholes valuation model or Monte
Carlo Simulation model.
Beneficial Conversion Features of Convertible
Securities: Conversion options that are not bifurcated as a
derivative pursuant to ASC 815 and not accounted for as a separate
equity component under the cash conversion guidance are evaluated
to determine whether they are beneficial to the investor at
inception (a beneficial conversion feature) or may become
beneficial in the future due to potential adjustments. The
beneficial conversion feature guidance in ASC 470-20 applies to
convertible stock as well as convertible debt which are outside the
scope of ASC 815. A beneficial conversion feature is defined as a
nondetachable conversion feature that is in the money at the
commitment date. The beneficial conversion feature guidance
requires recognition of the conversion option’s in-the-money
portion, the intrinsic value of the option, in equity, with an
offsetting reduction to the carrying amount of the instrument. The
resulting discount is amortized as a dividend over either the life
of the instrument, if a stated maturity date exists, or to the
earliest conversion date, if there is no stated maturity date. If
the earliest conversion date is immediately upon issuance, the
dividend must be recognized at inception. When there is a
subsequent change to the conversion ratio based on a future
occurrence, the new conversion price may trigger the recognition of
an additional beneficial conversion feature on
occurrence.
Allowance for Accounts
Receivable: We estimate
losses from the inability of our distributors to make required
payments and periodically review the payment history of each of our
distributors, as well as their financial condition, and revise our
reserves as a result.
Inventory
Valuation: All inventories
are stated at lower of cost or net realizable value, with cost
determined substantially on a “first-in, first-out”
basis. Selling, general, and administrative expenses are not
inventoried, but are charged to expense when
purchased.
Reverse Stock
Split: On March 29, 2019,
the Company implemented a 1:800 reverse stock split of all of our
issued and outstanding common stock. As a result of the reverse
stock split, every 800 shares of issued and outstanding common
stock were converted into 1 share of common stock. All fractional
shares created by the reverse stock split were rounded to the
nearest whole share. The number of authorized shares of common
stock did not change. The reverse stock split decreased the
Company’s issued and outstanding shares of common stock from
2,135,478,405 shares of Common Stock to 2,669,348 shares as of that
date.
Results
of Operations
Comparison
of 2019 and 2018
Sales Revenue, Cost of
Sales and Gross Loss from Devices and Disposables: Revenues
from the sale of LuViva devices for 2019 and 2018 were
approximately $36,000 and $57,000, respectively. Revenues in 2019
were approximately, $21,000 or 37% lower when compared to the same
period in 2018, due to lack of funding to support sales and
marketing efforts. Related costs of sales were approximately
$70,000 and $89,000 in 2019 and 2018, respectively. Costs of sales
in 2019, were approximately, $19,000 or 21% lower when compared to
the same period in 2018, due to lower sales and cost of sales in
the same period. This resulted in a gross loss of approximately
$34,000 on the sales of devices and disposables for 2019 compared
with a gross loss of approximately $32,000 for the same period in
2018.
Research and Development
Expenses: Research and development expenses for 2019,
decreased to approximately $122,000, from approximately $244,000 in
2018. The decrease of $122,000, or 50%, was primarily due to cost
reduction plans in research and development payroll
expenses.
Sales and Marketing
Expenses: Sales and marketing expenses for 2019, decreased
to approximately $87,000, compared to $195,000 in 2018. The
decrease, of approximately $108,000, or 55% was primarily due to
Company-wide expense reduction and cost savings
efforts.
General and Administrative
Expense: General and administrative expenses for 2019,
decreased to approximately $694,000, compared to $1,077,000 for the
same period in 2018. The decrease of approximately $383,000, or
36%, was primarily related to lower compensation and option
expenses incurred during the same period. For 2019, general and
administrative expenses consisted primarily of professional fees,
insurance, and paid and accrued compensation costs.
Other Income: Other
income was approximately $48,000 in 2019, compared to $54,000 in
the same period in 2018, a decrease of $6,000 or 11%. Other income
consists of refunds from prior years for insurance
policies.
Interest Expense:
Interest expense for 2019 decreased to approximately $1,412,000,
compared to $1,763,000 for the same period in 2018. The decrease of
approximately $351,000, or 20%, was primarily related to a decrease
in the amortization expense of and interest recorded for the value
of the beneficial conversion feature on convertible debt
outstanding and amortization of debt issuance costs.
Fair Value of Warrants
Recovery and Expense: Fair value of warrants recovery for
2019, decreased to approximately $380,000 compared to $3,234,000
for the same period in 2018. The decrease of approximately
$2,854,000, or 88% was primarily due to the less favorable
significant changes in warrant conversion prices and decrease in
stock price, in the fiscal year ended December 31,
2019.
Gain from extinguishment of
debt: Gain from the restructuring and exchange of debt due
to officers for 2019, decreased to approximately nil compared to
$1,039,000 for the same period in 2018. The decrease of
approximately $1,039,000 or 100% was primarily due to having no
exchanges of debt for equity in 2019 than in the same period in
2018.
Net loss / profit:
Net loss attributable to common stockholders increased to
approximately $1,921,000, or $0.58 per share, in 2019, from a net
profit of $900,000, or $1.95 per share, in 2018. The increase in
the net loss of $2,821,000, or 313% was for reasons outlined above.
As stated previously, our net loss for the year ended December 31,
2019 was primarily realized due $1.4 million, of amortization
expense of and interest recorded for the value of the beneficial
conversion feature on convertible debt outstanding and amortization
of debt issuance costs and the other items as described above. Our
net profit for the year ended December 31, 2018 was primarily
realized due to a $3.2 million gain in the fair value of warrants
recorded in 2018 and a $1.0 million gain from extinguishment of
debt.
There
was no income tax benefit recorded for 2019 or 2018, due to
recurring net operating losses.
Liquidity
and Capital Resources
Since
our inception, we have raised capital through the public and
private sale of debt and equity, funding from collaborative
arrangements, and grants. At December 31, 2019, we had cash of
approximately $899,000 and a negative working capital of
approximately $11,381,000.
Our
major cash flows for the year ended December 31, 2019 consisted of
cash out-flows of $0.8 million from operations, including
approximately $1.9 million of net loss, and a net change from
financing activities of $1.7 million, which primarily represented
the proceeds received from future issuance of common stock and
warrants, and proceeds from debt financing. Our net loss for the
year ended December 31, 2019 was primarily realized due to $1.4
million, of interest expense and of amortization expense of and
interest recorded for the value of the beneficial conversion
feature on convertible debt outstanding and amortization of debt
issuance costs.
Capital resources for 2020
On
January 6, 2020, we entered into an exchange agreement with Jones
Day. We will exchange $1,744,768 of debt outstanding for: $175,000,
an unsecured promissory note in the amount of $550,000; due 13
months form the date of issuance, that may be called at any time
prior to maturity upon a payment of $150,000; and an unsecured
promissory note in the principal amount of $444,768, bearing an
annualized interest rate of 6.0% and due in four equal annual
installments beginning on the second anniversary of the date of
issuance.
On
January 16, 2020, we entered into an exchange agreement with GPB.
This exchange agreement which has not been completed will call for
the exchange of $3,360,811 of debt outstanding as of December 12,
2019 for: cash of $1,500,000; 1,860,811 common stock shares;
7,185,000 warrants to purchase common stock shares at a strike
price of $0.20 for the 2016 warrants issued; 1,860,811 warrants to
purchase common stock shares at a strike price of $0.25; 3,721,622
warrants to purchase common stock shares at a strike price of
$0.75; and 2,791 series D preferred stock shares (each Series D
preferred stock share converts into 3,000 shares of the
Company’s common stock shares). If we are able to raise
capital in excess of $4,000,000, the exchange amounts shall be
adjusted. If the financing is between $4,000,000 and $4,900,000,
for every $100,000 raised in excess of $4,000,000 we will pay an
additional $50,000 to pay down debt. If between $5,000,000 and
$6,000,000 is raised thru financings, we will pay an additional
$1,000,000 to pay down debt. If the financing is in excess of
$6,000,000 then we will pay the entire debt balance outstanding. In
the event of alternative financings, we may elect to pay GPB a
total of $1,500,000 in cash to GPB at which time GPB shall waive
any security interest in our assets, and GPB shall exchange any
remaining debt from the notes into the Series D unit offering. GPB
shall have the right to convert the outstanding notes into equity,
but not the obligation. A 9.99% blocker shall be in effect such
that GPB agrees to restrict its holdings of our common stock shares
to less than 9.99% of the total number of our outstanding common
stock shares at any one point in time. All royalty payments owed to
GPB pursuant thereto shall remain our obligations to GPB and shall
remain in full force and effect. We shall have 8 months from the
execution date of this exchange agreement, subject to early
termination as forth below (in “forbearance
agreement”). We shall be entitled to extend the forbearance
agreement for four additional months for a $50,000 per month
payment. If after the financing is completed and in the event of
future financings or significant collaborations with a partner
generating sales greater than $1,000,000, we agree to buy back
$500,000 of the Series D preferred stock shares. The interest rate
will revert to their original non default rates. Also, all existing
warrants issued prior to exchange agreement will be
canceled.
On
March 31, 2020, we entered into a securities purchase agreement
with Auctus Fund, LLC for the issuance and sale to Auctus of
$112,750 in aggregate principal amount of a 12% convertible
promissory note. On March 31, 2020, we issued the note to Auctus
and issued 250,000 five-year common stock warrants at an exercise
price of $0.16. On April 3, 2020, we received net proceeds of
$100,000. The note matures on January 26, 2021 and accrues interest
at a rate of 12% per year. We may not prepay the note, in whole or
in part. After the 90th calendar day after
the issuance date, and ending on the later of maturity date and the
date of payment of the default amount, Auctus may convert the note,
at any time, in whole or in part, provided such conversion does not
provide Auctus with more than 4.99% of the outstanding common share
stock. The conversion may be made converted into shares of the our
common stock, at a conversion price equal to the lesser of: (i) the
lowest Trading Price during the twenty-five (25) trading day period
on the latest complete trading prior to the issue date and (ii) the
variable conversion price (55% multiplied by the market price,
market price means the lowest trading price for the common stock
during the twenty-five (25) trading day period ending on the latest
complete trading day prior to the conversion date. Trading price is
the lowest trade price on the trading market as reported. The note
includes customary events of default provisions and a default
interest rate of 24% per year.
Capital resources for 2019
On
December 5, 2019, we entered into an exchange agreement with
Aquarius. Based on this agreement we will exchange $145,544 of debt
outstanding for: 291,088 common stock shares; 145,544 warrants to
purchase common stock shares at a strike price of $0.25; and
145,544 warrants to purchase common stock shares at a strike price
of $0.75.
On
December 30, 2019, we entered into an exchange agreement with K2
Medical. Based on this agreement we will exchange $790,544 of debt
outstanding for: 1,905,270 common stock shares; 496,602 warrants to
purchase common stock shares at a strike price of $0.20; 704,334
warrants to purchase common stock shares at a strike price of
$0.25; and 704,334 warrants to purchase common stock shares at a
strike price of $0.75.
On
December 30, 2019, we entered into an exchange agreement with Mr.
Blumberg. Based on this agreement we will exchange $305,320 of debt
outstanding for: 1,167,630 common stock shares; 928,318 warrants to
purchase common stock shares at a strike price of $0.20; 119,656
warrants to purchase common stock shares at a strike price of
$0.25; and 119,656 warrants to purchase common stock shares at a
strike price of $0.75.
On
December 30, 2019, we entered into an exchange agreement with Mr.
Case. Based on this agreement we will exchange $179,291 of debt
outstanding for: 896,455 common stock shares; and 896,456 warrants
to purchase common stock shares at a strike price of
$0.20.
On
December 30, 2019, we entered into an exchange agreement with Mr.
Grimm. Based on this agreement we will exchange $51,110 of debt
outstanding for: 255,548 common stock shares; and 255,548 warrants
to purchase common stock shares at a strike price of
$0.20.
On
December 30, 2019, we entered into an exchange agreement with Mr.
Gould. Based on this agreement we will exchange $111,227 of debt
outstanding for: 556,136 common stock shares; and 556,136 warrants
to purchase common stock shares at a strike price of
$0.20.
On
December 30, 2019, we entered into an exchange agreement with Mr.
Mamula. Based on this agreement we will exchange $15,577 of debt
outstanding for: 77,885 common stock shares; and 77,885 warrants to
purchase common stock shares at a strike price of
$0.20.
On
December 30, 2019, we entered into an exchange agreement with Mr.
Imhoff. Based on this agreement we will exchange $400,417 of debt
outstanding for: 1,699,255 common stock shares; 1,497,367 warrants
to purchase common stock shares at a strike price of $0.20; 100,944
warrants to purchase common stock shares at a strike price of
$0.25; and 100,944 warrants to purchase common stock shares at a
strike price of $0.75.
On
December 30, 2019, we entered into an exchange agreement with Ms.
Rosenstock. Based on this agreement we will exchange $78,986 of
debt outstanding for: 100,000 common stock shares; and 50,000
warrants to purchase common stock shares at a strike price of
$0.25; and 50,000 warrants to purchase common stock shares at a
strike price of $0.75. Ms. Rosenstock also forgave $28,986 in
debt.
On July
1, 2019, we entered into a loan agreement with Accilent Capital
Management Inc / Rev Royalty Income and Growth Trust
(“Accilent”), providing for the purchase by Rev of an
unsecured promissory note in the principal amount of $49,389 (CAD$
65,500). The note was fully funded on July 9, 2019 (net of a 8%
original issue discount and other expenses). The note bears an
interest rate of 16% and was due and payable on September 11, 2019.
Following maturity, demand, default, or judgment and until actual
payment in full, interest rate shall be paid at the rate of 19% per
annum. We will issue warrants to purchase one common share for each
warrant held in the aggregate amount of 215,000 warrants at an
exercise price of $0.25 per warrant, or alternatively, the same
price as for warrants granted to investors as part of our financing
subject to adjustment and exercisable within 3 years from issuance
(the “Initial Warrants”). In the event that the common
shares of the Issuer were not listed on the TSX Venture Exchange
pursuant to the “Transaction” on or prior to September
1, 2019, an additional 100,000 warrants will be issued at an
exercise price equal to the lesser of $0.25 or the price of the
next issuance of common shares of the Issuer (the “Revised
Exercise Price”). Further, the exercise price of the Initial
Warrants will adjust to the Revised Exercise Price has stated
herein. As of December 31, 2019, $57,946 remained outstanding,
which included a fee of $3,951 and accrued interest of
$4,606.
Auctus Note
On
December 17, 2019, we entered into a securities purchase agreement
and convertible note with Auctus. The convertible note issued to
Auctus will be for a total of $2.4 million. The first tranche of
$700,000 has been received and will have a maturity date of
December 17, 2021 and an interest rate of ten percent (10%). The
note may not be prepaid in whole or in part except as otherwise
explicitly allowed. Any amount of principal or interest on the note
which is not paid when due shall bear interest at the rate of the
lessor of 24% and the maximum permitted by law (the “default
interest”). The variable conversion prices shall equal the
lesser of: (i) the lowest trading price on the issue date, and (ii)
the variable conversion price. The variable conversion price shall
mean 95% multiplied by the market price (the market price means the
average of the five lowest trading prices during the period
beginning on the issue date and ending on the maturity date), minus
$0.04 per share, provided however that in no event shall the
variable conversion price be less than $0.15. If an event of
default under this note occurs and/or the note is not extinguished
in its entirety prior to December 17, 2020 the $0.15 price shall no
longer apply. In addition, Auctus will receive 7,500,000 five-year
common stock purchase warrants, at an exercise price of $0.20, on
the first tranche of $700,000. From the $700,000, received
$570,000, $65,000 went to attorney’s fees and Auctus Fund
Management, and $65,000 was paid for the partial payment of an
$89,250 promissory note that was issued on July 3, 2018 to Auctus.
At a future date, the second tranche of $400,000 will be received
when we register the underlying shares. The last tranche of $1.3
million will be received within 60 days of the S-1 registration
statement becoming effective. The conversion price of the notes
will be at market value with a minimum conversion amount of $0.15.
The last two tranches will have warrants attached. As of December
31, 2019, $700,000 remained outstanding and accrued interest of
$2,722.
In the
event (i) the we make a public announcement of certain merger or
consolidation or sale of substantially all of its assets or (ii)
any person (including our company) publicly announces a tender
offer to purchase 50% or more of the outstanding Common Stock, then
the Conversion Price shall equal the lower of (x) the Conversion
Price which would have been applicable before the date of such
announcement and (y) the Conversion Price that would otherwise be
in effect until the transaction is consummated or
abandoned.
We
shall include on each registration statement it files with the
Securities and Exchange Commission (the “SEC”) all the
shares of Common Stock issuable upon conversion of the Auctus Note
and exercise of the Auctus Warrant (the “Auctus Registrable
Securities”). We will be subject to liquidated damages of 25%
of the outstanding principal balance of the Auctus Note, but not
less than $15,000, if it fails to comply with the registration
requirement.
Six
months following the date of the Auctus Note, Auctus shall have the
right to redeem all or a portion of the Auctus Note, up to the
maximum monthly redemption amount as set forth in the Auctus Note.
Payments for such redemption maybe made either in cash or shares or
a combination of both.
The
Auctus Warrant entitles its holder to purchase 7,500,000 shares of
the Common Stock at an exercise price of $0.2 per share (the
“Exercise Price”), subject to certain adjustments as
provided in the Auctus Warrant. If we at any time while the Auctus
Warrant is outstanding, sells any Common Stock or securities
entitling any person to acquire shares of Common Stock at an
effective price per share less than the then Exercise Price (such
lower price, the “Base Share Price” and such issuances
collectively, a “Dilutive Issuance”), then the Exercise
Price shall be reduced at the option of the holder and only reduced
to equal the Base Share Price, and the number of Warrant Shares
issuable hereunder shall be increased proportionately. The Auctus
Warrant may be exercised cashlessly if there is no effective
registration statement covering the Common Stock issuable upon
exercise of the Auctus Warrant. The Auctus Warrant contains a 4.99%
beneficial ownership blocker.
Pursuant to a
Security Agreement between Auctus (the “Auctus Security
Agreement”) and us dated December 17, 2019, all our
obligations under the Auctus Note are secured by our assets and
personal properties, subordinate only to the our obligations to GPB
Debt Holdings II LLC and senior to all other
obligations.
On
December 17, 2019, we also entered into a Registration Rights
Agreement (the “Auctus Registration Rights Agreement”)
with Actus pursuant to which, we agreed to file with the SEC a
registration statement covering the maximum number of the Auctus
Registrable Securities within 90 days of the date of the
Registration Rights Agreement and use its reasonable best efforts
to amend or file a new Registration Statement to cover all the
Registrable Securities as soon as practicable. All reasonable
expenses related to such registration shall be borne by
us.
Series D Financing
During
December 2019 and January 2020, the Company received equity
investments in the amount of $738,000. These investors received a
total of 1,476,000 common stock shares and 1,476,000 warrants to
purchase common stock shares at a strike price of $0.25, 1,476,000
warrants to purchase common stock shares at a strike price of $0.75
and 738 Series D preferred stock shares (each Series D preferred
stock share converts into 3,000 shares of the Company’s
common stock shares). Of the amount invested $388,000 was from
related parties.
We
agreed use commercially reasonable efforts to have its Common Stock
listed on the TSX Venture Exchange. Commencing on the date of
listing of the Common Stock on TSX Venture Exchange, each Series D
Investor has the right, upon 5 days’ notice to us, to
exchange its Series D Preferred into certain 12% Senior Secured
Debentures (the “Debentures”) on the basis of $1 Stated
Value of Series D Preferred for $1 principal amount of the
Debentures. The Debentures shall bear interest at 10% per annum,
payable quarterly in cash or, at our option, in shares of Common
Stock at the average of the 20 VWAPs (as defined in the Debentures)
immediately prior to the payment date.
Each
share of Series D Preferred is convertible, at any time for a
period of 5 years after issuance, into that number of shares of
Common Stock, determined by dividing the Stated Value by $0.25,
subject to certain adjustments set forth in the Series D
Certificate of Designation (the “Series D Conversion
Price”). The conversion of Series D Preferred is subject to a
4.99% beneficial ownership limitation, which may be increased to
9.99% at the election of the holder of the Series D Preferred. If
the average of the VWAPs (as defined in the Series D Certificate of
Designation) for any consecutive 5 trading day period
(“Measurement Period”) exceeds 200% of the then Series
D Conversion Price and the average daily trading volume of the
Common Stock on the primary trading market exceeds a number of
shares per trading day during the Measurement Period (subject to
adjustments), the Company may redeem the then outstanding Series D
Preferred, for cash in an amount equal to aggregate Stated Value
then outstanding plus accrued but unpaid dividends .
The
Series D Warrants may be exercised cashlessly if there is no
effective registration statement covering the Common Stock issuable
upon exercise of the Series D Warrants. The Series D Warrants
contain a 4.99% beneficial ownership blocker which may be increased
to 9.99% at the holder’s election.
On
December 30, 2019, we also entered into a Security Agreement with
the Series D Investors (the “Series D Security
Agreement”) pursuant to which all obligations under the
Debentures and the Series D Certificate of Designation are secured
by all of our assets and personal properties.
On
December 30, 2019, we also entered into a Registration Rights
Agreement (the “Series D Registration Rights Agreement
“) with the Series D Investors pursuant to which we agreed to
file with the SEC, a registration statement on a Form S-3 (or on
other appropriate form if a Form S-3 is not available) covering the
Common Stock issuable upon conversion of the Debentures or exercise
of the Series D Warrants within 90 days of the date of the
Registration Rights Agreement and cause such registration statement
to be declared effective within 120 days of the date of the
Registration Rights Agreement. All reasonable expenses related to
such registration shall be borne by us.
On
February 14, 2019, we entered into a Purchase and Sale Agreement
with Everest Business Funding for the sale of its accounts
receivable. The transaction provided us with $48,735 after $1,265
in debt issuance costs (bank costs) for a total purchase amount of
$50,000, in which we would have to repay $68,500. At a minimum we
would need to pay $535.16 per day or 20.0% of the future collected
accounts receivable or “receipts.” The effective
interest rate as calculated for this transaction is approximately
132.5%. As of December 31, 2019, $60,484 had been paid, leaving a
balance of $8,016, the discount and unamortized debt issuance costs
had been fully amortized.
Effective March 29,
2019, we entered into a securities purchase with Auctus for the
issuance of a $65,000 convertible promissory note. At issuance, we
recorded a $65,000 beneficial conversion feature, which was fully
amortized at December 31, 2019. The note accrued interest at a rate
of 12% until it matured in December 2019. Beginning December 2019,
the note is convertible, in whole or in part, at the holder's
option, into shares of our stock at a conversion price equal to 50%
of the lowest trading price during the 25 trading days prior to
conversion. Upon the occurrence of an event of default, the note
will bear interest at a rate of 24% per year and the holder of the
note we may be required to redeem or convert the note at 150% of
the outstanding principal balance. At December 31, 2019, the
balance due on this total was $106,210, including a default penalty
of $41,210. Interest accrued on the note totaled $142 at December
31, 2019 and is included in accrued expenses on the accompanying
consolidated balance sheet.
On May
15, 2019, we entered into a securities purchase agreement with
Eagle Equities, LLC, providing for the purchase by Eagle of a
convertible redeemable note in the principal amount of $57,750. The
note was fully funded on May 21, 2019, upon which we received
$45,000 of net proceeds (net of a 10% original issue discount and
other expenses). The note bears an interest rate of 8% and are due
and payable on May 15, 2020. We could have prepaid the note, in
whole or in part, for 115% of outstanding principal and interest
until 30 days from issuance, for 121% of outstanding principal and
interest at any time from 31 to 60 days from issuance, for 127% of
outstanding principal and interest at any time from 61 to 90 days
from issuance, for 133% of outstanding principal and interest at
any time from 91 to 120 days from issuance, for 139% of outstanding
principal and interest at any time from 121 to 150 days from
issuance and for 145% of outstanding principal and interest at any
time from 151 days from issuance to 180 days from issuance. The
note may not be prepaid after the 180th day. The note may
be converted by Eagle at any time after five months from issuance
into shares of our common stock (as determined in the notes)
calculated at the time of conversion. The conversion price of the
notes will be equal to 60% of the average of the two lowest closing
bid prices of our common stock shares as reported on OTC Markets
exchange, for the 20 prior trading days including the day upon
which we receive a notice of conversion is received by us. The
notes may be prepaid in accordance with the terms set forth in the
notes. The notes also contain certain representations, warranties,
covenants and events of default including if we are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Eagle’s
option and in its sole discretion, Eagle may consider the notes
immediately due and payable. As of December 31, 2019, the
outstanding note was for $27,817, which consisted of unamortized
balance of $14,438 of a beneficial conversion feature, unamortized
original issue discount of $1,942, unamortized debt issuance costs
of $2,774 and interest of $1,166 included in accrued expenses on
the accompanying consolidated balance sheet.
On May
15, 2019, we entered into a securities purchase agreement with Adar
Bays, LLC, providing for the purchase by Adar of a convertible
redeemable note in the principal amount of $57,750. The note was
fully funded on May 21, 2019, upon which we received $45,000 of net
proceeds (net of a 10% original issue discount and other expenses).
The note bears an interest rate of 8% and are due and payable on
May 15, 2020. We could have prepaid the note, in whole or in part,
for 115% of outstanding principal and interest until 30 days from
issuance, for 121% of outstanding principal and interest at any
time from 31 to 60 days from issuance, for 127% of outstanding
principal and interest at any time from 61 to 90 days from
issuance, for 133% of outstanding principal and interest at any
time from 91 to 120 days from issuance, for 139% of outstanding
principal and interest at any time from 121 to 150 days from
issuance and for 145% of outstanding principal and interest at any
time from 151 days from issuance to 180 days from issuance. The
note may not be prepaid after the 180th day. The note may
be converted by Adar at any time after five months from issuance
into shares of our common stock (as determined in the notes)
calculated at the time of conversion. The conversion price of the
notes will be equal to 60% of the average of the two lowest closing
bid prices of our common stock shares as reported on OTC Markets
exchange, for the 20 prior trading days including the day upon
which we receive a notice of conversion is received by us. The
notes may be prepaid in accordance with the terms set forth in the
notes. The notes also contain certain representations, warranties,
covenants and events of default including if we are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Adar’s
option and in its sole discretion, Adar may consider the notes
immediately due and payable. In addition, we had recorded a $38,500
beneficial conversion feature, $5,250 original issue discount and
$7,500 of debt issuance costs. As of December 31, 2019, the note
outstanding increased to $87,970 as a default penalty of $27,030
was added to the outstanding balance of the note, which consisted
of unamortized balance of $14,438 of a beneficial conversion
feature, unamortized original issue discount of $1,942, unamortized
debt issuance costs of $2,774 and interest of $3,190 included in
accrued expenses on the accompanying consolidated balance
sheet.
See
“—Recent Developments” for information regarding
capital-raising activities since December 31, 2019.
We will
be required to raise additional funds through public or private
financing, additional collaborative relationships or other
arrangements, as soon as possible. We cannot be certain that our
existing and available capital resources will be sufficient to
satisfy our funding requirements through 2019. We are evaluating
various options to further reduce our cash requirements to operate
at a reduced rate, as well as options to raise additional funds,
including loans.
Generally,
substantial capital will be required to develop our products,
including completing product testing and clinical trials, obtaining
all required U.S. and foreign regulatory approvals and clearances,
and commencing and scaling up manufacturing and marketing our
products. Any failure to obtain capital would have a material
adverse effect on our business, financial condition and results of
operations. Based on discussions with our distributors, we expect
to generate purchase orders for approximately $1.0 to $2.0 million
in LuViva devices and disposables in 2020 and expect those purchase
orders to result in actual sales of $0.5 to $1.0 million in 2020,
representing what we view as current demand for our products. We
cannot be assured that we will generate all or any of these
additional purchase orders, or that existing orders will not be
canceled by the distributors or that parts to build product will be
available to meet demand, such that existing orders will result in
actual sales. Because we have a short history of sales of our
products, we cannot confidently predict future sales of our
products beyond this time frame and cannot be assured of any
particular amount of sales. Accordingly, we have not identified any
particular trends with regard to sales of our
products.
Our
financial statements have been prepared and presented on a basis
assuming we will continue as a going concern. The above factors
raise substantial doubt about our ability to continue as a going
concern, as more fully discussed in Note 1 to the consolidated
financial statements contained herein and in the report of our
independent registered public accounting firm accompanying our
financial statements contained in our annual report on Form 10-K
for the year ended December 31, 2019.
Off-Balance
Sheet Arrangements
We have
no material off-balance sheet arrangements, no special purpose
entities, and no activities that include non-exchange-traded
contracts accounted for at fair value.
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk.
Not
applicable.
Item 8. Financial Statements and Supplementary
Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the
Board of Directors and Stockholders of
Guided
Therapeutics, Inc.
Opinion
on the Financial Statements
We have
audited the accompanying consolidated balance sheets of Guided
Therapeutics, Inc. and Subsidiary. (the “Company”) as
of December 31, 2019 and 2018, and the related consolidated
statements of operations, stockholders’ deficit, and cash
flows for the years then ended, and the related notes
(collectively, the “consolidated financial
statements”). In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31,
2019 and 2018, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Substantial Doubt
about the Company’s Ability to Continue as a Going
Concern
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the
Company has recurring losses from operations, limited cash flow,
and an accumulated deficit. These conditions raise substantial
doubt about the Company’s ability to continue as a going
concern. Management's plans in regard to these matters are also
described in Note 1. The consolidated financial statements do not
include any adjustment that might result from the outcome of this
uncertainty. Our opinion is not modified with respect to that
matter.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States)
(“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risk of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a
reasonable basis for our opinion.
We have
served as the Company’s auditor since 2007.
/s/ UHY LLP
UHY
LLP
Sterling Heights,
Michigan
April
20, 2020
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS (in thousands)
AS
OF DECEMBER 31,
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash
and cash equivalents
|
$899
|
$-
|
|
Accounts
receivable, net of allowance for doubtful accounts of $114 and $157
at December 31, 2019 and 2018, respectively
|
13
|
13
|
|
Inventory,
net of reserves of $831 and $767 at December 31, 2019 and 2018,
respectively
|
48
|
114
|
|
Other
current assets
|
70
|
69
|
|
Total
current assets
|
1,030
|
196
|
|
NONCURRENT
ASSETS:
|
|
|
|
Property
and equipment, net
|
-
|
21
|
|
Lease
asset-right, net of amortization
|
132
|
-
|
|
Other
assets
|
18
|
19
|
|
Total
noncurrent assets
|
150
|
40
|
|
TOTAL
ASSETS
|
1,180
|
236
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Notes
payable in default, related parties
|
349
|
334
|
|
Notes
payable in default
|
427
|
366
|
|
Short-term
notes payable
|
380
|
225
|
|
Short-term
notes payable, related parties
|
646
|
674
|
|
Convertible
notes in default
|
2,915
|
2,778
|
|
Short-term
convertible notes payable
|
73
|
-
|
|
Short-term
convertible notes payable, related parties
|
513
|
380
|
|
Accounts
payable
|
2,897
|
3,013
|
|
Accounts
payable, related parties
|
136
|
-
|
|
Accrued
liabilities
|
3,235
|
3,156
|
|
Subscription
receivable
|
635
|
-
|
|
Current
portion of lease liability
|
103
|
-
|
|
Deferred
revenue
|
101
|
66
|
|
Total
current liabilities
|
12,410
|
10,992
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
Warrants,
at fair value
|
5,092
|
4,728
|
|
Lease
liability
|
29
|
-
|
|
Long-term
convertible notes payable, net
|
15
|
-
|
|
Long-term
debt-related parties
|
569
|
340
|
|
Total
long-term liabilities
|
5,705
|
5,068
|
|
TOTAL
LIABILITIES
|
18,115
|
16,060
|
|
|
|
|
|
COMMITMENTS & CONTINGENCIES (Note 8)
|
|
|
|
STOCKHOLDERS’
DEFICIT:
|
|
|
|
Series
C convertible preferred stock, $.001 par value; 9.0 shares
authorized, 0.3 shares issued and outstanding as of December 31,
2019 and 2018, respectively. (Liquidation preference of $286 at
December 31, 2019 and 2018, respectively).
|
105
|
105
|
|
Series
C1 convertible preferred stock, $.001 par value; 20.3 shares
authorized, 1.0 shares issued and outstanding as of December 31,
2019 and 2018, respectively. (Liquidation preference of $1,049 at
December 31, 2019 and 2018).
|
170
|
170
|
|
Series
C2 convertible preferred stock, $.001 par value; 5,000 shares
authorized, 3.3 shares issued and outstanding as of December 31,
2019 and 2018, respectively. (Liquidation preference of $3,263 at
December 31, 2019 and 2018).
|
531
|
531
|
|
Common
stock, $.001 par value; 3,000,000 shares authorized, 3,319 and
2,669 shares issued and outstanding as of December 31, 2019 and
2018, respectively
|
3,394
|
2,877
|
|
Additional
paid-in capital
|
118,552
|
118,259
|
|
Treasury
stock, at cost
|
(132)
|
(132)
|
|
Accumulated
deficit
|
(139,555)
|
(137,634)
|
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
(16,935)
|
(15,824)
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
1,180
|
236
|
The
accompanying notes are an integral part of these consolidated
statements.
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands)
FOR
THE YEARS ENDED DECEMBER 31,
|
|
|
|
|
REVENUE:
|
|
|
|
Sales
– devices and disposables, net
|
$36
|
$57
|
|
Cost
of goods sold
|
70
|
89
|
|
Gross
loss
|
(34)
|
(32)
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
Research
and development
|
122
|
244
|
|
Sales
and marketing
|
87
|
195
|
|
General
and administrative
|
694
|
1,077
|
|
Total
operating expenses
|
903
|
1,516
|
|
|
|
|
|
Operating
loss
|
(937)
|
(1,548)
|
|
|
|
|
|
OTHER
INCOME (EXPENSES):
|
|
|
|
Other
income
|
48
|
54
|
|
Interest
expense
|
(1,412)
|
(1,763)
|
|
Gain
from extinguishment of debt
|
-
|
1,039
|
|
Change
in fair value of warrants
|
380
|
3,234
|
|
Total
other income (expenses)
|
(984)
|
2,564
|
|
|
|
|
|
(LOSS)
INCOME BEFORE INCOME TAXES
|
(1,921)
|
1,016
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
-
|
-
|
|
|
|
|
|
NET
(LOSS) INCOME
|
(1,921)
|
1,016
|
|
|
|
|
|
PREFERRED
STOCK DIVIDENDS
|
-
|
(116)
|
|
|
|
|
|
NET
(LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS
|
$(1,921)
|
$900
|
|
NET
(LOSS) INCOME PER SHARE ATTRIBUTABLE TO COMMON
STOCKHOLDERS
|
|
|
|
BASIC
|
$(0.58)
|
$1.95
|
|
DILUTED
|
$(0.58)
|
$0.0138
|
|
|
|
|
|
WEIGHTED
AVERAGE SHARES OUTSTANDING
|
|
|
|
|
|
|
|
BASIC
|
3,302
|
462
|
|
DILUTED
|
3,302
|
65,227
|
The
accompanying notes are an integral part of these consolidated
statements.
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR
THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (In
Thousands)
|
|
|
Preferred Stock
Series C1
|
Preferred Stock
Series
C2
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, January 1,
2018
|
1
|
$355
|
4
|
$701
|
-
|
$-
|
62
|
$791
|
$117,416
|
$(132)
|
$(138,533)
|
$(19,402)
|
|
Issuance of warrants with
debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
20
|
-
|
-
|
20
|
|
Conversion of Series C preferred
stock to common stock
|
(1)
|
(250)
|
-
|
-
|
-
|
-
|
160
|
128
|
409
|
-
|
(117)
|
170
|
|
Conversion of debt into common
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
2,359
|
1,888
|
(963)
|
-
|
-
|
925
|
|
Issuance of common
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
88
|
70
|
(23)
|
-
|
-
|
47
|
|
Exchange of Series C1 for C2
preferred stock
|
-
|
-
|
(3)
|
(531)
|
3
|
531
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Beneficial conversion feature for
convertible debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
689
|
-
|
-
|
689
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
44
|
-
|
-
|
44
|
|
Forgiveness of
debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
667
|
-
|
-
|
667
|
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,016
|
1,016
|
|
BALANCE, December 31,
2018
|
-
|
$105
|
1
|
$170
|
3
|
$531
|
2,669
|
$2,877
|
$118,259
|
$(132)
|
$(137,634)
|
$(15,824)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares in
transit
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
692
|
-
|
-
|
692
|
|
Conversion of debt into common
stock
|
-
|
-
|
-
|
-
|
-
|
-
|
650
|
517
|
(484)
|
-
|
-
|
33
|
|
Beneficial conversion feature of
convertible debt
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
77
|
-
|
-
|
77
|
|
Stock-based
compensation
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
8
|
-
|
-
|
8
|
|
Net income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,921)
|
(1,921)
|
|
BALANCE,
December 31, 2019
|
-
|
$105
|
1
|
$170
|
3
|
$531
|
3,319
|
$3,394
|
$118,552
|
$(132)
|
$(139,555)
|
$(16,935)
|
The
accompanying notes are an integral part of these consolidated
statements.
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31,
(In
Thousands)
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
(loss) income
|
$(1,921)
|
$1,016
|
|
Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
Bad
debt expense
|
-
|
1
|
|
Depreciation
|
21
|
27
|
|
Amortization
of debt issuance costs and discounts
|
105
|
190
|
|
Amortization
of beneficial conversion feature
|
92
|
645
|
|
Stock
based compensation
|
8
|
44
|
|
Change
in fair value of warrants
|
(380)
|
(3,234)
|
|
Gain
on extinguishment of debt
|
-
|
(1,039)
|
|
Changes
in operating assets and liabilities:
|
|
|
|
Accounts
receivable
|
-
|
(10)
|
|
Inventory
|
66
|
151
|
|
Other
current assets
|
(2)
|
42
|
|
Other
assets
|
1
|
41
|
|
Accounts
payable
|
20
|
(6)
|
|
Deferred
revenue
|
35
|
45
|
|
Accrued
liabilities
|
1,149
|
722
|
|
Total
adjustments
|
1,115
|
(2,382)
|
|
|
|
|
|
Net
cash used in operating activities
|
(806)
|
(1,365)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Proceeds
from debt financing, net of discounts and debt issuance
costs
|
1,351
|
1,386
|
|
Payments
made on notes and loans payable
|
(281)
|
(192)
|
|
Proceeds
for future issuance of common stock, warrants and preferred
stock
|
635
|
126
|
|
Net
proceeds from issuance of common stock and warrants
|
-
|
44
|
|
|
|
|
|
Net
cash provided by financing activities
|
1,705
|
1,364
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
899
|
(1)
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, beginning of year
|
-
|
1
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, end of year
|
$899
|
$-
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF:
|
|
|
|
Cash paid
for:
|
|
|
|
Interest
|
$14
|
$116
|
|
NONCASH
INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
Issuance
of common stock as debt repayment
|
$33
|
$925
|
|
Dividends
on preferred stock
|
$-
|
$116
|
The
accompanying notes are an integral part of these consolidated
statements.
GUIDED THERAPEUTICS, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2019 AND 2018
1.
ORGANIZATION, BACKGROUND, AND BASIS OF PRESENTATION
Guided
Therapeutics, Inc. (formerly SpectRx, Inc.), together with its
wholly owned subsidiary, InterScan, Inc. (formerly Guided
Therapeutics, Inc.), collectively referred to herein as the
“Company”, is a medical
technology company focused on developing innovative medical devices
that have the potential to improve healthcare. The Company’s
primary focus is the continued commercialization of its LuViva
non-invasive cervical cancer detection device and extension of its
cancer detection technology into other cancers, including
esophageal. The Company’s technology, including products in
research and development, primarily relates to biophotonics
technology for the non-invasive detection of
cancers.
Basis
of Presentation
All
information and footnote disclosures included in the consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United
States.
A 1:800
reverse stock split of all of the Company’s issued and
outstanding common stock was implemented on March 29, 2019. As a
result of the reverse stock split, every 800 shares of issued and
outstanding common stock were converted into 1 share of common
stock. All fractional shares created by the reverse stock split
were rounded to the nearest whole share. The number of authorized
shares of common stock did not change. The reverse stock split
decreased the Company’s issued and outstanding shares of
common stock from 2,652,309,322 shares to 3,319,486 shares as of
that date with rounding. See Note 4, Stockholders’ Deficit.
Unless otherwise specified, all per share amounts are reported on a
post-stock split basis, as of December 31, 2019 and
2018.
The
Company’s prospects must be considered in light of the
substantial risks, expenses and difficulties encountered by
entrants into the medical device industry. This industry is
characterized by an increasing number of participants, intense
competition and a high failure rate. The Company has experienced
net losses since its inception and, as of December 31, 2019, it had
an accumulated deficit of approximately $139.6 million. To date,
the Company has engaged primarily in research and development
efforts and the early stages of marketing its products. The Company
may not be successful in growing sales for its products. Moreover,
required regulatory clearances or approvals may not be obtained in
a timely manner, or at all. The Company’s products may not
ever gain market acceptance and the Company may not ever generate
significant revenues or achieve profitability. The development and
commercialization of the Company’s products requires
substantial development, regulatory, sales and marketing,
manufacturing and other expenditures. The Company expects operating
losses to continue for the foreseeable future as it continues to
expend substantial resources to complete development of its
products, obtain regulatory clearances or approvals, build its
marketing, sales, manufacturing and finance capabilities, and
conduct further research and development.
Certain
prior year amounts have been reclassified in order to conform to
the current year presentation.
Going
Concern
The
Company’s consolidated financial statements have been
prepared and presented on a basis assuming it will continue as a
going concern. The factors below raise substantial doubt about the
Company’s ability to continue as a going concern. The
financial statements do not include any adjustments that might be
necessary from the outcome of this uncertainty.
At
December 31, 2019, the Company had a negative working capital of
approximately $11.4 million, accumulated deficit of $139.6 million,
and incurred a net loss of $1.9 million for the year then ended
(the net loss for the year ended December 31, 2019 was primarily
realized due to a $1.4 million in interest expense).
Stockholders’ deficit totaled approximately $16.9 million at
December 31, 2019, primarily due to recurring net losses from
operations, deemed dividends on warrants and preferred stock,
offset by proceeds from the exercise of options and warrants and
proceeds from sales of stock.
During
the end of 2019 and beginning of 2020, the Company was able to
raise $1.4 million in equity and debt investments. In addition, the
Company has executed several exchange agreements that will convert
debt for equity, as well as eliminate some existing debt. The
Company’s capital-raising efforts are ongoing and the Company
has taken the following steps to increase the likelihood of a
successful financing: 1) Applied to the Canadian Stock Exchange for
a possible listing, 2) Debt has been significantly reduced and
additional agreements are in place, contingent on a successful
financing, to reduce debt even further either by forgiveness of
debt and/or exchanges of debt for equity and 3) Monthly operating
expenses are scrutinized and controlled. If sufficient capital
cannot be raised during 200, the Company will continue its plans of
curtailing operations by reducing discretionary spending and
staffing levels and attempting to operate by only pursuing
activities for which it has external financial support. However,
there can be no assurance that such external financial support will
be sufficient to maintain even limited operations or that the
Company will be able to raise additional funds on acceptable terms,
or at all. In such a case, the Company might be required to enter
into unfavorable agreements or, if that is not possible, be unable
to continue operations, and to the extent practicable, liquidate
and/or file for bankruptcy protection.
The
Company had warrants exercisable for approximately 46.0 million
shares of its common stock outstanding at December 31, 2019, with
exercise prices ranging between $0.04 and $60,000 per share.
Exercises of these warrants would generate a total of approximately
$1.6 million in cash, assuming full exercise, although the Company
cannot be assured that holders will exercise any warrants.
Management may obtain additional funds through the public or
private sale of debt or equity, and grants, if available. However,
please refer to Footnote 11 - CONVERTIBLE DEBT IN DEFAULT in the
paragraph: Debt Restructuring for more information regarding our
warrants.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. Significant areas where estimates are used include the
allowance for doubtful accounts, inventory valuation and input
variables for Black-Scholes, Monte Carlo simulations and binomial
calculations. The Company uses the Monte Carlo simulations and
binomial calculations in the calculation of the fair value of the
warrant liabilities and the valuation of embedded conversion
options and freestanding warrants.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts
of Guided Therapeutics, Inc. and its wholly owned subsidiary. All
intercompany transactions are eliminated.
Accounting
Standard Updates
Implemented
In
February 2016, the FASB issued ASU 2016-02, “Leases (Topic
842)” that requires lessees to recognize on the balance sheet
the assets and liabilities associated with the rights and
obligations created by those leases. Under the new guidance, a
lessee is required to recognize assets and liabilities for leases
with lease terms of more than 12 months. Consistent with current
U.S. GAAP, the recognition, measurement, and presentation of
expenses and cash flows arising from a lease by a lessee primarily
depends on its classification as finance or operating lease. The
update is effective for reporting periods beginning after December
15, 2018. The adoption
resulted in the Company in recognizing a lease asset and a
corresponding lease liability of $213,000 at adoption.
In May
2014, the Financial Accounting Standards Board (“FASB”)
issued ASU 2014-09, “Revenue from Contracts with Distributors
(Topic 606),” (“ASU 2014-09”). ASU 2014-09
outlines a new, single comprehensive model for entities to use in
accounting for revenue arising from contracts with distributors and
supersedes most current revenue recognition guidance, including
industry-specific guidance. This new revenue recognition model
provides a five-step analysis in determining when and how revenue
is recognized. The new model requires revenue recognition to depict
the transfer of promised goods or services to distributors in an
amount that reflects the consideration a company expects to
receive. ASU 2014-09 also requires additional disclosure about the
nature, amount, timing and uncertainty of revenue and cash flows
arising from customer contracts, including significant judgments
and changes in judgments and assets recognized from costs incurred
to obtain or fulfill a contract. In August 2015, the FASB issued
ASU 2015-14, “Deferral of the Effective Date”, which
amends ASU 2014-09. As a result, the effective date will be the
first quarter of fiscal year 2018 with early adoption permitted in
the first quarter of fiscal year 2017. Subsequently, the FASB has
issued the following standards related to ASU 2014-09: ASU 2016-08,
“Revenue from Contracts with Distributors (Topic 606),
Principal versus Agent Considerations (Reporting Revenue Gross
versus Net),” (“ASU 2016-08”); ASU 2016-10,
“Revenue from Contracts with Distributors (Topic 606),
Identifying Performance Obligations and Licensing,”
(“ASU 2016-10”); ASU 2016-12, “Revenue from
Contracts with Distributors (Topic 606) Narrow-Scope Improvements
and Practical Expedients,” (“ASU 2016-12”); and
ASU 2016-20, “Technical Corrections and Improvements to Topic
606, Revenue from Contracts with Distributors,” (“ASU
2016-20”), which are intended to provide additional guidance
and clarity to ASU 2014-09. The Company must adopt ASU 2016-08, ASU
2016-10, ASU 2016-12 and ASU 2016-20 along with ASU 2014-09
(collectively, the “New Revenue Standards”). The New
Revenue Standards may be applied using one of two retrospective
application methods: (1) a full retrospective approach for all
periods presented, or (2) a modified retrospective approach that
presents a cumulative effect as of the adoption date and additional
required disclosures. The Company has evaluated the adoption of
this guidance and has taken a modified retrospective approach to
the presentation of revenue from contracts with distributors. The
Company adopted this standard on January 1, 2018, using the
modified retrospective method, with no impact on its 2018 financial
statements. The cumulative effect of initially applying the new
guidance had no impact on its financial statements in future
periods.
In
February 2018, the FASB issued ASU 2018-02, Income Statement
– Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income. The amendment of ASU 2018-02 states an entity
may elect to reclassify the income tax effects of the Tax Cuts and
Jobs Act of 2017 (the “Tax Cuts and Jobs Act”) on items
within accumulated other comprehensive income to retained earnings.
The amendments in this update are effective for annual periods, and
interim periods within those annual periods, beginning after
December 15, 2018. Early adoption is permitted. The adoption did
not have a material effect on the Company’s consolidated
financial statements.
Except
as noted above, the guidance issued by the FASB during the current
year is not expected to have a material effect on the
Company’s consolidated financial statements.
A
variety of proposed or otherwise potential accounting standards are
currently under consideration by standard-setting organizations and
certain regulatory agencies. Because of the tentative and
preliminary nature of such proposed standards, management has not
yet determined the effect, if any, that the implementation of such
proposed standards would have on the Company’s consolidated
financial statements.
Cash
Equivalents
The
Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be a cash
equivalent.
Accounts
Receivable
The
Company performs periodic credit evaluations of its
distributors’ financial conditions and generally does not
require collateral. The Company reviews all outstanding accounts
receivable for collectability on a quarterly basis. An allowance
for doubtful accounts is recorded for any amounts deemed
uncollectable. The Company does not accrue interest receivable on
past due accounts receivable.
Concentrations
of Credit Risk
The
Company, from time to time during the years covered by these
consolidated financial statements, may have bank balances in excess
of its insured limits. Management has deemed this a normal business
risk.
Inventory
Valuation
All
inventories are stated at lower of cost or net realizable value,
with cost determined substantially on a “first-in,
first-out” basis. Selling, general, and administrative
expenses are not inventoried, but are charged to expense when
incurred. At December 31, 2019 and 2018, our inventories were as
follows (in thousands):
|
|
|
|
|
|
|
|
Raw
materials
|
$781
|
$783
|
|
Work in
process
|
81
|
81
|
|
Finished
goods
|
17
|
17
|
|
Inventory
reserve
|
(831)
|
(767)
|
|
Total
|
$48
|
$114
|
The
company periodically reviews the value of items in inventory and
provides write-downs or write-offs of inventory based on its
assessment of market conditions. Write-downs and write-offs are
charged to cost of goods sold.
Property
and Equipment
Property and
equipment are recorded at cost. Depreciation is computed using the
straight-line method over estimated useful lives of three to seven
years. Leasehold improvements are amortized at the shorter of the
useful life of the asset or the remaining lease term. Depreciation
and amortization expense is included in general and administrative
expense on the statement of operations. Expenditures for repairs
and maintenance are expensed as incurred. Property and equipment
are summarized as follows at December 31, 2019 and 2018 (in
thousands):
|
|
|
|
|
|
|
|
Equipment
|
$1,349
|
$1,378
|
|
Software
|
740
|
740
|
|
Furniture and
fixtures
|
124
|
124
|
|
Leasehold
Improvement
|
180
|
199
|
|
|
2,393
|
2,441
|
|
Less accumulated
depreciation
|
(2,393)
|
(2,420)
|
|
Total
|
$-
|
$21
|
Debt
Issuance Costs
Debt
issuance costs are capitalized and amortized over the term of the
associated debt. Debt issuance costs are presented in the balance
sheet as a direct deduction from the carrying amount of the debt
liability consistent with the debt discount.
Other
Assets
Other
assets primarily consist of a deposit for the corporate
office.
Patent
Costs (Principally Legal Fees)
Costs
incurred in filing, prosecuting, and maintaining patents are
recurring, and expensed as incurred. Maintaining patents are
expensed as incurred as the Company has not yet received U.S. FDA
approval and recovery of these costs is uncertain. Such costs
aggregated approximately $15,000 and $11,000 in 2019 and 2018,
respectively.
Leases
With the implementation of ASU 2016-02,
“Leases (Topic 842)”, the Company recorded a lease
asset-right and a lease liability. The implementation required the
analysis of certain criteria in determining its treatment. The
Company determined that its corporate office lease met those
criteria. The Company implemented the guidance using the
alternative transition method. Under this alternative, the
effective date would be the date of initial application. The
Company analyzed the lease at its effective date and calculated an
initial lease payment amount of $267,380 with a present value of
$213,000 using a 20% discount. As of December 31, 2019, the
balance of the lease asset – right and lease liability was
approximately $132,000.
The
cumulative effect of initially applying the new guidance had an
immaterial impact on the opening balance of retained earnings, The
Company does not expect the guidance to have a material impact on
its consolidated net earnings in future periods. The Company
elected the Practical expedients permitted under the transition
guidance within the new standards, which allowed the Company to
carry forward the historical lease classification.
Accrued
Liabilities
Accrued
liabilities are summarized as follows at December 31, 2019 and 2018
(in thousands):
|
|
|
|
|
|
|
|
Compensation
|
$1,123
|
$1,030
|
|
Professional
fees
|
181
|
203
|
|
Interest
|
1,603
|
892
|
|
Warranty
|
2
|
2
|
|
Vacation
|
41
|
53
|
|
Preferred
dividends
|
120
|
120
|
|
Stock subscription
for licenses
|
-
|
692
|
|
Other accrued
expenses
|
165
|
164
|
|
Total
|
$3,235
|
$3,156
|
Subscription
receivables
Cash
received from investors for common stock shares that has not
completed processing is recorded as a liability to subscription
receivables. As of December 31, 2019, the Company had reserved
1,270,000 common stock shares in exchange for
$635,000.
Revenue
recognition
The
Company follows, ASC 606 Revenue from Contracts with Customers
establishes a single and comprehensive framework which sets out how
much revenue is to be recognized, and when. The core principle is
that a vendor should recognize revenue to depict the transfer of
promised goods or services to customers in an amount that reflects
the consideration to which the vendor expects to be entitled in
exchange for those goods or services. Revenue will now be
recognized by a vendor when control over the goods or services is
transferred to the customer. In contrast, Revenue based revenue
recognition around an analysis of the transfer of risks and
rewards; this now forms one of a number of criteria that are
assessed in determining whether control has been transferred. The
application of the core principle in ASC 606 is carried out in five
steps: Step 1 – Identify the contract with a customer: a
contract is defined as an agreement (including oral and implied),
between two or more parties, that creates enforceable rights and
obligations and sets out the criteria for each of those rights and
obligations. The contract needs to have commercial substance and it
is probable that the entity will collect the consideration to which
it will be entitled. Step 2 – Identify the performance
obligations in the contract: a performance obligation in a contract
is a promise (including implicit) to transfer a good or service to
the customer. Each performance obligation should be capable of
being distinct and is separately identifiable in the contract. Step
3 – Determine the transaction price: transaction price is the
amount of consideration that the entity can be entitled to, in
exchange for transferring the promised goods and services to a
customer, excluding amounts collected on behalf of third parties.
Step 4 – Allocate the transaction price to the performance
obligations in the contract: for a contract that has more than one
performance obligation, the entity will allocate the transaction
price to each performance obligation separately, in exchange for
satisfying each performance obligation. The acceptable methods of
allocating the transaction price include adjusted market assessment
approach, expected cost plus a margin approach, and, the residual
approach in limited circumstances. Discounts given should be
allocated proportionately to all performance obligations unless
certain criteria are met and reallocation of changes in standalone
selling prices after inception is not permitted. Step 5 –
Recognize revenue as and when the entity satisfies a performance
obligation: the entity should recognize revenue at a point in time,
except if it meets any of the three criteria, which will require
recognition of revenue over time: the entity’s performance
creates or enhances an asset controlled by the customer, the
customer simultaneously receives and consumes the benefit of the
entity’s performance as the entity performs, and the entity
does not create an asset that has an alternative use to the entity
and the entity has the right to be paid for performance to
date.
Revenue
by product line:
|
|
|
|
|
|
|
|
Devices
|
$17
|
$17
|
|
Disposables
|
2
|
32
|
|
Other
|
15
|
1
|
|
Warranty
|
2
|
7
|
|
Total
|
$36
|
$57
|
Revenue
by geographic location:
|
|
|
|
|
|
|
|
Asia
|
$22
|
$49
|
|
Africa
|
-
|
8
|
|
Europe
|
14
|
-
|
|
Total
|
$36
|
$57
|
Significant
Distributors
As of
the year ended December 31, 2019, all the Company’s revenues
were from three distributors and for extended warranties. Revenue
from these distributors totaled approximately $36,000 for the year
ended December 31, 2019. For the year ended December 31, 2018, 82%
of the Company’s revenue was from one distributor and totaled
$40,750. There were no amounts due from these distributors as of
December 31, 2019, and 2018.
Deferred revenue
The
Company defers payments received as revenue until earned based on
the related contracts and applying ASC 606 as required. As of
December 31, 2019, and 2018, the Company had $101,000 and $66,000
in deferred revenue, respectively.
Research
and Development
Research and
development expenses consist of expenditures for research conducted
by the Company and payments made under contracts with consultants
or other outside parties and costs associated with internal and
contracted clinical trials. All research and development costs are
expensed as incurred.
Income
Taxes
The
Company uses the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and
tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Management provides valuation
allowances against the deferred tax assets for amounts that are not
considered more likely than not to be realized.
The
Company has filed its 2018 federal and state corporate tax
returns. The Company
has entered into an agreed upon payment plan with the IRS for
delinquent payroll taxes. The Company is currently in process of
setting up a payment arrangement for its delinquent state income
taxes with the State of Georgia and the returns are currently under
review by state authorities. Although the Company has been
experiencing recurring losses, it is obligated to file tax returns
for compliance with IRS regulations and that of applicable state
jurisdictions. At December 31, 2019, the Company has approximately
$76 million of net operating losses, but it has not filed its
Federal tax returns, therefore this number may not be accurate.
This net operating loss will be eligible to be carried forward for
tax purposes at federal and applicable states level. A full
valuation allowance has been recorded related the deferred tax
assets generated from the net operating losses.
As of
January 1, 2018, corporate tax rates in the U.S. have decreased
from 34% to 21%.
Uncertain
Tax Positions
The
Company assesses each income tax position is assessed using a
two-step process. A determination is first made as to whether it is
more likely than not that the income tax position will be
sustained, based upon technical merits, upon examination by the
taxing authorities. If the income tax position is expected to meet
the more likely than not criteria, the benefit recorded in the
financial statements equals the largest amount that is greater than
50% likely to be realized upon its ultimate settlement. At December
31, 2019 and, 2018, there were no uncertain tax
positions.
Warrants
The
Company has issued warrants, which allow the warrant holder to
purchase one share of stock at a specified price for a specified
period of time. The Company records equity instruments including
warrants issued to non-employees based on the fair value at the
date of issue. The fair value of warrants classified as equity
instruments at the date of issuance is estimated using the
Black-Scholes Model. The fair value of warrants classified as
liabilities at the date of issuance is estimated using the Monte
Carlo Simulation or Binomial model.
Stock
Based Compensation
The
Company records compensation expense related to options granted to
employees and non-employees based on the fair value of the
award.
Compensation cost
is recorded as earned for all unvested stock options outstanding at
the beginning of the first year based upon the grant date fair
value estimates, and for compensation cost for all share-based
payments granted or modified subsequently based on fair value
estimates.
For the
years ended December 31, 2019 and 2018, share-based compensation
for options attributable to employees, officers and Board members
were approximately $8,000 and $44,000, respectively. These amounts
have been included in the Company’s statements of operations.
Compensation costs for stock options which vest over time are
recognized over the vesting period. As of December 31, 2019, the
Company did not have any unrecognized compensation costs related to
granted stock options to be recognized.
Beneficial
Conversion Features of Convertible Securities
Conversion options
that are not bifurcated as a derivative pursuant to ASC 815 and not
accounted for as a separate equity component under the cash
conversion guidance are evaluated to determine whether they are
beneficial to the investor at inception (a beneficial conversion
feature) or may become beneficial in the future due to potential
adjustments. The beneficial conversion feature guidance in ASC
470-20 applies to convertible stock as well as convertible debt
which are outside the scope of ASC 815. A beneficial conversion
feature is defined as a nondetachable conversion feature that is in
the money at the commitment date. The beneficial conversion feature
guidance requires recognition of the conversion option’s
in-the-money portion, the intrinsic value of the option, in equity,
with an offsetting reduction to the carrying amount of the
instrument. The resulting discount is amortized as a dividend over
either the life of the instrument, if a stated maturity date
exists, or to the earliest conversion date, if there is no stated
maturity date. If the earliest conversion date is immediately upon
issuance, the dividend must be recognized at inception. When there
is a subsequent change to the conversion ratio based on a future
occurrence, the new conversion price may trigger the recognition of
an additional beneficial conversion feature on
occurrence.
Derivatives
The
Company reviews the terms of convertible debt issued to determine
whether there are embedded derivative instruments, including
embedded conversion options, which are required to be bifurcated
and accounted for separately as derivative financial instruments.
In circumstances where the host instrument contains more than one
embedded derivative instrument, including the conversion option,
that is required to be bifurcated, the bifurcated derivative
instruments are accounted for as a single, compound derivative
instrument
Bifurcated embedded
derivatives are initially recorded at fair value and are then
revalued at each reporting date with changes in the fair value
reported as non-operating income or expense. When the equity or
convertible debt instruments contain embedded derivative
instruments that are to be bifurcated and accounted for as
liabilities, the total proceeds received are first allocated to the
fair value of all the bifurcated derivative instruments. The
remaining proceeds, if any, are then allocated to the host
instruments themselves, usually resulting in those instruments
being recorded at a discount from their face value. The discount
from the face value of the convertible debt, together with the
stated interest on the instrument, is amortized over the life of
the instrument through periodic charges to interest
expense.
3.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The
guidance for fair value measurements, ASC820, Fair Value
Measurements and Disclosures, establishes the authoritative
definition of fair value, sets out a framework for measuring fair
value, and outlines the required disclosures regarding fair value
measurements. Fair value is the price that would be received to
sell an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at
the measurement date. The Company uses a three-tier fair value
hierarchy based upon observable and non-observable inputs as
follow:
●
Level 1
– Quoted market prices in active markets for identical assets
and liabilities;
●
Level 2
– Inputs, other than level 1 inputs, either directly or
indirectly observable; and
●
Level 3 –
Unobservable inputs developed using internal estimates and
assumptions (there is little or no market date) which reflect those
that market participants would use.
The
Company records its derivative activities at fair value, which
consisted of warrants as of December 31, 2019. The fair value of
the warrants was estimated using the Binomial Simulation model.
Gains and losses from derivative contracts are included in net gain
(loss) from derivative contracts in the statement of operations.
The fair value of the Company’s derivative warrants is
classified as a Level 3 measurement, since unobservable inputs are
used in the valuation.
The
following table presents the fair value for those liabilities
measured on a recurring basis as of December 31, 2019 and
2018:
FAIR
VALUE MEASUREMENTS (In Thousands)
The
following is summary of items that the Company measures at fair
value on a recurring basis:
|
|
Fair
Value at December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in
connection with Distributor Debt
|
-
|
-
|
(114)
|
(114)
|
|
Warrants issued in
connection with Short-term loans
|
-
|
-
|
(83)
|
(83)
|
|
Warrants issued in
connection with Long-term loans
|
-
|
-
|
(893)
|
(893)
|
|
Warrants issued in
connection with Senior Secured Debt
|
-
|
-
|
(4,002)
|
(4,002)
|
|
Embedded derivative
due to the conversion option that needed to be bifurcated for the
Auctus $700,000 loan on December 17, 2019
|
-
|
-
|
-
|
-
|
|
Total
long-term liabilities at fair value
|
$-
|
$-
|
$(5,092)
|
$(5,092)
|
|
|
Fair
Value at December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in
connection with Distributor Debt
|
-
|
-
|
(114)
|
(114)
|
|
Warrants issued in
connection with Senior Secured Debt
|
-
|
-
|
(4,614
|
(4,614
|
|
Total
long-term liabilities at fair value
|
$-
|
$-
|
$(4,728
|
$(4,728
|
|
|
|
|
|
|
The
following is a summary of changes to Level 3 instruments during the
year ended December 31, 2019:
|
|
Fair
Value Measurements Using Significant Unobservable Inputs (Level
3)
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2018
|
$(114)
|
$-
|
$(4,614)
|
$-
|
$(4,728)
|
|
Warrants
issued during the year
|
-
|
(108)
|
-
|
(636)
|
(744)
|
|
Change
in fair value during the year
|
-
|
25
|
612
|
(257)
|
380
|
|
Balance, December
31, 2019
|
$(114)
|
$(83)
|
$(4,002)
|
$(893)
|
$(5,092)
|
As of
December 31, 2019, the fair value of warrants was approximately
$5.1 million. A net change of approximately $0.4 million has been
recorded to the accompanying statement of operations for the year
ended.
4.
STOCKHOLDER’S DEFICIT
Common
Stock
The
Company has authorized 3,000,000,000 shares of common stock with
$0.001 par value, of which 3,319,486 were issued and outstanding as
of December 31, 2019. As of December 31, 2018, there were
3,000,000,000 authorized shares of common stock, of which 2,669,348
were issued and outstanding.
For the
year ended December 31, 2019, the Company issued 650,138 shares of
common stock as listed below:
|
Convertible Debt
Conversions
|
|
650,138
|
Summary
table of common stock share transactions:
|
Balance
at December 31, 2018
|
|
2,669,348
|
|
Issued
in 2019
|
|
650,138
|
|
Balance
at December 31, 2019
|
|
3,319,486
|
Common
stock shares to be issued for subscription receivables and debt
exchange agreements
As of
December 31, 2019, the Company received investments for common
stock shares and warrants. The Company also received debt exchange
agreements for common stock shares and warrants. As of December 31,
2019, the Company had not issued the common stock shares to the
investors and debtors.
During
December 2019, the Company received equity investments in the
amount of $635,000. These investors will receive a total of
1,270,000 common stock shares and 1,270,000 warrants to purchase
common stock shares at a strike price of $0.25, 1,270,000 warrants
to purchase common stock shares at a strike price of $0.75 and 635
Series D preferred stock (each Series D preferred stock shares
converts into 3,000 shares of the Company’s common stock
shares). Of the amount invested $350,000 was from related
parties.
On
December 5, 2019, the Company entered into an exchange agreement
with Aquarius. Based on this agreement the Company will exchange
$145,544 of debt outstanding for: 291,088 common stock shares;
145,544 warrants to purchase common stock shares at a strike price
of $0.25; and 145,544 warrants to purchase common stock shares at a
strike price of $0.75.
On
December 30, 2019, the Company entered into an exchange agreement
with K2 Medical. Based on this agreement the Company will exchange
$790,544 of debt outstanding for: 1,881,495 common stock shares;
496,602 warrants to purchase common stock shares at a strike price
of $0.20; 692,446 warrants to purchase common stock shares at a
strike price of $0.25; and 692,446 warrants to purchase common
stock shares at a strike price of $0.75.
On
December 30, 2019, the Company entered into an exchange agreement
with Mr. Blumberg. Based on this agreement the Company will
exchange $305,320 of debt outstanding for: 1,167,630 common stock
shares; 928,318 warrants to purchase common stock shares at a
strike price of $0.20; 119,656 warrants to purchase common stock
shares at a strike price of $0.25; and 119,656 warrants to purchase
common stock shares at a strike price of $0.75.
On
December 30, 2019, the Company entered into an exchange agreement
with Mr. Case. Based on this agreement the Company will exchange
$179,291 of debt outstanding for: 896,456 common stock shares; and
896,455 warrants to purchase common stock shares at a strike price
of $0.20.
On
December 30, 2019, the Company entered into an exchange agreement
with Mr. Grimm. Based on this agreement the Company will exchange
$51,110 of debt outstanding for: 255,548 common stock shares; and
255,548 warrants to purchase common stock shares at a strike price
of $0.20.
On
December 30, 2019, the Company entered into an exchange agreement
with Mr. Gould. Based on this agreement the Company will exchange
$111,227 of debt outstanding for: 556,136 common stock shares; and
556,136 warrants to purchase common stock shares at a strike price
of $0.20.
On
December 30, 2019, the Company entered into an exchange agreement
with Mr. Mamula. Based on this agreement the Company will exchange
$15,577 of debt outstanding for: 77,885 common stock shares; and
77,885 warrants to purchase common stock shares at a strike price
of $0.20.
On
December 30, 2019, the Company entered into an exchange agreement
with Dr. Imhoff. Based on this agreement the Company will exchange
$400,417 of debt outstanding for: 1,699,255 common stock shares;
1,497,367 warrants to purchase common stock shares at a strike
price of $0.20; 100,944 warrants to purchase common stock shares at
a strike price of $0.25; and 100,944 warrants to purchase common
stock shares at a strike price of $0.75.
On
December 30, 2019, the Company entered into an exchange agreement
with Ms. Rosenstock. Based on this agreement the Company will
exchange $78,986 of debt outstanding for: 100,000 common stock
shares; and 50,000 warrants to purchase common stock shares at a
strike price of $0.25; and 50,000 warrants to purchase common stock
shares at a strike price of $0.75. Ms. Rosenstock also forgave
$28,986 in debt to the Company.
On
December 30, 2019, the Company entered into an exchange agreement
with Michael James. Based on this agreement the Company will
exchange $2,286 of debt outstanding for: 7,746 common stock shares;
1,227 warrants to purchase common stock shares at a strike price of
$0.25; 1,227 warrants to purchase common stock shares at a strike
price of $0.75; and 5,291 warrants to purchase common stock shares
at a strike price of $0.20.
The
Company’s COO and director, Mark Faupel, is a shareholder of
Shenghuo, and a former director, Richard Blumberg, is a managing
member of Shenghuo.
During
2018, the Company had exercised its rights under the $10,000,000
GHS Equity Financing Agreement entered into on March 1, 2018, to
exercise puts of $47,320 for the issuance of 87,500 common stock
shares. Pursuant to the agreement a put maybe executed for a price
that is 80% of the “market price” which is the average
of the two lowest volume weighted average prices of the
Company’s common stock for 15 consecutive trading days
preceding the put date.
Preferred
Stock
The
Company has authorized 5,000,000 shares of preferred stock with a
$.001 par value. The board of directors has the authority to issue
these shares and to set dividends, voting and conversion rights,
redemption provisions, liquidation preferences, and other rights
and restrictions. The board of directors designated 525,000 shares
of preferred stock redeemable convertible preferred stock, none of
which remain outstanding, 33,000 shares of preferred stock as
Series B Preferred Stock, none of which remain outstanding, 9,000
shares of preferred stock as Series C Convertible Preferred Stock,
(the “Series C Preferred Stock”), of which 286 were
issued and outstanding at December 31, 2019 and 2018, respectively
and 20,250 shares of preferred stock as Series C1 Preferred Stock,
of which 1,050 shares were issued and outstanding at December 31,
2019 and 2018, respectively.
On
August 31, 2018, the Company entered into agreements with certain
holders of the Company’s Series C1 Preferred Stock, including
the chairman of the Company’s board of directors, and the
Chief Operating Officer and a director of the Company (the
“Exchange Agreements”), pursuant to which those holders
separately agreed to exchange each share of the Series C1 Preferred
Stock held for one (1) share of the Company’s newly created
Series C2 preferred stock, par value $0.001 per share (the
“Series C2 Preferred Stock”). In total, for 3,262.25
shares of Series C1 Preferred Stock to be surrendered, the Company
issued 3,262.25 shares of Series C2 Preferred Stock.
The Company will issue Series D Preferred Stock in
2020. At the end of 2019 and beginning of 2020, the Company had
subscriptions from investors that would provide each investor one
Series D Preferred Stock share for each $1,000 invested. And
each Series D preferred stock converts into 3,000 shares of
the Company’s common stock shares.
Series C Convertible Preferred Stock
On June
29, 2015, the Company entered into a securities purchase agreement
with certain accredited investors, including John Imhoff and Mark
Faupel, members of the Board, for the issuance, exchange and sale
of an aggregate of 6,737 shares of Series C convertible preferred
stock, at a purchase price of $750 per share and a stated value of
$1,000 per share. Additionally, during October 2015 the Company
entered into an interim agreement amending the securities purchase
agreement to provide for certain of the investors to purchase an
additional aggregate of 1,166 shares. For a total of Series C
convertible preferred stock issued of 7,903 shares. Of the 7,903
Series C convertible preferred stock issued, 1,835 were issued in
exchange of Series B convertible preferred stock. Therefore 6,068
Series C preferred stock were issued at a purchase price of $750
for gross proceeds of $4,551,000. The Company received net cash
proceeds of $3,698,000, after cash and non-cash expenses of
$853,000.
Pursuant to the
Series C certificate of designations, shares of Series C preferred
stock are convertible into common stock by their holder at any time
and may be mandatorily convertible upon the achievement of
specified average trading prices for the Company’s common
stock. At December 31, 2019, there were 286 shares outstanding with
a conversion price of $0.50 per share, such that each share of
Series C preferred stock would convert into approximately 2,000
shares of the Company’s common stock, subject to customary
adjustments, including for any accrued but unpaid dividends and
pursuant to certain anti-dilution provisions, as set forth in the
Series C certificate of designations. The conversion price will
automatically adjust downward to 80% of the then-current market
price of the Company’s common stock 15 trading days after any
reverse stock split of the Company’s common stock, and 5
trading days after any conversions of the Company’s
outstanding convertible debt.
Holders
of the Series C preferred stock are entitled to quarterly
cumulative dividends at an annual rate of 12.0% until 42 months
after the original issuance date (the “Dividend End
Date”), payable in cash or, subject to certain conditions,
the Company’s common stock. In addition, upon conversion of
the Series C preferred stock prior to the Dividend End Date, the
Company will also pay to the converting holder a “make-whole
payment” equal to the number of unpaid dividends through the
Dividend End Date on the converted shares. At December 31, 2019,
the “make-whole payment” for a converted share of
Series C preferred stock would convert to 200 shares of the
Company’s common stock. The Series C preferred stock
generally has no voting rights except as required by Delaware law.
Upon the Company’s liquidation or sale to or merger with
another corporation, each share will be entitled to a liquidation
preference of $1,000, plus any accrued but unpaid dividends. In
addition, the purchasers of the Series C preferred stock received,
on a pro rata basis, warrants exercisable to purchase an aggregate
of approximately 1 share of Company’s common stock. The
warrants contain anti-dilution adjustments in the event that the
Company issues shares of common stock, or securities exercisable or
convertible into shares of common stock, at prices below the
exercise price of such warrants. As a result of the anti-dilution
protection, the Company is required to account for the warrants as
a liability recorded at fair value each reporting period. At
December 31, 2019, the exercise price per share was
$512,000.
On May
23, 2016, an investor canceled certain of these warrants,
exercisable into 903 shares of common stock. The same investor also
transferred certain of these warrants, exercisable for 150 shares
of common stock, to two investors who also had participated in the
2015 Series C financing.
Series C1 Convertible Preferred Stock
Between
April 27, 2016 and May 3, 2016, the Company entered into various
agreements with certain holders of Series C preferred stock,
including directors John Imhoff and Mark Faupel, pursuant to which
those holders separately agreed to exchange each share of Series C
preferred stock held for 2.25 shares of the Company’s newly
created Series C1 Preferred Stock and 12 (9,600 pre-split) shares
of the Company’s common stock (the “Series C
Exchanges”). In connection with the Series C Exchanges, each
holder also agreed to roll over the $1,000 stated value per share
of the holder’s shares of Series C1 Preferred Stock into the
next qualifying financing undertaken by the Company on a
dollar-for-dollar basis and, except in the event of an additional
$50,000 cash investment in the Company by the holder, to execute a
customary “lockup” agreement in connection with the
financing. In total, for 1,916 shares of Series C preferred stock
surrendered, the Company issued 4,312 shares of Series C1 Preferred
Stock and 29 shares of common stock. At December 31, 2019, there
were 1,050 shares outstanding with a conversion price of $0.50 per
share, such that each share of Series C preferred stock would
convert into approximately 2,000 shares of the Company’s
common stock.
On August 31, 2018, 3,262.25 shares of Series C1
Preferred Stock were surrendered, and the Company issued 3,262.25
shares of Series C2 Preferred Stock. At December 31,
2019, shares of Series C2 had a
conversion price of $0.50 per share, such that each share of Series
C preferred stock would convert into approximately 2,000 shares of
the Company’s common stock.
The
Series C1 preferred stock has terms that are substantially the same
as the Series C preferred stock, except that the Series C1
preferred stock does not pay dividends (unless and to the extent
declared on the common stock) or at-the-market “make-whole
payments” and, while it has the same anti-dilution
protections afforded the Series C preferred stock, it does not
automatically reset in connection with a reverse stock split or
conversion of our outstanding convertible debt.
Series C2 Convertible Preferred Stock
On August 31, 2018, the Company entered into
agreements with certain holders of the Company’s Series C1
Preferred Stock, including the chairman of the Company’s
board of directors, and the Chief Operating Officer and a director
of the Company pursuant to which those holders separately agreed to
exchange each share of the Series C1 Preferred Stock held for one
(1) share of the Company’s newly created Series C2 Preferred
Stock. In total, for 3,262.25 shares of Series C1 Preferred Stock
to be surrendered, the Company issued 3,262.25 shares of Series C2
Preferred Stock. At December 31, 2019, shares of Series C2 had a conversion price of
$0.50 per share, such that each share of Series C preferred stock
would convert into approximately 2,000 shares of the
Company’s common stock.
The
terms of the Series C2 Preferred Stock are substantially the same
as the Series C1 Preferred Stock, except that (i) shares of Series
C1 Preferred Stock may not be convertible into the Company’s
common stock by their holder for a period of 180 days following the
date of the filing of the Certificate of Designation (the
“Lock-Up Period”); (ii) the Series C2 Preferred Stock
has the right to vote as a single class with the Company’s
common stock on an as-converted basis, notwithstanding the Lock-Up
Period; and (iii) the Series C2 Preferred Stock will automatically
convert into that number of securities sold in the next Qualified
Financing (as defined in the Exchange Agreement) determined by
dividing the stated value ($1,000 per share) of such share of
Series C2 Preferred Stock by the purchase price of the securities
sold in the Qualified Financing.
Warrants
The
following table summarizes transactions involving the
Company’s outstanding warrants to purchase common stock for
the year ended December 31, 2019:
|
|
Warrants
(Underlying
Shares)
|
|
Outstanding,
January 1, 2019
|
23,551,857
|
|
Issuances
|
22,465,001
|
|
Canceled /
Expired
|
(18)
|
|
Exercised
|
-
|
|
Outstanding,
December 31, 2019
|
46,016,840
|
The
Company had the following shares reserved for the warrants as of
December 31, 2019:
|
Warrants
(Underlying Shares)
|
Exercise
Price
|
Expiration
Date
|
|
13(1)
|
$60,000.00 per
share
|
June
14, 2021
|
|
2(7)
|
$5,760,000.00 per
share
|
December 2,
2020
|
|
2(8)
|
$7,040,000.00 per
share
|
December 2,
2020
|
|
1(9)
|
$7,603,200.00 per
share
|
June
29, 2020
|
|
13(9)
|
$512,000.00 per
share
|
September 21,
2020
|
|
24(10)
|
$512,000.00 per
share
|
June
29, 2020
|
|
12(11)
|
$512,000.00 per
share
|
September 4,
2020
|
|
1(12)
|
$7,603,200.00 per
share
|
September 4,
2020
|
|
1(13)
|
$512,000.00 per
share
|
October
23, 2020
|
|
1(14)
|
$7,603,200.00 per
share
|
October
23, 2020
|
|
35,937,500(15)
|
$0.04
per share
|
June
14, 2021
|
|
1,725,000(16)
|
$0.04
per share
|
February 21,
2021
|
|
22(17)
|
$11,137.28 per
share
|
June 6,
2021
|
|
250(18)
|
$0.04
per share
|
February 13,
2022
|
|
25(19)
|
$144.00
per share
|
May 16,
2022
|
|
688(20)
|
$15.20
per share
|
November 16,
2020
|
|
250(21)
|
$15.20
per share
|
December 28,
2020
|
|
75(22)
|
$16.08
per share
|
January
10, 2021
|
|
4,262(23)
|
$0.04
per share
|
March
19, 2021
|
|
1,875(24)
|
$16.08
per share
|
March
20, 2021
|
|
63(25)
|
$48.00
per share
|
April
30, 2021
|
|
125(26)
|
$48.00
per share
|
May 17,
2021
|
|
125(27)
|
$48.00
per share
|
May 25,
2021
|
|
500(28)
|
$48.00
per share
|
June 1,
2021
|
|
1,875(29)
|
$200.00
per share
|
August
22, 2021
|
|
625(30)
|
$200.00
per share
|
September 18,
2021
|
|
1,250(31)
|
$1.12
per share
|
October
23, 2021
|
|
19(32)
|
$0.64
per share
|
November 20,
2021
|
|
375(33)
|
$0.32
per share
|
December 5,
2021
|
|
100(34)
|
$0.16
per share
|
December 19,
2021
|
|
188(35)
|
$0.24
per share
|
December 23,
2021
|
|
14(36)
|
$0.24
per share
|
December 27,
2021
|
|
313(37)
|
$0.24
per share
|
January
7, 2021
|
|
188(38)
|
$0.21
per share
|
January
17, 2021
|
|
438(39)
|
$0.16
per share
|
January
30, 2021
|
|
625(40)
|
$0.16
per share
|
February 15,
2021
|
|
325,000(41)
|
$0.18
per share
|
April
4, 2022
|
|
200,000(42)
|
$0.20
per share
|
April
25, 2022
|
|
215,000(43)
|
$0.20
per share
|
July 1,
2022
|
|
100,000(44)
|
$0.20
per share
|
September 1,
2022
|
|
7,500,000(45)
|
$0.20
per share
|
December 17,
2024
|
|
46,016,840*
|
|
|
* However, please refer to Footnote 10 - CONVERTIBLE DEBT IN
DEFAULT in the paragraph: Debt Restructuring for more
information regarding our warrants.
(1)
Issued in June 2015
in exchange for warrants originally issued as part of a May 2013
private placement.
(6)
Issued in June 2015
in exchange for warrants originally issued as part of a 2014 public
offering.
(7)
Issued as part of a
March 2015 private placement.
(8)
Issued to a
placement agent in conjunction with a June 2015 private
placement.
(9)
Issued as part of a
June 2015 private placement.
(10)
Issued as part of a
June 2015 private placement.
(11)
Issued as part of a
June 2015 private placement.
(12)
Issued to a
placement agent in conjunction with a June 2015 private
placement.
(13)
Issued as part of a
June 2015 private placement.
(14)
Issued to a
placement agent in conjunction with a June 2015 private
placement.
(15)
Issued as part of a
February 2016 private placement.
(16)
Issued to a
placement agent in conjunction with a February 2016 private
placement.
(17)
Issued pursuant to
a strategic license agreement.
(18)
Issued as part of a
February 2017 private placement.
(19)
Issued as part of a
May 2017 private placement.
(20)
Issued to investors
for a loan in November 2017.
(21)
Issued to investors
for a loan in December 2017.
(22)
Issued to investors
for a loan in January 2018.
(23)
Issued to investors
for a loan in March 2018.
(24)
Issued to investors
for a loan in March 2018.
(25)
Issued to investors
for a loan in April 2018.
(26)
Issued to investors
for a loan in May 2018.
(27)
Issued to investors
for a loan in May 2018.
(28)
Issued to investors
for a loan in June 2018
(29)
Issued to investors
for a loan in August 2018
(30)
Issued to investors
for a loan in September 2018
(31)
Issued to investors
for a loan in October 2018
(32)
Issued to investors
for a loan in November 2018
(33)
Issued to investors
for a loan in December 2018
(34)
Issued to investors
for a loan in December 2018
(35)
Issued to investors
for a loan in December 2018
(36)
Issued to investors
for a loan in December 2018
(37)
Issued to investors
for a loan in January 2019
(38)
Issued to investors
for a loan in January 2019
(39)
Issued to investors
for a loan in January 2019
(40)
Issued to investors
for a loan in February 2019
(41)
Issued to investors
for a loan in April 2019
(42)
Issued to investors
for a loan in April 2019
(43)
Issued to investors
for a loan in July 2019
(44)
Issued to investors
for a loan in September 2019
(45)
Issued to investors
for a loan in December 2019
All
outstanding warrant agreements provide for anti-dilution
adjustments in the event of certain mergers, consolidations,
reorganizations, recapitalizations, stock dividends, stock splits
or other changes in the Company’s corporate structure; except
for (8). In addition, warrants subject to footnotes (1) and
(9)-(11), (13), and (15) – (45) in the table above are
subject to “lower price issuance” anti-dilution
provisions that automatically reduce the exercise price of the
warrants (and, in the cases of warrants subject to footnote (1),
(15) and (16) in the table above, increase the number of shares of
common stock issuable upon exercise), to the offering price in a
subsequent issuance of the Company’s common stock, unless
such subsequent issuance is exempt under the terms of the
warrants.
For the
warrants to footnote (15), the Company further agreed to amend the
warrant issued with the original senior secured convertible note,
to adjust the number of shares issuable upon exercise of the
warrant to equal the number of shares that will initially be
issuable upon conversion of the new convertible note (without
giving effect to any beneficial ownership limitations set forth in
the terms of the new convertible note).
The
warrants subject to footnote (1) are subject to a mandatory
exercise provision. This provision permits the Company, subject to
certain limitations, to require exercise of such warrants at any
time following (a) the date that is the 30th day after the later of
the Company’s receipt of U.S. FDA approval for LuViva and the
date on which the common stock achieves an average market price for
20 consecutive trading days of at least $832,000.00 with an average
daily trading volume during such 20 consecutive trading days of at
least 250 shares, or (b) the date on which the average market price
of the common stock for 20 consecutive trading days immediately
prior to the date the Company delivers a notice demanding exercise
is at least $103,680,000.00 and the average daily trading volume of
the common stock exceeds 250 shares for such 20 consecutive trading
days. If these warrants are not timely exercised upon demand, they
will expire. Upon the occurrence of certain events, the Company may
be required to repurchase these warrants, as well as the warrants
subject to footnote (1) in the table above. The holders of the
warrants subject to footnote (1) in the table above have agreed to
surrender the warrants, upon consummation of a qualified public
financing, for new warrants exercisable for 200% of the number of
shares underlying the surrendered warrants, but without certain
anti-dilution protections included with the surrendered
warrants.
The
warrants subject to footnote (6) in the table above are also
subject to a mandatory exercise provision. This provision permits
the Company, subject to certain limitations, to require exercise of
50% of the then-outstanding warrants if the trading price of its
common stock is at least two times the initial warrant exercise
price for any 20-day trading period. Further, in the event that the
trading price of the Company’s common stock is at least 2.5
times the initial warrant exercise price for any 20-day trading
period, the Company will have the right to require the immediate
exercise of 50% of the then-outstanding warrants. Any warrants not
exercised within the prescribed time periods will be canceled to
the extent of the number of shares subject to mandatory
exercise.
Series
B Tranche B Warrants
As
discussed in Note 3, Fair Value Measurements, between June 13, 2016
and June 14, 2016, the Company entered into various agreements with
holders of the Company’s “Series B Tranche B”
warrants, pursuant to which each holder separately agreed to
exchange the warrants for either (1) shares of common stock equal
to 166% of the number of shares of common stock underlying the
surrendered warrants, or (2) new warrants exercisable for 200% of
the number of shares underlying the surrendered warrants, but
without certain anti-dilution protections included with the
surrendered warrants. In total, for surrendered warrants
then-exercisable for an aggregate of 1,482 shares of common stock
(but subject to exponential increase upon operation of certain
anti-dilution provisions), the Company issued or is obligated to
issue 21 shares of common stock and new warrants that, if exercised
as of the date hereof, would be exercisable for an aggregate of 271
shares of common stock. As of December 31, 2019, the Company had
issued 18 shares of common stock and rights to common stock shares
for 3. In certain circumstances, in lieu of presently issuing all
of the shares (for each holder that opted for shares of common
stock), the Company and the holder further agreed that the Company
will, subject to the terms and conditions set forth in the
applicable warrant exchange agreement, from time to time, be
obligated to issue the remaining shares to the holder. No
additional consideration will be payable in connection with the
issuance of the remaining shares. The holders that elected to
receive shares for their surrendered warrants have agreed that they
will not sell shares on any trading day in an amount, in the
aggregate, exceeding 20% of the composite aggregate trading volume
of the common stock for that trading day. The holders that elected
to receive new warrants will be required to surrender their old
warrants upon consummation of the Company’s next financing
resulting in net cash proceeds to the Company of at least $1
million. The new warrants will have an initial exercise price equal
to the exercise price of the surrendered warrants as of immediately
prior to consummation of the financing, subject to customary
“downside price protection” for as long as the
Company’s common stock is not listed on a national securities
exchange and will expire five years from the date of
issuance.
5.
INCOME TAXES
The
Company has incurred net operating losses ("NOLs") since inception.
As of December 31, 2019, the company had NOL carryforwards
available through 2038 of approximately $75.8 million to offset its
future income tax liability. The company has recorded deferred tax
assets but reserved against, due to uncertainties related to
utilization of NOLs as well as calculation of effective tax rate.
Utilization of existing NOL carryforwards may be limited in future
years based on significant ownership changes. The company is in the
process of analyzing their NOL and has not determined if the
company has had any change of control issues that could limit the
future use of NOL. NOL carryforwards that were generated after 2017
of approximately $4.2 million may only be used to offset 80% of
taxable income and are carried forward indefinitely.
Components of
deferred taxes are as follow at December 31 (in
thousands):
|
|
|
|
|
Deferred tax
assets:
|
|
|
|
Warrant
liability
|
$1,087
|
$1,182
|
|
Accrued executive
compensation
|
515
|
498
|
|
Reserves and
other
|
468
|
488
|
|
Net operating loss
carryforwards
|
18,961
|
19,297
|
|
|
21,031
|
21,465
|
|
Valuation
allowance
|
(21,031)
|
(21,465
|
|
Net deferred tax
assets
|
$0
|
$0
|
The
following is a summary of the items that caused recorded income
taxes to differ from taxes computed using the statutory federal
income tax rate for the years ended December 31:
|
|
|
|
|
Statutory federal
tax rate
|
21%
|
21%
|
|
State taxes, net of
federal benefit
|
4
|
4
|
|
Nondeductible
expenses
|
-
|
-
|
|
Valuation
allowance
|
(25)
|
(25)
|
|
Effective tax
rate
|
0%
|
0%
|
On
December 22, 2017, the U.S. government enacted comprehensive tax
reform commonly referred to as the Tax Cuts and Jobs Act
(“TCJA”). Under ASC 740, the effects of changes in tax
rates and laws are recognized in the period which the new
legislation is enacted. Among other things, the TCJA (1) reduces
the U.S. statutory corporate income tax rate from 34% to 21%
effective January 1, 2018 (2) eliminates the corporate alternative
minimum tax (3) eliminates the Section 199 deduction (4) changes
rules related to uses and limitations of net operating loss
carryforwards beginning after December 31, 2017.
The
Company applies the applicable authoritative guidance which
prescribes a comprehensive model for the manner in which a company
should recognize, measure, present and disclose in its financial
statements all material uncertain tax positions that the Company
has taken or expects to take on a tax return. As of December 31,
2019, the Company has no uncertain tax positions. There are no
uncertain tax positions for which it is reasonably possible that
the total amounts of unrecognized tax benefits will significantly
increase or decrease within twelve months from December 31,
2019.
The
Company files federal income tax returns and income tax returns in
various state tax jurisdictions with varying statutes of
limitations. The Company has filed its 2018 federal and state
corporate tax returns.
The
provision for income taxes as of the dates indicated consisted of
the following (in thousands) December 31:
|
|
|
|
|
Current
|
$-
|
$-
|
|
Deferred
|
-
|
-
|
|
Deferred
provision
|
-
|
-
|
|
Impact of change in
enacted tax rates
|
-
|
-
|
|
Change in valuation
allowance
|
-
|
-
|
|
Total provision for
income taxes
|
$-
|
$-
|
In 2019
and 2018, our effective tax rate differed from the U.S. federal
statutory rate due to the valuation allowance over our deferred tax
assets.
6.
STOCK OPTIONS
The
Company’s 1995 Stock Plan (the “Plan”) has
expired pursuant to its terms, so zero shares remained available
for issuance at December 31, 2019 and 2018. The Plan allowed for
the issuance of incentive stock options, nonqualified stock
options, and stock purchase rights. The exercise price of options
was determined by the Company’s board of directors, but
incentive stock options were granted at an exercise price equal to
the fair market value of the Company’s common stock as of the
grant date. Options historically granted have generally become
exercisable over four years and expire ten years from the date of
grant.
Due to
the 1:800 reverse stock split of all of the Company’s issued
and outstanding common stock was implemented on March 29, 2019. As
a result of the reverse stock split, every 800 shares of issued and
outstanding common stock were converted into 1 share of common
stock. This resulted in the number of stock options outstanding to
be zero.
7.
LITIGATION AND CLAIMS
From
time to time, the Company may be involved in various legal
proceedings and claims arising in the ordinary course of business.
Management believes that the dispositions of these matters,
individually or in the aggregate, are not expected to have a
material adverse effect on the Company’s financial condition.
However, depending on the amount and timing of such disposition, an
unfavorable resolution of some or all of these matters could
materially affect the future results of operations or cash flows in
a particular year.
As of
December 31, 2019, and 2018, there was no accrual recorded for any
potential losses related to pending litigation.
8.
COMMITMENTS AND CONTINGENCIES
Operating
Leases
In
December 2009, the Company moved its offices, which comprise its
administrative, research and development, marketing and production
facilities to 5835 Peachtree Corners East, Suite B, Peachtree
Corners, Georgia 30092. The Company leased approximately 23,000
square feet under a lease that expired in June 2017. In July 2017,
the Company leased the offices on a month to month basis. On
February 23, 2018, the Company modified its lease to reduce its
occupancy to 12,835 square feet. The fixed monthly lease expense
will be: $13,859 each month for the period beginning January 1,
2018 and ending March 31, 2018; $8,022 each month for the period
beginning April 1, 2018 and ending March 31, 2019; $8,268 each
month for the period beginning April 1, 2019 and ending March 31,
2020; and $8,514 each month for the period beginning April 1, 2020
and ending March 31, 2021.
The
Company recognizes lease expense on a straight-line basis over the
estimated lease term and combine lease and non-lease components.
Future minimum rental payments at December 31, 2019 under
non-cancellable operating leases for office space and equipment are
as follows (in thousands):
|
Year
|
|
|
2020
|
120
|
|
2021
|
30
|
|
Total
|
159
|
|
Less:
Interest
|
27
|
|
Present value of
lease liability
|
132
|
Related
Party Contracts
On June
5, 2016, the Company entered into a license agreement with Shenghuo
Medical, LLC pursuant to which the Company granted Shenghuo an
exclusive license to manufacture, sell and distribute LuViva in
Taiwan, Brunei Darussalam, Cambodia, Laos, Myanmar, Philippines,
Singapore, Thailand, and Vietnam. Shenghuo was already the
Company’s exclusive distributor in China, Macau and Hong
Kong, and the license extended to manufacturing in those countries
as well. Under the terms of the license agreement, once Shenghuo
was capable of manufacturing LuViva in accordance with ISO 13485
for medical devices, Shenghuo would pay the Company a royalty equal
to $2.00 or 20% of the distributor price (subject to a discount
under certain circumstances), whichever is higher, per disposable
distributed within Shenghuo’s exclusive territories. In
connection with the license grant, Shenghuo was to underwrite the
cost of securing approval of LuViva with Chinese Food and Drug
Administration. At its option, Shenghuo also would provide up to
$1.0 million in furtherance of the Company’s efforts to
secure regulatory approval for LuViva from the U.S. Food and Drug
Administration, in exchange for the right to receive payments equal
to 2% of the Company’s future sales in the United States, up
to an aggregate of $4.0 million. Pursuant to the license agreement,
Shenghuo had the option to have a designee appointed to the
Company’s board of directors (former director Richard
Blumberg was the designee). As partial consideration for, and as a
condition to, the license, and to further align the strategic
interests of the parties, the Company agreed to issue a convertible
note to Shenghuo, in exchange for an aggregate cash investment of
$200,000. The note will provide for a payment to Shenghuo of
$300,000, expected to be due the earlier of 90 days from issuance
and consummation of any capital raising transaction by the Company
with net cash proceeds of at least $1.0 million. The note will
accrue interest at 20% per year on any unpaid amounts due after
that date. The note will be convertible into shares of the
Company’s common stock at a conversion price per share of
$11,137, subject to customary anti-dilution adjustment. The note
will be unsecured and is expected to provide for customary events
of default. The Company will also issue Shenghuo a five-year
warrant exercisable immediately for approximately 22 shares of
common stock at an exercise price equal to the conversion price of
the note, subject to customary anti-dilution
adjustment.
On July
24, 2019, Shandong Yaohua Medical Instrument Corporation
(“SMI”), agreed to modify its existing agreement. Under
the terms of this modification, the Company agreed to grant (1)
exclusive manufacturing rights, excepting the disposable cervical
guides for the Republic of Turkey, and the final assembly rights
for Hungary, and (2) exclusive distribution and sales for LuViva in
jurisdictions, subject to the following terms and conditions.
First, SMI shall complete the payment for parts, per the purchase
order, for five additional LuViva devices. Second, in consideration
for the $885,144 that the Company received, SMI will receive 12,147
common stock shares. Third, SMI shall honor all existing purchase
orders it has executed to date with the Company, in order to
maintain jurisdiction sales and distribution rights. If SMI needs
cervical guides then it will do so at a cost including labor, plus
ten percent markup. The Company will provide 200 cervical guides at
no cost for the clinical trials. Fourth, the Company and SMI will
make best efforts to sell devices after CFDA approval. With an
initial estimate of year one sales of 200 LuViva devices; year two
sales of 500 LuViva devices; year three sales of 1,000 LuViva
devices; and year four sales of 1,250 LuViva devices. Fifth, SMI
shall pay for entire costs of securing approval of LuViva with the
Chinese FDA. Sixth, SMI shall arrange, at its sole cost, for a
manufacturer in China to build tooling to support manufacture. In
addition, SMI retains the right to manufacture for China, Hong
Kong, Macau and Taiwan, where SMI has distribution and sales
rights. For each single-use cervical guide sold by SMI in the
jurisdictions, SMI shall transfer funds to escrow agent at a rate
of $1.90 per chip. If within 18 months of the license’s
effective date, SMI fails to achieve commercialization of LuViva in
China, SMI shall no longer have any rights to manufacture,
distribute or sell LuViva. Commercialization is defined as: Filing
an application with the Chinese FDA for the approval of LuViva; Any
assembly or manufacture of the devices or disposables that begins
in China; and purchase of at least 10 devices and disposables for
clinical evaluations and regulatory use and or sales in the
jurisdictions. The Company had recorded an accrued liability for
SMI of $692,335, which will be reclassified to additional paid in
capital and 12,147 common stock shares. The common stock shares
were issued on March 5, 2020.
On
September 6, 2016, the Company entered into a royalty agreement
with one of its directors, John Imhoff, and another stockholder,
Dolores Maloof, pursuant to which the Company sold to them a
royalty of future sales of single-use cervical guides for LuViva.
Under the terms of the royalty agreement, and for consideration of
$50,000, the Company will pay them an aggregate perpetual royalty
initially equal to $0.10, and from and after October 2, 2016, equal
to $0.20, for each disposable that the Company sells (or that is
sold by a third party pursuant to a licensing arrangement with the
Company).
9.
NOTES PAYABLE
Notes
Payable in Default
At
December 31, 2019 and 2018, the Company maintained notes payable to
both related and non-related parties totaling approximately
$776,000 and $700,000, respectively. These notes are short term,
straight-line amortizing notes. The notes carry annual interest
rates between 0% and 10% and have default rates as high a
20%. The Company is
accruing interest at the default rate of 18.0% on two of the
loans.
On July
1, 2019, the Company entered into a loan agreement with Accilent
Capital Management Inc / Rev Royalty Income and Growth Trust
(“Accilent”), providing for the purchase by Accilent of
an unsecured promissory note in the principal amount of $49,389
(CAD$ 65,500). The note was fully funded on July 9, 2019 (net of an
8% original issue discount and other expenses). The note bears an
interest rate of 16% and was due and payable on September 11, 2019.
Following maturity, demand, default, or judgment and until actual
payment in full, interest rate shall be paid at the rate of 19% per
annum. The Company will issue warrants to purchase one common share
of the Company for each warrant held in the aggregate amount of
215,000 warrants at an exercise price of $0.25 per warrant, or
alternatively, the same price as for warrants granted to investors
as part of a financing of the Company subject to adjustment and
exercisable within 3 years from issuance (the “Initial
Warrants”). In the event that the common shares of the Issuer
are not listed on the TSX Venture Exchange pursuant to the
“Transaction” on or prior to September 1, 2019, an
additional 100,000 warrants will be issued at an exercise price
equal to the lesser of $0.25 or the price of the next issuance of
common shares of the Issuer (the “Revised Exercise
Price”). Further, the exercise price of the Initial Warrants
will adjust to the Revised Exercise Price has stated herein. As of
December 31, 2019, $57,946 remained outstanding, which included a
fee of $4,951 and interest of $4,606.
The
following table summarizes the Notes payable in default, including related
parties:
|
|
|
|
|
Dr.
Imhoff
|
$199
|
$199
|
|
Dr.
Cartwright
|
2
|
2
|
|
Ms.
Rosenstock
|
50
|
50
|
|
Mr.
Fowler
|
26
|
26
|
|
Mr.
Mermelstein
|
244
|
211
|
|
GHS
|
-
|
15
|
|
GPB
|
17
|
17
|
|
Aquarius
|
108
|
108
|
|
Accilent
|
58
|
-
|
|
Mr.
Blumberg
|
70
|
70
|
|
Mr.
James
|
2
|
2
|
|
Notes
payable in default
|
$776
|
$700
|
The
notes payable to related parties was $349,000 of the $776,000
balance at December 31, 2019.
Short
Term Notes Payable
In July
2019, the Company entered into a premium finance agreement to
finance its insurance policies totaling $142,000. The note requires
monthly payments of $14,459, including interest at 4.91% and
matures in April 2020. As of December 31, 2019, the note for the
premium finance agreement was $57,483. The balance due on insurance
policies totaled $50,000 at December 31, 2018.
On
August 22, 2018, the Company issued a promissory note to Mr. Case
for $150,000 in aggregate principal amount of a 6% promissory note
for an aggregate purchase price of $157,500 (representing a $7,500
original issue discount). Pursuant to the promissory note the
entire unpaid principal balance on the promissory note together
with all accrued and unpaid interest and loan origination fees, if
any, at the choice of the investor, shall be due and payable in
full from the funds received by the Company from a financing of at
least $2,000,000, or at the option of the investor, to be included
in the Company’s financing under the same terms as the new
investors with the most favorable terms making a cash investment.
If the Company does not complete a financing of at least $2,000,000
within 90 days of the execution of this promissory note, any unpaid
amounts shall be due in full to the investor and shall accrue
interest at 12% (instead of 6%) per annum from the date thereof (90
days after execution), if not paid in full. In addition, the
investor will be granted 1,500,000 warrants under this promissory
note. The warrants shall be issued and vest upon the financing of
at least $2,000,000 and expire on the third anniversary of said
financing. The warrant exercise price shall be set at the same
price as for warrants granted to the investors with the most
favorable terms as part of any $2,000,000 or more financing of the
Company or $0.25, whichever is lower. The warrants shall have
standard anti-dilution features to protect the holder from dilution
due to down rounds of financing. As of December 31, 2019, and 2018,
the Company had not repaid the note and original issue discount of
$157,500 ($7,500 is recorded in accrued expenses).
On
September 19, 2018, the Company issued a promissory note to Mr.
Gould for $50,000 in aggregate principal amount of a 6% promissory
note for an aggregate purchase price of $52,500 (representing a
$2,500 original issue discount). Pursuant to the promissory note
the entire unpaid principal balance on the promissory note together
with all accrued and unpaid interest and loan origination fees, if
any, at the choice of the investor, shall be due and payable in
full from the funds received by the Company from a financing of at
least $2,000,000, or at the option of the investor, to be included
in the Company’s financing under the same terms as the new
investors with the most favorable terms making a cash investment.
If the Company does not complete a financing of at least $2,000,000
within 90 days of the execution of this promissory note, any unpaid
amounts shall be due in full to the investor and shall accrue
interest at 12% (instead of 6%) per annum from the date thereof (90
days after execution), if not paid in full. In addition, the
investor will be granted 500,000 warrants under this promissory
note. The warrants shall be issued and vest upon the financing of
at least $2,000,000 and expire on the third anniversary of said
financing. The warrant exercise price shall be set at the same
price as for warrants granted to the investors with the most
favorable terms as part of any $2,000,000 or more financing of the
Company or $0.25, whichever is lower. The warrants shall have
standard anti-dilution features to protect the holder from dilution
due to down rounds of financing. As of December 31, 2019, and 2018,
the Company had not repaid the note a and original issue discount
of $52,500 ($2,500 is recorded in accrued expenses) and therefore
the accrued interest rate increased to 12%.
On
February 15, 2019, the Company issued a promissory note to Mr.
Gould for $50,000 in aggregate principal amount of a 6% promissory
note for an aggregate purchase price of $52,500 (representing a
$2,500 original issue discount). Pursuant to the promissory note
the entire unpaid principal balance on the promissory note together
with all accrued and unpaid interest and loan origination fees, if
any, at the choice of the investor, shall be due and payable in
full from the funds received by the Company from a financing of at
least $1,000,000, or at the option of the investor, to be included
in the Company’s financing under the same terms as the new
investors with the most favorable terms making a cash investment.
If the Company did not complete a financing of at least $1,000,000
within 90 days of the execution of this promissory note, any unpaid
amounts shall be due in full to the investor and shall accrue
interest at 12% (instead of 6%) per annum from the date thereof (90
days after execution), if not paid in full. In addition, the
investor will be granted 500,000 warrants under this promissory
note. The warrants shall be issued and vest upon the financing of
at least $1,000,000 and expire on the third anniversary of said
financing. The warrant exercise price shall be set at the same
price as for warrants granted to the investors with the most
favorable terms as part of any $1,000,000 or more financing of the
Company or $0.25, whichever is lower. The warrants shall have
standard anti-dilution features to protect the holder from dilution
due to down rounds of financing. As of December 31, 2019, the
Company had not repaid the note and original issue discount of
$52,500 ($2,500 is recorded in accrued expenses).
For a
total note that had not been repaid to Mr. Gould of $100,000 and
$5,000 of which is recorded in accrued expenses for original issue
discount.
On
February 8, 2019, a note payable in default as reported in the
Company’s Form 10-K report - Footnote 9: Notes payable – Note payable
in default, was exchanged for a note with a convertible
option. The note amount was for $145,544. At the sole discretion of
the Company, rather than paying the holder in cash, the note can be
exchanged for equity in the new financing of at least $1,000,000.
If the financing occurs the Company will then have the option to
exchange the debt for $145,544 and award 291,088 warrants at $0.25
per share. If the Company elects to pay the balance in cash, the
note shall accrue simple interest of 6% per annum commencing on the
date of the new financing of at least $1,000,000.
On
February 14, 2019, the Company entered into a Purchase and Sale
Agreement with Everest Business Funding for the sale of its
accounts receivable. The transaction provided the Company with
$48,735 after $1,265 in debt issuance costs (bank costs) for a
total purchase amount of $50,000, in which the Company would have
to repay $68,500. At a minimum the Company would need to pay
$535.16 per day or 20.0% of the future collected accounts
receivable or “receipts.” The effective interest rate
as calculated for this transaction is approximately 132.5%. As of
December 31, 2019, $60,105 had been paid, leaving a balance of
$8,016.
At
December 31, 2019 and 2018, the Company maintained short term notes
payable to both related and non-related parties totaling $1,026,000
and $899,000, respectively. These notes are short term,
straight-line amortizing notes. The notes carry annual interest
rates between 5% and 19%.
The
following table summarizes the Short-term notes payable, including related
parties:
|
|
|
|
|
Dr.
Imhoff
|
$167
|
$135
|
|
Dr.
Cartwright
|
48
|
144
|
|
Dr.
Faupel
|
5
|
123
|
|
Ms.
Maloof
|
-
|
25
|
|
Mr.
Case
|
150
|
150
|
|
Mr.
Mamula
|
15
|
-
|
|
Mr.
Gould
|
100
|
50
|
|
K2
(Shenghuo)
|
203
|
177
|
|
Everest
|
8
|
-
|
|
Premium Finance
(insurance)
|
58
|
50
|
|
Mr.
Blumberg
|
223
|
45
|
|
Mr.
Grimm
|
49
|
-
|
|
Short-term
notes payable, including related parties
|
$1,026
|
$899
|
The
short-term notes payable in default to related parties was $646,000
of the $1,026,000 balance at December 31, 2019.
10.
SHORT-TERM CONVERTIBLE DEBT
Related
Party Convertible Note Payable – Short-Term
On June
5, 2016, the Company entered into a license agreement with a
distributor pursuant to which the Company granted the distributor
an exclusive license to manufacture, sell and distribute the
Company’s LuViva Advanced Cervical Cancer device and related
disposables in Taiwan, Brunei Darussalam, Cambodia, Laos, Myanmar,
Philippines, Singapore, Thailand, and Vietnam. The distributor was
already the Company’s exclusive distributor in China, Macau
and Hong Kong, and the license will extend to manufacturing in
those countries as well.
As
partial consideration for, and as a condition to, the license, and
to further align the strategic interests of the parties, the
Company agreed to issue a convertible note to the distributor, in
exchange for an aggregate cash investment of $200,000. The note
will provide for a payment to the distributor of $240,000, due upon
consummation of any capital raising transaction by the Company
within 90 days and with net cash proceeds of at least $1.0 million.
As of December 31, 2019, and 2018, the Company had a note due of
$512,719 and $432,000, respectively. The note accrues interest at
20% per year on any unpaid amounts due after that date. The note
will be convertible into shares of the Company’s common stock
at a conversion price per share of $11,137, subject to customary
anti-dilution adjustment. The note will be unsecured and is
expected to provide for customary events of default. The Company
will also issue the distributor a five-year warrant exercisable
immediately for 22 shares of common stock at an exercise price
equal to the conversion price of the note, subject to customary
anti-dilution adjustment.
Convertible
Note Payable – Short-Term
On
March 12, 2018, the Company entered into a securities purchase
agreement with Eagle Equities, LLC, providing for the purchase by
Eagle of a convertible redeemable note in the principal amount of
$66,667. The note was fully funded on March 14, 2018, upon which
the Company received $51,000 of net proceeds (net of a 10% original
issue discount and other expenses). The note bears an interest rate
of 8% and are due and payable on March 12, 2019. The note may be
converted by Eagle at any time after twelve months from issuance
into shares of our common stock (as determined in the notes)
calculated at the time of conversion, except for the second note,
which also requires full payment by Eagle of the secured note it
issued to us before conversions may be made. The conversion price
of the notes will be equal to 60% of the lowest trading price of
the common stock for the 20 prior trading days including the day
upon which the Company receive a notice of conversion. The notes
may be prepaid in accordance with the terms set forth in the notes.
The notes also contain certain representations, warranties,
covenants and events of default including if the Company are
delinquent in our periodic report filings with the SEC and
increases in the amount of the principal and interest rates under
the notes in the event of such defaults. In the event of default,
at Eagle’s option and in its sole discretion, Eagle may
consider the notes immediately due and payable. During 2020, Eagle
provided a forbearance to the Company on the default after a
payment was made. As of December 31, 2019, the notes had been
converted and no balance remained outstanding. At December 31,
2018, the outstanding balance was $3,095, including unamortized
debt issuance costs of $1,751, and unamortized discount of $1,297
and accrued interest of $177. In addition, as of December 31, 2019
the beneficial conversion feature had been fully amortized. At
December 31, 2018, the Company recorded a $44,444 beneficial
conversion feature which $35,701 was amortized leaving and
unamortized balance of $8,743. As of December 31, 2019, the
beneficial conversion feature was fully amortized.
On May
15, 2019, the Company entered into a securities purchase agreement
with Eagle Equities, LLC, providing for the purchase by Eagle of a
convertible redeemable note in the principal amount of $57,750. The
note was fully funded on May 21, 2019, upon which the Company
received $45,000 of net proceeds (net of a 10% original issue
discount and other expenses). The note bears an interest rate of 8%
and is due and payable on May 15, 2020. The Company could have
prepaid the note, in whole or in part, for 115% of outstanding
principal and interest until 30 days from issuance, for 121% of
outstanding principal and interest at any time from 31 to 60 days
from issuance, for 127% of outstanding principal and interest at
any time from 61 to 90 days from issuance, for 133% of outstanding
principal and interest at any time from 91 to 120 days from
issuance, for 139% of outstanding principal and interest at any
time from 121 to 150 days from issuance and for 145% of outstanding
principal and interest at any time from 151 days from issuance to
180 days from issuance. The note may not be prepaid after the
180th day.
The note may be converted by Eagle at any time after five months
from issuance into shares of the Company common stock (as
determined in the notes) calculated at the time of conversion. The
conversion price of the notes will be equal to 60% of the average
of the two lowest closing bid prices of the Company’s common
stock shares as reported on OTC Markets exchange, for the 20 prior
trading days including the day upon which the Company receive a
notice of conversion is received by the Company. The notes may be
prepaid in accordance with the terms set forth in the notes. The
notes also contain certain representations, warranties, covenants
and events of default including if the Company are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Eagle’s
option and in its sole discretion, Eagle may consider the notes
immediately due and payable. During 2020, Eagle provided a
forbearance to the Company on the default after a payment was made.
On May 15, 2019, the Company had recorded a $38,500 beneficial
conversion feature, $5,250 original issue discount and $7,500 of
debt issuance costs. As of December 31, 2019, the outstanding note
was for $25,651, which consisted of unamortized balance of $14,438
of a beneficial conversion feature, unamortized original issue
discount of $1,942, unamortized debt issuance costs of $2,774 and
interest of $1,166 included in accrued expenses on the accompanying
consolidated balance sheet.
On May
15, 2019, the Company entered into a securities purchase agreement
with Adar Bays, LLC, providing for the purchase by Adar of a
convertible redeemable note in the principal amount of $57,750. The
note was fully funded on May 21, 2019, upon which the Company
received $45,000 of net proceeds (net of a 10% original issue
discount and other expenses). The note bears an interest rate of 8%
and are due and payable on May 15, 2020. The Company could have
prepaid the note, in whole or in part, for 115% of outstanding
principal and interest until 30 days from issuance, for 121% of
outstanding principal and interest at any time from 31 to 60 days
from issuance, for 127% of outstanding principal and interest at
any time from 61 to 90 days from issuance, for 133% of outstanding
principal and interest at any time from 91 to 120 days from
issuance, for 139% of outstanding principal and interest at any
time from 121 to 150 days from issuance and for 145% of outstanding
principal and interest at any time from 151 days from issuance to
180 days from issuance. The note may not be prepaid after the
180th day.
The note may be converted by Adar at any time after five months
from issuance into shares of the Company common stock (as
determined in the notes) calculated at the time of conversion. The
conversion price of the notes will be equal to 60% of the average
of the two lowest closing bid prices of the Company’s common
stock shares as reported on OTC Markets exchange, for the 20 prior
trading days including the day upon which the Company receive a
notice of conversion is received by the Company. The notes may be
prepaid in accordance with the terms set forth in the notes. The
notes also contain certain representations, warranties, covenants
and events of default including if the Company are delinquent in
our periodic report filings with the SEC and increases in the
amount of the principal and interest rates under the notes in the
event of such defaults. In the event of default, at Adar’s
option and in its sole discretion, Adar may consider the notes
immediately due and payable. During 2020, Adar provided a
forbearance to the Company on the default after a payment was made.
On May 15, 2019, the Company had recorded a $38,500 beneficial
conversion feature, $5,250 original issue discount and $7,500 of
debt issuance costs. As of December 31, 2019, the note outstanding
increased to $84,780 as a default penalty of $27,030 was added to
the outstanding balance of the note, which consisted of unamortized
balance of $14,438 of a beneficial conversion feature, unamortized
original issue discount of $1,942, unamortized debt issuance costs
of $2,774 and interest of $3,190 included in accrued expenses on
the accompanying consolidated balance sheet.
The
following table summarizes the Convertible notes payable:
|
|
|
|
|
Shenghuo
|
$513
|
$432
|
|
Eagle
|
26
|
3
|
|
Adar
|
85
|
-
|
|
Debt discount and
issuance costs to be amortized
|
(9)
|
(10)
|
|
Debt discount
related to beneficial conversion
|
(29)
|
(45)
|
|
Convertible
notes payable, including related parties
|
$586
|
$380
|
The
convertible notes payable to related parties was $513,000 of the
$586,000 balance at December 31, 2019.
11.
CONVERTIBLE DEBT IN DEFAULT
Secured Promissory Note.
Effective
September 10, 2014, the Company sold a secured promissory note to
an accredited investor, GHS Investments, LLC (“GHS”),
with an initial principal amount of $1,275,000, for a purchase
price of $570,000 (less an original issue discount of $560,000 and
debt issuance costs of $130,000). The note is secured by the
Company’s current and future accounts receivable and
inventory and accrued interest at a rate of 18% per year. The note
has subsequently been assigned to different credited investors and
the terms of the note were amended extend the maturity until August
31, 2016. The balance of this note was reduced by a transfer of
$306,863 as part of a debt restructuring that occurred on December
7, 2016 (see – “Senior Secured Promissory Note”).
The holder may convert the outstanding balance into shares of
common stock at a conversion price per share equal to 75% of the
lowest daily volume average price of common stock during the five
days prior to conversion. The balance due on the note was $148,223
and $151,974 at December 31, 2019 and 2018,
respectively.
Senior Secured Promissory Note
Effective
February 12, 2016, the Company entered into a securities purchase
agreement with GPB Debt Holdings II LLC (“GPB”) for the
issuance of a $1,437,500 senior secured convertible note for an
aggregate purchase price of $1,029,000 (representing an original
issue discount of $287,500 and debt issuance costs of $121,000). On
May 28, 2016, the balance of the note was increased by $87,500 for
a total principal balance of $1,525,000. On December 7, 2016, the
Company entered into an exchange agreement with GPB and as a result
the principal balance increased by a transfer $312,500 (see –
“Senior Secured Promissory Note”) for a total principal
balance of $1,837,500. In addition, GPB received warrants for 2,246
shares of the Company’s common stock. The Company allocated
proceeds totaling $359,555 to the fair value of the warrants at
issuance and recorded an additional discount on the debt. The
warrant is exercisable at any time, pending availability of
sufficient authorized but unissued shares of the Company’s
common stock, at an exercise price per share equal to the
conversion price of the convertible note, subject to certain
customary adjustments and anti-dilution provisions contained in the
warrant. The warrant has a five-year term. As of December 31, 2019,
the exercise price had been adjusted to $0.04 and the number of
common stock shares exchangeable for was 35,937,500.
The
convertible note requires monthly interest payments at a rate of
17% per year and was due on February 12, 2018. Subject to resale
restrictions and the availability of sufficient authorized but
unissued shares of the Company’s common stock, the note is
convertible at a conversion price equal to 70% of the average
closing price per share for the five trading days prior to
issuance. The note is currently in default and has accrued interest
at a rate of 22% as the Company is past due on the required monthly
interest payments. Upon the occurrence of an event of default, the
holder may require the Company to redeem the convertible note at
120% of the outstanding principal balance, but as of December 31,
2019, had not done so. The note is secured by a lien on
substantially all of the Company’s assets.
As
of December 31, 2019, the balance due on the convertible debt was
$2,177,030, consisting of principal of $1,837,500 and a prepayment
penalty of $339,050, and $2,198,236 consisting of principal of
$1,837,500 and a prepayment penalty of $360,736, respectively.
Interest accrued on the note total $1,175,925 and $699,74 at
December 31, 2019 and 2018, respectively, and is included in
accrued expenses on the accompanying consolidated balance
sheet.
The
Company used a placement agent in connection with the transaction.
For its services, the placement agent received a cash placement fee
equal to 4% of the aggregate gross proceeds from the transaction
and a warrant to purchase shares of common stock equal to an
aggregate of 6% of the total number of shares underlying the
securities sold in the transaction, at an exercise price equal to,
and terms otherwise identical to, the warrant issued to the
investor. Finally, the Company agreed to reimburse the placement
agent for its reasonable out-of-pocket expenses.
In
connection with the transaction, on February 12, 2016, the Company
and GPB entered into a four-year consulting agreement, pursuant to
which the investor will provide management consulting services to
the Company in exchange for a royalty payment, payable quarterly,
equal to 3.85% of the Company’s revenues from the sale of
products. As of December 31, 2019, and 2018, GPB had earned
approximately $32,000 and $31,000 in royalties,
respectively.
Forbearance
On
August 8, 2017, the Company entered into a forbearance agreement
with GPB, with regard to the senior secured convertible note. Under
the forbearance agreement, GPB has agreed to forbear from
exercising certain of its rights and remedies (but not waive such
rights and remedies), arising as a result of the Company’s
failure to pay the monthly interest due and owing on the note. In
consideration for the forbearance, the Company agreed to waive,
release, and discharge GPB from all claims against GPB based on
facts existing on or before the date of the forbearance agreement
in connection with the note, or the dealings between the Company
and GPB, or the Company’s equity holders and GPB, in
connection with the note. Pursuant to the forbearance agreement,
the Company has reaffirmed its obligations under the note and
related documents and executed a confession of judgment regarding
the amount due under the note, which GPB may file upon any future
event of default by the Company. During the forbearance period, the
Company must continue to comply will all the terms, covenants, and
provisions of the note and related documents.
The
“Forbearance Period” shall mean the period beginning on
the date hereof and ending on the earliest to occur of: (i) the
date on which Lender delivers to Company a written notice
terminating the Forbearance Period, which notice may be delivered
at any time upon or after the occurrence of any Forbearance Default
(as hereinafter defined), and (ii) the date Company repudiates or
asserts any defense to any Obligation or other liability under or
in respect of this Agreement or the Transaction Documents or
applicable law, or makes or pursues any claim or cause of action
against Lender; (the occurrence of any of the foregoing clauses (i)
and (ii), a “Termination Event”). As used herein, the
term “Forbearance Default” shall mean: (A) the
occurrence of any Default or Event of Default other than the
Specified Default; (B) the failure of Company to timely comply with
any material term, condition, or covenant set forth in this
Agreement; (C) the failure of any representation or warranty made
by Company under or in connection with this Agreement to be true
and complete in all material respects as of the date when made; or
(D) Lender’s reasonable belief that Company: (1) has ceased
or is not actively pursuing mutually acceptable restructuring or
foreclosure alternatives with Lender; or (2) is not negotiating
such alternatives in good faith. Any Forbearance Default will not
be effective until one (1) Business Day after receipt by Company of
written notice from Lender of such Forbearance Default. Any
effective Forbearance Default shall constitute an immediate Event
of Default under the Transaction Documents.
Other
Convertible Debt in Default
Effective May 19,
2017, the Company entered into a securities purchase agreement with
GHS for the purchase of a $66,000 convertible promissory note for
the purchase of $60,000 in net proceeds (representing a 10%
original issue discount of $6,000). The accrued interest rate of 8%
per year until it matured in December 31, 2017. Beginning February
2018, the note is convertible, in whole or in part, at the
holder’s option, into shares of the Company’s stock at
a conversion price equal to 60% of the lowest trading price during
the 25 trading days prior to conversion. Upon the occurrence of an
event of default, the note will bear interest at a rate of 20% per
year and the holder of the note may require the Company to redeem
or convert the note at 150% of the outstanding principal balance.
At December 31, 2019, and 2018, the balance due on this total was
$83,094, including a default penalty of $37,926 and accrued
interest of $16,641, and $94,411 including a default penalty of
$37,926 and accrued interest of $517, respectively. GHS converted
$12,700 and $29,642 of principal and accrued interest during the
years ended December 31, 2019, respectively.
Effective March 20,
2018, the Company entered into a securities purchase with Auctus
Fund, LLC ("Auctus") for the issuance of a $150,000 convertible
promissory note and warrants exercisable for 4,262 shares of the
Company's common stock. At issuance, the Company recorded a $97,685
beneficial conversion feature, which was fully amortized at
December 31, 2018. The warrants are exercisable at any time, at an
exercise price equal to $0.04 per share, subject to certain
customary adjustments and price-protection provisions contained in
the warrant. The warrants have a five-year term. The note accrued
interest at a rate of 12% per year until it matured in December
2018. Beginning December 2018, the note is convertible, in whole or
in part, at the holder's option, into shares of the Company's stock
at a conversion price equal to 60% of the lowest trading price
during the 20 trading days prior to conversion. Upon the occurrence
of an event of default, the note will bear interest at a rate of
24% per year and the holder of the note may require the Company to
redeem or convert the note at 150% of the outstanding principal
balance. At December 31, 2019 and 2018, the balance due on this
total was $192,267, including a default penalty of $70,931, and
$133,870, respectively. Interest accrued on the note totals $45,629
and $517 at December 31, 2019 and 2018, respectively, and is
included in accrued expenses on the accompanying consolidated
balance sheet.
Auctus
converted $14,236 and $30,152 of principal and accrued interested
during the years ended December 31, 2019 and 2018,
respectively.
Effective May 17,
2018, the Company entered into a securities purchase agreement with
GHS for the purchase of a convertible promissory note with a
principal of $9,250 for a purchase price of $7,500 (representing an
original issue discount of $750 and debt issuance costs of $1,000).
The note accrued interest at a rate of 8% per year until it matured
June 17, 2019. Beginning February 2018, the note is convertible, in
whole or in part, at the holder's option, into shares of the
Company's stock at a conversion price equal to 70% of the lowest
trading price during the 25 trading days prior to conversion (if
the note cannot be converted due to Depository Trust Company freeze
then rate decreases to 60%). Upon the occurrence of an event of
default, the note will bear interest at a rate of 20% per year and
the holder of the note may require the Company to redeem or convert
the note at 150% of the outstanding principal balance. At December
31, 2019 and 2018, the balance due on this total was $14,187,
including a default penalty of $4,937, and $14,187, including a
default penalty of $4,937 and unamortized debt discount and debt
issuance costs of $742, respectively. Interest accrued on the note
totals $3,972 and $1,135 at December 31, 2019 and 2018,
respectively, and is included in accrued expenses on the
accompanying consolidated balance sheet.
Effective June 22,
2018, the Company entered into a securities purchase agreement with
GHS for the purchase of a $68,000 convertible promissory note for a
purchase price of $60,000 (representing an original issue discount
of $6,000 and debt issuance costs of $2,000). At issuance, the
Company recorded a $29,143 beneficial conversion feature, which was
fully amortized at December 31, 2019. The accrued interest at a
rate of 10% per year until it matured on June 22, 2019. Beginning
May 2019, the note is convertible, in whole or in part, at the
holder's option, into shares of the Company's stock at a conversion
price equal to 70% of the lowest trading price during the 25
trading days prior to conversion (if the note cannot be converted
due to Depository Trust Company freeze then rate decreases to 60%).
Upon the occurrence of an event of default, the note will bear
interest at a rate of 20% per year and the holder of the note may
require the Company to redeem or convert the note at 150% of the
outstanding principal balance. At December 31, 2019 and 2018, the
balance due on this total was $103,285, including a default penalty
of $35,285, and $103,285, including unamortized debt discount and
debt issuance costs of $6,162, respectively. Interest accrued on
the note totals $29,287 and $8,263 at December 31, 2019 and 2018,
respectively, and is included in accrued expenses on the
accompanying consolidated balance sheet.
Effective July 3,
2018, the Company entered into a securities purchase with Auctus
for the issuance of a $89,250 convertible promissory note. At
issuance, the Company recorded a $59,000 beneficial conversion
feature, which was fully amortized at December 31, 2019. The note
accrued interest at a rate of 12% per year until it matured in
April 2019. Beginning April 2019, the note is convertible, in whole
or in part, at the holder's option, into shares of the Company's
stock at a conversion price equal to 60% of the lowest trading
price during the 20 trading days prior to conversion. Upon the
occurrence of an event of default, the note will bear interest at a
rate of 24% per year and the holder of the note may require the
Company to redeem or convert the note at 150% of the outstanding
principal balance. At December 31, 2019 and 2018, the balance due
on this total was $90,641, including a default penalty of $56,852,
and $81,528, including unamortized debt discount and debt issuance
costs of $7,721, respectively. Interest accrued on the note totals
$16,436 and $5,385 at December 31, 2019 and 2018, respectively, and
is included in accrued expenses on the accompanying consolidated
balance sheet.
Effective March 29,
2019, the Company entered into a securities purchase with Auctus
for the issuance of a $65,000 convertible promissory note. At
issuance, the Company recorded a $65,000 beneficial conversion
feature, which was fully amortized at December 31, 2019. The note
accrued interest at a rate of 12% until it matured in December
2019. Beginning December 2019, the note is convertible, in whole or
in part, at the holder's option, into shares of the Company's stock
at a conversion price equal to 50% of the lowest trading price
during the 25 trading days prior to conversion. Upon the occurrence
of an event of default, the note will bear interest at a rate of
24% per year and the holder of the note may require the Company to
redeem or convert the note at 150% of the outstanding principal
balance. At December 31, 2019, the balance due on this total was
$106,210, including a default penalty of $41,210. Interest accrued
on the note totaled $142 at December 31, 2019 and is included in
accrued expenses on the accompanying consolidated balance
sheet.
The
following table summarizes the Convertible notes in
default:
|
|
|
|
|
GPB
|
$2,177
|
$2,198
|
|
GHS
|
349
|
364
|
|
Auctus
|
389
|
215
|
|
Convertible
notes in default
|
$2,915
|
$2,778
|
12.
LONG-TERM DEBT
Long-term
Debt – Related Parties
On July
24, 2019, Dr. Faupel and Mr. Cartwright agreed to an addendum to
the exchange agreement and to modify the terms of the original
exchange agreement. Under this modification Dr. Faupel and Mr.
Cartwright agreed to extend the note to be due in full on the third
anniversary of that agreement. The modification also included
simple interest at a 6% rate, with the principal and accrued
interest due in total at the date of maturity or September 4,
2021.
During
the quarter ended September 30, 2018, the Company entered into an
exchange agreement dated July 14, 2018, Dr Faupel, agreed to
exchange outstanding amounts due to him for loans, interest, bonus,
salary and vacation pay in the amount of $661,000 for a $207,000
promissory note dated September 4, 2018. As a result of the
exchange agreement, the Company recorded a gain for extinguishment
of debt of $199,000 and a capital contribution of $235,000 during
the year ended December 31, 2018. In the July 20, 2018 exchange
agreement, Dr, Cartwright, agreed to exchange outstanding amounts
due to him for loans, interest, bonus, salary and vacation pay in
the amount of $1,621,000 for a $319,000 promissory note dated
September 4, 2018. As a result of the exchange agreement, the
Company recorded a gain for extinguishment of debt of $840,000 and
a capital contribution of $432,000 during the year ended December
31, 2018.
The
table below summarizes the detail of the exchange
agreement:
For Dr.
Faupel:
|
Salary
|
$134
|
|
Bonus
|
20
|
|
Vacation
|
95
|
|
Interest on
compensation
|
67
|
|
Loans to
Company
|
196
|
|
Interest on
loans
|
149
|
|
Total
outstanding prior to exchange
|
$661
|
|
Amount forgiven
during the quarter ended September 30, 2018
|
(454)
|
|
Promissory
note dated September 4, 2018
|
$207
|
|
Interest accrued
through December 31, 2019
|
17
|
|
Balance
outstanding at December 31, 2019
|
$224
|
For Dr.
Cartwright:
|
Salary
|
$337
|
|
Bonus
|
675
|
|
Interest on
compensation
|
59
|
|
Loans to
Company
|
528
|
|
Interest on
loans
|
22
|
|
Total
outstanding prior to exchange
|
$1,621
|
|
Amount
forgiven during the quarter ended September 30, 2018
|
(1,302)
|
|
Promissory
note dated September 4, 2018
|
$319
|
|
Interest
accrued through December 31, 2019
|
26
|
|
Balance
outstanding at December 31, 2019
|
$345
|
Long-term
Convertible Notes Payable, net
On
December 17, 2019, the Company entered into a securities purchase
agreement and convertible note with Auctus. The convertible note
issued to Auctus will be for a total of $2.4 million. The first
tranche of $700,000 has been received and will have a maturity date
of December 17, 2021 and an interest rate of ten percent (10%). The
note may not be prepaid in whole or in part except as otherwise
explicitly allowed. Any amount of principal or interest on the note
which is not paid when due shall bear interest at the rate of the
lessor of 24% or the maximum permitted by law (the “default
interest”). The variable conversion prices shall equal the
lesser of: (i) the lowest trading price on the issue date, and (ii)
the variable conversion price. The variable conversion price shall
mean 95% multiplied by the market price (the market price means the
average of the five lowest trading prices during the period
beginning on the issue date and ending on the maturity date), minus
$0.04 per share, provided however that in no event shall the
variable conversion price be less than $0.15. If an event of
default under this note occurs and/or the note is not extinguished
in its entirety prior to December 17, 2020 the $0.15 price shall no
longer apply. In connection with the first tranche of $700,000, the
Company issued to 7,500,000 warrants to purchase common stock at an
exercise price of $0.20. The fair value of the warrants at the date
of issuance was $745,972 and was $635,000 allocated to the warrant
liability and a loss of $110,972 was recorded at the date of
issuance for the amount of the fair value in excess of the net
proceeds received of $635,000. The $700,000 proceeds were received
net of debt issuance costs of $65,000 (net cash of $635,000). The
Company used $65,000 of the proceeds to make a partial payment of
the $89,250 convertible promissory note issued on July 3, 2018 to
Auctus. At a future date, the second tranche of $400,000 will be
received when the Company registers the underlying shares. The last
tranche of $1.3 million will be received within 60 days of the S-1
registration statement becoming effective. The conversion price of
the notes will be at market value with a minimum conversion amount
of $0.15. The last two tranches will have warrants attached. As of
December 31, 2019, $700,000 remained outstanding and accrued
interest of $2,722. Further, as of December 31, 2019, the Company
had unamortized debt issuance costs of $63,000 and an unamortized
debt discount on warrants of $622,000, providing a net balance of
$15,000 that is carried in long-term convertible notes payable,
net.
In
addition, the Company determined that the conversion option needed
to be bifurcated from the debt arrangement and will valued at fair
value each reporting period. The initial value at the date of
issuance deemed to be $0 due to the presence of the $0.15 floor
price.
13.
INCOME (LOSS) PER COMMON SHARE
Basic
net income (loss) per share attributable to common stockholders
amounts are computed by dividing the net income (loss) plus
preferred stock dividends and deemed dividends on preferred stock
by the weighted average number of shares outstanding during the
year.
Diluted
net income (loss) per share attributable to common stockholders
amounts are computed by dividing the net income (loss) plus
preferred stock dividends, deemed dividends on preferred stock,
after-tax interest on convertible debt and convertible dividends by
the weighted average number of shares outstanding during the year,
plus Series C convertible preferred stock, convertible debt,
convertible preferred dividends and warrants convertible into
common stock shares.
The
following table sets forth pertinent data relating to the
computation of basic and diluted net loss per share attributable to
common shareholders.
|
In thousands
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
$( 1,921)
|
$900
|
|
|
Basic weighted average number of shares outstanding
|
3,302
|
462
|
|
|
Net income (loss) per share (basic)
|
$(0.58)
|
$1.95
|
|
|
Diluted weighted average number of shares outstanding
|
3,302
|
65,227
|
|
|
Net income (loss) per share (diluted)
|
$(0.58)
|
$0.0138
|
|
|
|
|
|
|
|
Dilutive equity instruments (number of equivalent
units):
|
|
|
|
|
Stock options
|
-
|
-
|
|
|
Preferred stock
|
-
|
-
|
|
|
Convertible debt
|
39,636
|
42,226
|
|
|
Warrants
|
30,208
|
22,530
|
|
|
Total Dilutive instruments
|
73,144
|
65,226
|
|
For
period of net loss, basic and diluted earnings per share are the
same as the assumed exercise of warrants and the conversion of
convertible debt are anit-dilutive.
14. SUBSEQUENT
EVENTS
During
January 2020, the Company received equity investments in the amount
of $103,000. These investors received a total of 206,000 common
stock shares and 206,000 warrants to purchase common stock shares
at a strike price of $0.25, 206,000 warrants to purchase common
stock shares at a strike price of $0.75 and 103 Series D preferred
stock (each Series D preferred stock shares converts into 3,000
shares of the Company’s common stock shares).
On
January 6, 2020, the Company entered into an exchange agreement
with Jones Day. The Company will exchange $1,744,768 of debt
outstanding for: $175,000, an unsecured promissory note in the
amount of $550,000; due 13 months form the date of issuance, that
may be called by the Company at any time prior to maturity upon a
payment of $150,000; and an unsecured promissory note in the
principal amount of $444,768, bearing an annualized interest rate
of 6.0% and due in four equal annual installments beginning on the
second anniversary of the date of issuance.
On
January 6, 2020, the Company entered into a finder’s fee
agreement. The finder will receive 5% cash and 5% warrants on all
funds it raises including bridge loans. The three-year common stock
share warrants will have an exercise price of $0.25. During 2019
and 2020, the finder helped the Company raise $300,000, therefore a
fee of $15,000 was paid and 60,000 warrants will be
issued.
On
January 15, 2020, the Company entered into a promissory note with
one of its vendors for the payment of a debt of $99,369. The debt
will be paid as follows: $18,000 due initially on January 16, 2020
and then $6,000 per month beginning on February 1, 2020 and on the
1st day of
each consecutive month following, until the above sum is paid in
full. The debt will bear simple interest at 18% following
default.
On
January 16, 2020, the Company entered into an exchange agreement
with GPB. This exchange agreement which has not been completed will
call for the exchange of $3,360,811 of debt outstanding as of
December 12, 2019 for: cash of $1,500,000; 1,860,811 common stock
shares; 7,185,000 warrants to purchase common stock shares at a
strike price of $0.20 for existing 2016 warrants; 1,860,811
warrants to purchase common stock shares at a strike price of
$0.25; 3,721,622 warrants to purchase common stock shares at a
strike price of $0.75; and 2,791 series D preferred stock shares
(each Series D preferred stock share converts into 3,000 shares of
the Company’s common stock shares). If the Company is able to
raise capital in excess of $4,000,000, the exchange amounts shall
be adjusted. If the financing is between $4,000,000 and $4,900,000,
for every $100,000 raised in excess of $4,000,000 the Company will
pay an additional $50,000 to pay down debt. If between $5,000,000
and $6,000,000 is raised thru financings, the Company will pay an
additional $1,000,000 to pay down debt. If the financing is in
excess of $6,000,000 then the Company will pay the entire debt
balance outstanding. In the event of alternative financings, the
Company may elect to pay GPB a total of $1,500,000 in cash to GPB
at which time GPB shall waive any security interest in the assets
of the Company, and GPB shall exchange any remaining debt from the
notes into the Series D unit offering. GPB shall have the right to
convert the outstanding notes into equity, but not the obligation.
A 9.99% blocker shall be in effect such that GPB agrees to restrict
its holdings of the Company’s common stock shares to less
than 9.99% of the total number of the Company’s outstanding
common stock shares at any one point in time. All royalty payments
owed to GPB pursuant thereto shall remain obligations of the
Company to GPB and shall remain in full force and effect. The
Company shall have 8 months from the execution date of this
exchange agreement, subject to early termination as forth below (in
“forbearance agreement”). The Company shall be entitled
to extend the forbearance agreement for four additional months for
a $50,000 per month payment. If after the financing is completed
and in the event of future financings or significant collaborations
with a partner generating sales greater than $1,000,000, the
Company agrees to buy back $500,000 of the Series D preferred stock
shares. The interest rate will revert to their original non default
rates. Also, all existing warrants issued prior to exchange
agreement will be canceled.
On
January 17, 2020, as part of the exchange agreement referred to
above the Company paid GPB $450,000.
In
addition, the Company is negotiating additional exchange agreements
that would potentially eliminate or convert debt into equity; as
well as convert certain forms of equity for other
equity.
On
January 22, 2020, the Company entered into a promotional agreement
with a consultant. The consultant will provide the Company investor
and public relations services. As compensation for these services,
the Company will issue a total of 5,000,000 common stock warrants
at a $0.25 strike price and expiring in three years, if the
following conditions occur: 1,250,000 common stock warrants, 6
months after the close of the Series D Preferred Stock units, if
the minimum common stock share price is a minimum of $0.50 based on
a 30-day VWAP, with a two year term; 1,250,000 common stock
warrants, 12 months after the close of the Series D Preferred Stock
units, if the minimum common stock share price is a minimum of
$0.75 based on a 30-day VWAP, with a one and half year term;
1,250,000 common stock warrants, 18 months after the close of the
Series D Preferred Stock units, if the minimum common stock share
price is a minimum of $1.00 based on a 30-day VWAP, with a one year
term; and 1,250,000 common stock warrants, 24 months after the
close of the Series D Preferred Stock units, if the minimum common
stock share price is a minimum of $1.25 based on a 30-day VWAP,
with a one year term. The consultant agrees to a 10.0% blocker at
any single point in time it cannot own 10.0% of the total common
stock shares outstanding.
On
March 31, 2020, the Company entered into a securities purchase
agreement with Auctus Fund, LLC for the issuance and sale to Auctus
of $112,750 in aggregate principal amount of a 12% convertible
promissory note. On March 31, 2020, the Company issued the note to
Auctus and issued 250,000 five-year common stock warrants at an
exercise price of $0.16. On April 3, 2020, the Company received net
proceeds of $100,000. The note matures on January 26, 2021 and
accrues interest at a rate of 12% per year. The Company may not
prepay the note, in whole or in part. After the 90th calendar day after
the issuance date, and ending on the later of maturity date and the
date of payment of the default amount, Auctus may convert the note,
at any time, in whole or in part, provided such conversion does not
provide Auctus with more than 4.99% of the outstanding common share
stock. The conversion may be made converted into shares of the
Company’s common stock, at a conversion price equal to the
lesser of: (i) the lowest Trading Price during the twenty-five (25)
trading day period on the latest complete trading prior to the
issue date and (ii) the variable conversion price (55% multiplied
by the market price, market price means the lowest trading price
for the common stock during the twenty-five (25) trading day period
ending on the latest complete trading day prior to the conversion
date. Trading price is the lowest trade price on the trading market
as reported. The note includes customary events of default
provisions and a default interest rate of 24% per
year.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
We
maintain a set of disclosure controls and procedures designed to
ensure that information required to be disclosed by us in reports
that we file or submit under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) is recorded, processed,
summarized, and reported, within the time periods specified in
Securities and Exchange Commission (“Commission”) rules
and forms. We carried out an evaluation under the supervision and
with the participation of our management, including the Chief
Executive Officer/Acting Chief Financial Officer, Gene Cartwright,
of the effectiveness of its disclosure controls and procedures.
Based on that evaluation, the Chief Executive Officer/Acting Chief
Financial Officer has concluded that our disclosure controls and
procedures were ineffective as of December 31, 2019, due to the
existence of a material weakness in our internal control over
financial reporting, described below, that we have yet to fully
remediate.
Management’s
Annual Report on Internal Control over Financial Reporting: Our
management, including our Chief Executive Officer/Acting Chief
Financial Officer, is responsible for establishing and maintaining
adequate internal control over our financial reporting. Internal
control over financial reporting is a process designed by, or under
the supervision of, our Chief Executive Officer/Chief Financial
Officer and implemented by our board of directors, management and
other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles and includes those policies and
procedures that: (i) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of our assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorization
of our management and directors; and (ii) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of our assets that could have a
material effect on the financial statements. Because of their
inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Under
the supervision and with the participation of our management,
including our Principal Executive Officer/Principal Financial
Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based on the 2013 version
of the Internal Control – Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway
Commission.
Based
on our evaluation, our management concluded that our internal
control over financial reporting was ineffective as of December 31,
2019, due to the existence of the material weakness described
below:
The
Company lacks the resources to properly research and account for
complex transactions. This deficiency has resulted in a material
weakness in our internal control over financial
reporting.
This
annual report does not include an attestation report of our
independent registered public accounting firm regarding internal
control over financial reporting. Management’s report was not
subject to attestation by our independent registered public
accounting firm pursuant to rules of the Commission that permit
non-accelerated filers to provide only the management’s
report in their annual reports on Form 10-K.
Except
as described above, there were no changes to the Company’s
internal controls over financial reporting occurred during the year
ended December 31, 2019 that have materially affected, or are
reasonably likely to materially affect, the Company’s
internal control over financial reporting.
Item 9B. Other Information
None.
PART
III
Item 10. Directors, Executive Officers and Corporate
Governance
Our
executive officers are elected by and serve at the discretion of
our board of directors. The following table lists information about
our directors and executive officers:
|
Name
|
|
Age
|
|
Position with Guided Therapeutics
|
|
Gene
S. Cartwright, Ph.D.
|
|
65
|
|
Chief
Executive Officer, President, Acting Chief Financial Officer and
Director
|
|
Mark
Faupel, Ph.D.
|
|
64
|
|
Chief
Operating Officer and Director
|
|
Richard
L. Fowler
|
|
63
|
|
Senior
Vice President of Engineering
|
|
John
E. Imhoff, M.D.
|
|
70
|
|
Director
|
|
Michael
C. James
|
|
61
|
|
Chairman
and Director
|
Except
as set forth below, all of the executive officers have been
associated with us in their present or other capacities for more
than the past five years. Officers are elected annually by the
board of directors and serve at the discretion of the board. There
are no family relationships among any of our executive officers and
directors.
Gene S. Cartwright, Ph.D. joined us in
January 2014 as the President, Chief Executive Officer and Acting
Chief Financial Officer. He was elected as a director on January
11, 2014. His most recent position was with Omnyx, LLC, a Joint
Venture between GE Healthcare and the University of Pittsburgh
Medical Center, where, as CEO for over four years he founded and
managed the successful development of products for the field of
Digital Pathology. Prior to his work with Omnyx, LLC, he was
President of Molecular Diagnostics for GE Healthcare. Prior to GE,
Dr. Cartwright was Divisional Vice President/General Manager for
Abbott Diagnostics’ Molecular Diagnostics business. In his
24-year career at Abbott, he also served as Divisional Vice
President for U.S. Marketing for five years. He received a Master
of Management degree from Northwestern’s Kellogg School of
Management and also holds a Ph.D. in chemistry from Stanford
University and an AB from Dartmouth College.
Dr.
Cartwright brings over 30 years of experience working in the IVD
diagnostics industry. He has great experience in the diagnostics
market both in the development and introduction of new diagnostics
technologies, as well as extensive successful commercial experience
with global businesses. With his background and experience, Dr.
Cartwright, as President and Chief Executive Officer, as well as
Acting Chief Financial Officer, works with and advises the board as
to how we can successfully market and build LuViva international
sales.
Mark Faupel, Ph.D., rejoined us as
Chief Operating Officer and director on December 8, 2016. He
previously served on our board of directors through 2013 and has
more than 30 years of experience in developing non-invasive
alternatives to surgical biopsies and blood tests, especially in
the area of cancer screening and diagnostics. Dr. Faupel was one of
our co-founders and also served as our Chief Executive Officer from
May 2007 through 2013. Prior thereto was our Chief Technical
Officer from April 2001 to May 2007. Dr. Faupel has served as a
National Institutes of Health reviewer, is the inventor on 26 U.S.
patents and has authored numerous scientific publications and
presentations, appearing in such peer-reviewed journals as The
Lancet. Dr. Faupel earned his Ph.D. in neuroanatomy and physiology
from the University of Georgia. Dr. Faupel is also a shareholder of
Shenghuo Medical, LLC. See Item 13, Certain Relationships and
Related Transactions and Director Independence
Rick Fowler, Senior Vice President of
Engineering is an accomplished Executive with significant
experience in the management of businesses that sell, market,
produce and develop sophisticated medical devices and
instrumentation. Mr. Fowler’s 25 plus years of experience
includes assembling and managing teams, leading businesses and
negotiating contracts, conducting litigation, and developing ISO,
CE, FDA QSR, GMP and GCP compliant processes and products. He is
adept at providing product life cycle management through effective
process definition and communication - from requirements gathering,
R&D feasibility, product development, product launch,
production startup and support. Mr. Fowler combines outstanding
analytical, out-of-the-box, and strategic thinking with strong
leadership, technical, and communication skills and he excels in
dynamic, demanding environments while remaining pragmatic and
focused. He is able to deliver high risk projects on time and under
budget as well as enhance operational effectiveness through
outstanding cross-functional team leadership (R&D, marketing,
product development, operations, quality assurance, sales, service,
and finance). In addition, Mr. Fowler is well versed in global
medical device regulatory and product compliance requirements. Mr.
Fowler became a consultant in 2020, but retained his
title.
John E. Imhoff, M.D. has served as a
member of our Board of Directors since April 2006. Dr. Imhoff is an
ophthalmic surgeon who specializes in cataract and refractive
surgery. He is one of our principal stockholders and invests in
many other private and public companies. He has a B.S. in
Industrial Engineering from Oklahoma State University, an M.D. from
the University of Oklahoma and completed his ophthalmic residency
at the Dean A. McGee Eye Institute. He has worked as an ophthalmic
surgeon and owner of Southeast Eye Center since 1983.
Dr.
Imhoff has experience in clinical trials and in other technical
aspects of a medical device company. His background in industrial
engineering is especially helpful to us, especially as Dr. Imhoff
can combine this knowledge with clinical applications. His
experience in the investment community is invaluable to a public
company often undertaking capital raising efforts.
Michael C. James has served as
a member of our Board of Directors since March 2007 and as Chairman
of the Board since October 2013. Mr. James is also the Managing
Partner of Kuekenhof Capital Management, LLC, a private investment
management company, Chief Executive Officer and the Chief Financial
Officer of Inergetics, Inc., a nutraceutical supplements company
and also the Chief Financial Officer of Terra Tech Corporation,
which is a hydroponic and agricultural company. He also holds the
position of Managing Director of Kuekenhof Equity Fund, L.P. and
Kuekenhof Partners, L.P. Mr. James currently sits on the Board of
Directors of Inergetics; Inc. Mr. James was Chief Executive
Officer of Nestor, Inc. from January 2009 to September 2009
and served on their Board of Directors from July 2006 to June 2009.
He was employed by Moore Capital Management, Inc., a private
investment management company from 1995 to 1999 and held position
of Partner. He was employed by Buffalo Partners, L.P., a private
investment management company from 1991 to 1994 and held the
position of Chief Financial and Administrative Officer. He began
his career in 1980 as a staff accountant with Eisner LLP. Mr. James
received a B.S. degree in Accounting from Farleigh Dickinson
University in 1980.
Mr.
James has experience both in the areas of company finance and
accounting, which is invaluable to us during financial audits and
offerings. Mr. James has extensive experience in the management of
both small and large companies and his entrepreneurial background
is relevant as we develop as a company.
Richard P. Blumberg was appointed to
the Board of Directors on November 10, 2016 and resigned on March
27, 2019.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers and persons who beneficially
own more than 10% of a registered class of our equity securities to
file reports of ownership and reports of changes in ownership with
the Securities and Exchange Commission. These persons are required
by regulations of the Securities and Exchange Commission to furnish
us with copies of all Section 16(a) forms they file.
Based
solely on our review of the copies of these forms received by us,
we believe that, with respect to fiscal year 2019, our officers,
directors were in compliance with all applicable filing
requirements.
Code
of Ethics
We have
adopted a code of ethics that applies to all of our directors,
officers and employees. To obtain a copy without charge, contact
our Corporate Secretary, Guided Therapeutics, Inc., 5835 Peachtree
Corners East, Suite B, Norcross, Georgia 30092. If we amend our
code of ethics, other than a technical, administrative or
non-substantive amendment, or we grant any waiver, including any
implicit waiver, from a provision of the code that applies to our
principal executive officer, principal financial officer, principal
accounting officer or controller, we will disclose the nature of
the amendment or waiver on our website, www.guidedinc.com, under
the “Investor Relations” tab under the tab “About
Us.” Also, we may elect to disclose the amendment or waiver
in a report on Form 8-K filed with the Securities and Exchange
Commission.
Material
Changes to Security Holders Nomination Procedure
There
has been no material change to the procedures by which security
holders may recommend nominees to the registrant’s board of
directors, since the last disclosure.
Item 11. Executive Compensation
Summary
Compensation Table
The
following table lists specified compensation we paid or accrued
during each of the fiscal years ended December 31, 2019 and 2018 to
the Chief Executive Officer and our two other most highly
compensated executive officers, collectively referred to as the
“named executive officers,” in 2019:
2019
and 2018 Summary Compensation Table
|
Name
and Principal Position
|
|
Year
|
|
|
|
|
|
|
Gene S. Cartwright,
Ph.D.
|
|
2019
|
|
-
|
-
|
-
|
-
|
|
President, CEO,
Acting CFO and Director (2)
|
|
2018
|
|
-
|
-
|
-
|
-
|
|
Mark Faupel,
Ph.D.
|
|
2019
|
|
-
|
-
|
-
|
-
|
|
COO and
Director(3)(2)
|
|
2018
|
|
-
|
-
|
-
|
-
|
|
Richard
Fowler,
|
|
2019
|
|
-
|
-
|
-
|
-
|
|
Senior Vice
President of Engineering(2)
|
|
2018
|
|
62,019
|
-
|
-
|
62,019
|
(1)
All amounts
reported as accrued. Dr. Cartwright, Dr. Faupel, and Mr. Fowler
have elected not to get paid a salary, due to our cash
position.
(2)
On December 8,
2016, the board of directors appointed Dr. Faupel as our new COO
and director.
For
2019 and 2018, Dr. Cartwright did not receive salary compensation.
As previously disclosed, on July 20, 2018, the Company entered into
an exchange agreement and promissory note with Dr. Cartwright. The
agreements were entered into in order to extinguish and restructure
current amounts owed to Dr. Cartwright. In the exchange agreement
Dr. Cartwright, agreed to exchange outstanding amounts due to him
for loans, interest, bonus, salary and vacation pay in the amount
of $1,621,499 for $319,204 promissory note. Pursuant to the
exchange agreement the note will bear interest at 6%. In addition,
Dr. Cartwright will receive 125 stock options, with 31 vesting
immediately and the remaining vesting monthly over three years. Dr,
Cartwright, agreed to exchange outstanding amounts due to him for
loans, interest, bonus, salary and vacation pay in the amount of
$1,621,000 for a $319,000 promissory note dated September 4, 2018.
As a result of the exchange agreement, the Company recorded a gain
for extinguishment of debt of $840,000 and a capital contribution
of $432,000 during the year ended December 31, 2018. The schedule
below summarizes the detail of outstanding amounts:
For Dr.
Cartwright:
|
Salary
|
$337
|
|
Bonus
|
675
|
|
Vacation
|
-
|
|
Interest on
compensation
|
59
|
|
Loans to
Company
|
528
|
|
Interest on
loans
|
22
|
|
Total
outstanding
|
$1,621
|
|
Amount
forgiven
|
1,302
|
|
Promissory
note issued in exchange
|
319
|
For
2019 and 2018, Dr. Faupel did not receive salary compensation. He
received no bonus in the years ended December 31, 2019 and 2018. As
previously disclosed, on July 24, 2018, the Company entered into an
exchange agreement and promissory note with Dr. Faupel. The
agreements were entered into in order to extinguish and restructure
current amounts owed to Dr. Faupel. In the exchange agreement Dr.
Faupel, agreed to exchange outstanding amounts due to him for
loans, interest, bonus, salary and vacation pay in the amount of
$660,895 for $207,111 promissory note. Pursuant to the exchange
agreement the note will bear interest at 6%. In addition, Dr.
Faupel will receive 94 stock options, with 31 vesting immediately
and the remaining vesting monthly over three years. Dr. Faupel will
also receive 560 options at $200.00 shall owe Dr. Faupel $113,000.
As a result of the exchange agreement, the Company recorded a gain
for extinguishment of debt of $199,079 and a capital contribution
of $234,990. As of December 31, 2019, Dr. Faupel’s total
undiscounted cash flow amount due was approximately $256,825
including interest. The schedule below summarizes the detail of
outstanding amounts:
For Dr.
Faupel:
|
Salary
|
$134
|
|
Bonus
|
20
|
|
Vacation
|
95
|
|
Interest on
compensation
|
67
|
|
Loans to
Company
|
196
|
|
Interest on
loans
|
149
|
|
Total
outstanding
|
$661
|
|
Amount
forgiven
|
454
|
|
Promissory
note issued in exchange
|
207
|
For
2019 and 2018, Mr. Fowler accrued base salary of nil and $62,019.
On March 2016, Mr. Fowler began working half-time and agreed to
reduce his base salary compensation to $107,500 from $215,000 in
2015. For both years he received the usual and customary company
benefits. He received no bonus in the years ended December 31, 2019
and 2018. In 2015, he received options to purchase 2 shares of
common stock, which vest over 48 months. As of December 31, 2019,
Mr. Fowler’s total deferred salary plus interest was
approximately $521,389.
Outstanding
Equity Awards to Officers at December 31, 2019
Name
and Principal
Position
|
Number
of
Securities
Underlying
Options
Exercisable
(#)(1)
|
Number
of Securities Underlying
Options Un-exercisable
(#)
|
Option
Exercise
Price
($)(2)
|
|
|
Gene S. Cartwright,
Ph.D.
President, CEO,
Acting CFO and Director
|
2
|
-
|
28,360
|
12/31/2024
|
|
Mark Faupel,
Ph.D.
COO and
Director
|
9
|
-
|
70,836
|
12/31/2024
|
|
Richard
Fowler
Senior Vice
President of Engineering
|
5
|
-
|
49,984
|
12/31/2024
|
(1)
Represents fully
vested options.
(2)
Average price,
based on all outstanding options.
Outstanding
Equity Awards to Directors at December 31, 2019
|
|
|
|
Name
and Principal Position
|
|
|
|
Ronald W. Hart,
Ph.D., Director (resigned as of December 11, 2015)
|
6
|
56,267
|
|
John E. Imhoff,
M.D., Director
|
7
|
57,143
|
|
Michael C. James,
Chairman and Director
|
6
|
56,267
|
|
|
|
|
Risk
Oversight
Our
board as a whole has responsibility for risk oversight, with
reviews of certain areas being conducted by the relevant board
committees that report on their deliberations to the full board, as
further described below. Given the small size of the board, the
board feels that this structure for risk oversight is appropriate
(except for those risks that require risk oversight by independent
directors only). The audit committee is specifically charged with
discussing risk management (primarily financial and internal
control risk), and receives regular reports from management and
independent auditors on risks related to, among others, our
financial controls and reporting. The compensation committee
reviews risks related to compensation and makes recommendations to
the board with respect to whether the Company’s compensation
policies are properly aligned to discourage inappropriate
risk-taking, and is regularly advised by management. In addition,
the Company’s management regularly communicates with the
board to discuss important risks for their review and oversight,
including regulatory risk, and risks stemming from periodic
litigation or other legal matters in which we are
involved.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters
The
following table lists information regarding the beneficial
ownership of our equity securities as of April 7, 2020 by (1) each
person whom we know to beneficially own more than 5% of the
outstanding shares of our common stock, (2) each director, (3) each
officer named in the summary compensation table below, and (4) all
directors and executive officers as a group. Unless otherwise
indicated, the address of each officer and director is 5835
Peachtree Corners East, Suite B, Norcross, Georgia
30092.
|
|
|
Series
D Preferred Stock (3)
|
Series C1
Preferred Stock (4)
|
Series C2
Preferred Stock (5)
|
|
Name and Address
of Beneficial Owner (1)
|
|
|
|
|
|
|
|
|
|
John E. Imhoff
(6)
|
10,933,547
|
54.83%
|
300
|
40.65%
|
-
|
-
|
2,400.75
|
73.57%
|
|
Lynne Imhoff
(7)
|
1,350,011
|
10.67%
|
-
|
-
|
675.00
|
64.33%
|
-
|
-
|
|
Michael C.
James/Kuekenhof Equity Fund, LLP (8)
|
15,511
|
*
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Gene Cartwright
(9)
|
450,008
|
3.86%
|
50
|
6.78%
|
-
|
-
|
-
|
-
|
|
Richard L. Fowler
(10)
|
6
|
*
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Mark L. Faupel
(11)
|
940,516
|
7.73%
|
38
|
5.15%
|
-
|
-
|
300.00
|
9.17%
|
|
Richard Blumberg
(12)
|
2,335,266
|
18.72%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Rosalind Master
Fund (13)
|
1,500,000
|
12.19%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
K2 Medical /
Shandong (14)
|
3,771,514
|
28.58%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Auctus
(15)
|
8,079,512
|
41.67%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Flynn D. Case
Living Trust (16)
|
1,792,906
|
14.69%
|
-
|
-
|
-
|
-
|
-
|
-
|
|
All directors and
executive officers as a group (4 persons) (17)
|
12,339,582
|
58.30%
|
388
|
52.57%
|
-
|
-
|
2,700.75
|
82.75%
|
(1)
Except as otherwise
indicated in the footnotes to this table and pursuant to applicable
community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common
stock.
(2)
Percentage
ownership is based on 11,308,191 shares of common stock outstanding
as of April 7, 2020. Beneficial ownership is determined in
accordance with the rules of the SEC, based on factors that include
voting and investment power with respect to shares. Shares of
common stock subject to convertible securities convertible or
exercisable within 60 days after the record date, are deemed
outstanding for purposes of computing the percentage ownership of
the person holding those securities but are not deemed outstanding
for purposes of computing the percentage ownership of any other
person. Note that certain of our outstanding securities, including
certain warrants and the shares of Series C1 preferred stock held
by the persons listed in this table, have anti-dilution
“ratchet” or “price-protection”
provisions that, when triggered, will increase the number of shares
of common stock underlying such securities. Subject to customary
exceptions, these provisions are triggered anytime we issue shares
of common stock to third parties at a price lower than the
then-current conversion price or exercise price of the subject
securities. As a result, the beneficial ownership reported in this
table is only as of the date presented, and the beneficial
ownership amounts of the persons in this table may increase on a
future date, even though such persons have not actually acquired
any additional shares of common stock.
(3)
As of April 7,
2020, there were 738 shares of Series D preferred stock shares that
will be issued, and each such share was convertible into
approximately 3,000 shares of common stock.
(4)
As of April 7,
2020, there were 1,049.25 shares of Series C1 preferred stock
outstanding, and each such share was convertible into approximately
2,000 shares of common stock. Three shareholders elected to convert
3,263.00 of their Series C1 preferred stock for Series C2 preferred
stock.
(5)
As of April 7,
2020, there were 3,262.25 shares of Series C2 preferred stock
outstanding, and each such share was convertible into approximately
2,000 shares of common stock.
(6)
Shares of common
stock consist of 2,299,272 shares of common stock directly held,
2,932,768 shares issuable upon exercise of warrants, 7 shares
subject to options, 900,000 shares issuable upon conversion of 300
shares of Series D preferred stock shares and 4,801,500 shares
issuable upon conversion of 2,400.75 shares of Series C2 preferred
stock. Dr. Imhoff is on the board of directors.
(7)
Shares of common
stock consist of 5 shares of common stock directly held, 6 shares
issuable upon exercise of warrants, and 1,350,000 shares issuable
upon conversion of 675.00 shares of Series C1 preferred
stock.
(8)
Shares of commons stock consist
of 7,755 shares of common stock directly held, 7,750 shares
issuable upon exercise of warrants, and 6 shares subject to
options. Mr. James is on the board of directors.
(9)
Shares of commons stock consist of
100,001 shares of common stock directly held, 200,005 shares
issuable upon exercise of warrants, 150,000 shares issuable
upon conversion of 50 shares of Series D preferred stock shares and
2 shares subject to
options. Dr. Cartwright is the CEO and on the board of
directors.
(10)
Shares of commons
stock consist of 1 shares of common stock directly held and
5 shares subject to
options.
(11)
Shares of common
stock consist of 76,003 shares of common stock directly held,
152,004 shares issuable upon exercise of warrants, 9 shares subject
to options, 114,000
shares issuable upon conversion of 38 shares of Series D preferred
stock shares and 598,500 shares issuable upon conversion of 300.00
shares of Series C2 preferred stock. Dr. Faupel is the COO and on
the board of directors.
(12)
Shares of commons stock consists of 1,167,632 shares of common
stock directly held, and 1,167,634 shares issuable upon
exercise of warrants.
(13)
Shares of commons stock consists of 500,000 shares of common stock
directly held, and 1,000,000 shares issuable upon exercise of
warrants.
(14)
Shares of commons stock consists of 1,881,495 shares of common
stock directly held, and 1,890,019 shares issuable upon
exercise of warrants.
(15)
Shares of commons
stock consists of 8,079,512 shares issuable upon exercise of
warrants.
(16)
Shares of commons
stock consists of 896,453 shares of common stock directly
held, and 896,453 shares issuable upon exercise of
warrants.
(17)
Shares of commons stock consists of
2,483,031 shares of common stock directly held, 3,292,517
shares issuable upon exercise of warrants, 24 shares subject to
options, 1,164,000 shares issuable upon conversion of 388
shares of Series D preferred stock shares and 5,400,000 shares issuable upon
conversion of 2,700.75 shares of Series C2 preferred
stock.
As of
April 7, 2020, there were 286 shares of Series C preferred stock
outstanding, and each such share was convertible into approximately
2,000 shares of common stock.
See
Item 5 of this report for information regarding Securities
Authorized for Issuance under Equity Compensation
Plans.
Item 13. Certain Relationships and Related Transactions
and Director Independence
Our
board recognizes that related person transactions present a
heightened risk of conflicts of interest. The audit committee has
the authority to review and approve all related party transactions
involving our directors or executive officers.
Under
the policy, when management becomes aware of a related person
transaction, management reports the transaction to the audit
committee and requests approval or ratification of the transaction.
Generally, the audit committee will approve only related party
transactions that are on terms comparable to those that could be
obtained in arm’s length dealings with an unrelated third
person. The audit committee will report to the full board all
related person transactions presented to it. Based on the
definition of independence of the NASDAQ Stock Market, the board
has determined that Mr. James and Dr. Imhoff are independent
directors.
John E.
Imhoff is one of our directors. In June 2015, Dr. Imhoff agreed to
exchange certain of his warrants, originally issued in December
2014 and exercisable for 1 share of our common stock, for two new
warrants that, unlike the original warrant, do not contain any
price or share reset provisions. Each new warrant is exercisable
for the same number of shares of our common stock as the original
warrant, at any time until December 2, 2020. The exercise price of
the first new warrant is $57,600 per share and the second new
warrant is $70,400 per share but, aside from the exercise price,
the new warrants are identical in terms to each other. As
additional consideration, we issued Dr. Imhoff an additional 1
share of common stock. Dr. Imhoff participated on terms equal to
those of other holders of the December 2014 warrants. As a result
of these transactions, Dr. Imhoff’s beneficial ownership of
our common stock increased from approximately 11.7% immediately
prior to the exchange, to approximately 11.8% immediately
afterward.
In
September 2015, Dr. Imhoff participated in our Series C preferred
stock issuance by exchanging all of his shares of Series B
preferred stock and investing $300,000 in cash, for a total of
1,067 shares of Series C preferred stock and warrants to purchase
211 shares of common stock. Dr. Imhoff participated on terms equal
to those of other Series C investors. As a result of these
transactions, Dr. Imhoff’s beneficial ownership of our common
stock increased from approximately 14% immediately prior to his
first acquisition of shares of Series C preferred stock, to 25%
immediately afterward.
On
March 11, 2016, Dr. Imhoff received 1 share of common stock as a
dividend on his Series B preferred stock (previously accrued but
unpaid), in accordance with the terms of the Series B preferred
stock.
In
April 2016, Dr. Imhoff exchanged his shares of Series C preferred
stock for a total of 2,400.75 shares of Series C1 preferred stock
and 16 shares of common stock. Dr. Imhoff participated on terms
equal to those of other Series C1 investors. As a result of this
transaction, Dr. Imhoff’s beneficial ownership of our common
stock increased from approximately 25% immediately prior to the
transaction, to 77% immediately afterward.
In June
2016, Dr. Imhoff agreed to exchange certain of his warrants,
exercisable for 6 shares of our common stock and subject to certain
anti-dilution provisions, in exchange for new warrants, exercisable
for 11 shares of our common stock, but without those anti-dilution
provisions. Dr. Imhoff will be required to surrender his old
warrants upon consummation of our next financing resulting in net
cash proceeds to us of at least $1 million. The new warrants will
have an initial exercise price equal to the exercise price of the
surrendered warrants as of immediately prior to consummation of the
financing, subject to customary “downside price
protection” for as long as our common stock is not listed on
a national securities exchange, and will expire five years from the
date of issuance.
On
September 6, 2016, we entered into a royalty agreement with Dr.
Imhoff and another party. Pursuant to the royalty agreement, in
exchange for a payment of $50,000 by Dr. Imhoff and the other
party, we granted them a royalty on future sales of our single-use
cervical guides. The royalty rate was initially $0.10 per
disposable, until October 2, 2016, at which point the royalty rate
increased to $0.20 per disposable. Any royalty payments will be
split evenly between Dr. Imhoff and the other party.
Lynne
Imhoff (no relation) currently beneficially owns in excess of 10%
of our outstanding common stock. In September 2015, Ms. Imhoff
participated in our Series C preferred stock issuance by exchanging
all of her shares of Series B preferred stock and investing
$125,000 in cash, for a total of 300 shares of Series C preferred
stock and warrants to purchase 1 shares of common stock. Ms. Imhoff
participated on terms equal to those of other Series C investors.
As a result of these transactions, Ms. Imhoff’s beneficial
ownership of our common stock increased from approximately 2%
immediately prior to her first acquisition of shares of Series C
preferred stock, to 4% immediately afterward.
In
April 2016, Ms. Imhoff exchanged her shares of Series C preferred
stock for a total of 675 shares of Series C1 preferred stock and 5
shares of common stock. Ms. Imhoff participated on terms equal to
those of other Series C1 investors. As a result of this
transaction, Ms. Imhoff’s beneficial ownership of our common
stock increased from approximately 4% immediately prior to the
transaction, to 45% immediately afterward.
In June
2016, Ms. Imhoff agreed to exchange certain of her warrants,
exercisable for 1 share of our common stock and subject to certain
anti-dilution provisions, in exchange for new warrants, exercisable
for 2 shares of our common stock, but without those anti-dilution
provisions. Ms. Imhoff will be required to surrender her old
warrants upon consummation of our next financing resulting in net
cash proceeds to us of at least $1 million. The new warrants will
have an initial exercise price equal to the exercise price of the
surrendered warrants as of immediately prior to consummation of the
financing, subject to customary “downside price
protection” for as long as our common stock is not listed on
a national securities exchange, and will expire five years from the
date of issuance.
Mark
Faupel is one of our directors and our Chief Operating Officer, and
Richard Blumberg was one of our directors. Dr. Faupel is a
shareholder of Shenghuo, and Mr. Blumberg, is a managing member of
Shenghuo. We entered into a license agreement with Shenghuo
pursuant to which we granted Shenghuo an exclusive license to
manufacture, sell and distribute our LuViva Advanced Cervical
Cancer device and related disposables in Taiwan, Brunei Darussalam,
Cambodia, Laos, Myanmar, Philippines, Singapore, Thailand, and
Vietnam. Shenghuo has been our exclusive distributor in China,
Macau and Hong Kong, and the license extends to manufacturing in
those countries as well. Pursuant to the license agreement,
Shenghuo had the option to have a designee appointed to our board
of directors. As partial consideration for, and as a condition to,
the license, and to further align the strategic interests of the
parties, we agreed to issue a convertible note to Shenghuo, in
exchange for an aggregate cash investment of $200,000. The note
will provide for a payment to Shenghuo of $300,000, expected to be
due the earlier of 90 days from issuance and consummation of any
capital raising transaction by us with net cash proceeds of at
least $1.0 million. The note will accrue interest at 20% per year
on any unpaid amounts due after that date. The note will be
convertible into shares of our common stock at a conversion price
per share of $11,137, subject to customary anti-dilution
adjustment. The note will be unsecured and is expected to provide
for customary events of default. We will also issue Shenghuo a
five-year warrant exercisable immediately for 22 shares of common
stock at an exercise price equal to the conversion price of the
note, subject to customary anti-dilution adjustment. As of December
31, 2019, the balance was $513,000.
In
September 2015, Dr. Faupel participated in our Series C preferred
stock issuance by investing $100,000 in cash, for a total of 133
shares of Series C preferred stock and warrants to purchase 1 share
of common stock. Dr. Faupel participated on terms equal to those of
other Series C investors. In April 2016, Dr. Faupel exchanged his
shares of Series C preferred stock for a total of 300 shares of
Series C1 preferred stock and 2 shares of common stock. Dr. Faupel
participated on terms equal to those of other Series C1
investors.
Item 14. Principal Accountant Fees and
Services
UHY LLP
is our current independent registered public accounting
firm.
We were
billed by UHY LLP $100,869 and $168,405 during the fiscal years
ended December 31, 2019 and 2018, respectively, for professional
services, which include fees associated with the annual audit of
financial statements, as well as the 10-K annual report and review
of our quarterly reports on Form 10-Q, and other SEC
filings.
|
|
|
|
|
Audit
fees
|
$95,646
|
$150,000
|
|
Audit related
fees
|
-
|
12,500
|
|
Tax
fees
|
5,223
|
5,905
|
|
Total
Fees
|
$100,869
|
$168,405
|
Audit Committee Pre-Approval Policy and Permissible Non-Audit
Services of Independent Registered Public Accounting
Firm
Our
Audit Committee pre-approves all audit and permissible non-audit
services provided by our independent registered public accounting
firm. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is
generally provided for up to one year, and any pre-approval is
detailed as to the particular service or category of services and
is generally subject to a specific budget. Our independent
registered public accounting firm and management are required to
periodically report to the Audit Committee regarding the extent of
services provided by the independent registered public accounting
firm in accordance with the pre-approval, and the fees for the
services performed to date. The Audit Committee may also
pre-approve particular services on a case-by-case
basis.
PART
IV
Item 15. Exhibits and Financial Statement
Schedules
The
consolidated financial statements included in Item 8 of this report
are filed as part of this report.
The
exhibits listed below are filed as part hereof, or incorporated by
reference into, this Report. All documents referenced below were
filed pursuant to the Securities and Exchange Act of 1934 by Guided
Therapeutics, Inc. (f/k/a SpectRx, Inc.), file number 0-22179,
unless otherwise indicated.
EXHIBIT
INDEX
|
EXHIBIT
NO.
|
|
DESCRIPTION
|
|
|
|
Restated
Certificate of Incorporation, as amended through November 3,
2016
|
|
|
|
Amended
and Restated Bylaws (incorporated by reference to Exhibit 3.1 to
the current report on Form 8-K, filed March 23, 2012)
|
|
|
|
Amended
and Restated Certificate of Incorporation, (incorporated by
reference to Exhibit 3.1 to the current report on Form 8-K, filed
November 15, 2018)
|
|
|
|
Certificate
of Designation of Preferences, Rights and Limitations of Series D
Convertible Preferred Stock
|
|
|
|
Specimen
Common Stock Certificate (incorporated by reference to Exhibit 4.1
to the amended registration statement on Form S-1/A (No. 333-22429)
filed April 24, 1997)
|
|
|
|
Secured
Promissory Note, dated September 10, 2014 (incorporated by
reference to Exhibit 4.1 to the current report on Form 8-K filed
September 10, 2014)
|
|
|
|
Amendment
#1 to Secured Promissory Note, dated March 10, 2015 (incorporated
by reference to Exhibit 10.1 to the current report on Form 8-K
filed March 19, 2015)
|
|
|
|
Amendment
#2 to Secured Promissory Note, dated May 4, 2015 (incorporated by
reference to Exhibit 10.1 to the current report on Form 8-K filed
May 7, 2015)
|
|
|
|
Amendment
#3 to Secured Promissory Note, dated June 1, 2015 (incorporated by
reference to Exhibit 10.1 to the current report on Form 8-K filed
June 5, 2015)
|
|
|
|
Amendment
#4 to Secured Promissory Note, dated June 16, 2015 (incorporated by
reference to Exhibit 10.4 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Amendment
#5 to Secured Promissory Note, dated June 29, 2015 (incorporated by
reference to Exhibit 10.5 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Amendment
#6 to Secured Promissory Note, dated January 20, 2016 (incorporated
by reference to Exhibit 10.1 to the current report on Form 8-K
filed February 16, 2016)
|
|
|
|
Amendment
#7 to Secured Promissory Note, dated February 11, 2016
(incorporated by reference to Exhibit 10.2 to the current report on
Form 8-K filed February 16, 2016)
|
|
|
|
Amendment
#8 to Secured Promissory Note, dated March 7, 2016 (incorporated by
reference to Exhibit 10.1 to the current report on Form 8-K filed
March 7, 2016)
|
|
|
|
Senior
Secured Convertible Note, dated February 12, 2016 (incorporated by
reference to Exhibit 4.1 to the current report on Form 8-K filed
February 12, 2016)
|
|
|
|
Form
of Exchange Note (GPB) (incorporated by reference to Exhibit 4.1 to
the current report on Form 8-K filed December 7, 2016)
|
|
|
|
10%
OID Convertible Promissory Note (incorporated by reference to
Exhibit 4.1 to the current report on Form 8-K filed December 30,
2016)
|
|
|
|
Convertible
Promissory Note (incorporated by reference to Exhibit 4.1 to the
current report on Form 8-K filed February 16, 2017)
|
|
|
|
Form
of Warrant (Standard Form) (incorporated by reference to Exhibit
4.1 to the current report on Form 8-K, filed September 14,
2010)
|
|
|
|
Form
of Warrant (InterScan) (incorporated by reference to Exhibit 4.13
to the annual report on Form 10-K for the year ended December 31,
2013, filed March 27, 2014)
|
|
|
|
Form
of Warrant (November 2011 Private Placement) (incorporated by
reference to Exhibit 4.1 to the current report on Form 8-K/A, filed
November 28, 2011)
|
|
|
|
Form
of Warrant (Series B-Tranche A) (incorporated by reference to
Exhibit 10.2 to amendment no. 1 to the current report on Form 8-K,
filed May 23, 2013)
|
|
|
|
Form
of Warrant (Series B-Tranche B) (incorporated by reference to
Exhibit 10.3 to amendment no. 1 to the current report on Form 8-K,
filed May 23, 2013)
|
|
|
|
Form
of Warrant (Regulation S) (incorporated by reference to Exhibit 4.1
to the current report on Form 8-K, filed September 8,
2014)
|
|
|
|
Form
of Warrant (2014 Public Offering Placement Agent) (incorporated by
reference to Exhibit 4.2 to the current report on Form 8-K filed
December 4, 2014)
|
|
|
|
Form
of Warrant (2014 Public Offering Warrant Exchanges) (incorporated
by reference to Exhibit 4.1 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Form
of Warrant (Series C) (incorporated by reference to Exhibit 4.3 to
the current report on Form 8-K filed June 30, 2015)
|
|
|
|
Form
of Warrant (Senior Secured Convertible Note) (incorporated by
reference to Exhibit 10.5 to the current report on Form 8-K filed
February 12, 2016)
|
|
|
|
Form
of Warrant (Series B-Tranche B Exchanges; GPB Exchange)
(incorporated by reference to Exhibit 4.1 to the current report on
Form 8-K filed June 14, 2016)
|
|
|
|
Common
Stock Purchase Warrant (Convertible Promissory Note) (incorporated
by reference to Exhibit 4.2 to the current report on Form 8-K filed
February 16, 2017)
|
|
|
|
Senior
Secured Convertible Note, dated December 17, 2019, by and between
Guided Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Common
Stock Warrant, dated December 17, 2019, by and between Guided
Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Form
of Common Stock Purchase Warrant
|
|
|
|
Form
of Common Stock Purchase Warrant
|
|
|
|
Form
of 12% debenture
|
|
|
|
Form
of Warrant (Exchange Agreements)
|
|
|
|
Form
of Common Stock Purchase Warrant
|
|
|
|
1995
Stock Plan and form of Stock Option Agreement (incorporated by
reference to Exhibit 10.2 to the registration statement on Form S-1
(No. 333-22429) filed February 27, 1997)
|
|
|
|
2005
Amendment to 1995 Stock Plan (incorporated by reference to Appendix
1 to the proxy statement on Schedule 14A, filed May 10,
2005)
|
|
|
|
2010
Amendment to 1995 Stock Plan (incorporated by reference to Exhibit
10.3 to the registration statement on Form S-8 (File No.
333-178261), filed December 1, 2011)
|
|
|
|
2012
Amendment to 1995 Stock Plan (incorporated by reference to Annex 1
to the proxy statement on Schedule 14A, filed April 30,
2012)
|
|
|
|
Securities
Purchase Agreement (Series C), dated June 29, 2015 (incorporated by
reference to Exhibit 10.6 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Registration
Rights Agreement (Series C), dated June 29, 2015 (incorporated by
reference to Exhibit 10.7 to the current report on Form 8-K filed
June 30, 2015)
|
|
|
|
Form
of Joinder Agreement (Series C) (incorporated by reference to
Exhibit 10.1 to the current report on Form 8-K filed July 13,
2015)
|
|
|
|
Interim
Securities Purchase Agreement (Series C), dated September 3, 2015
(incorporated by reference to Exhibit 10.1 to the current report on
Form 8-K filed September 3, 2015)
|
|
|
|
Securities
Purchase Agreement (Senior Secured Convertible Note), dated
February 11, 2016 (incorporated by reference to Exhibit 10.3 to the
current report on Form 8-K filed February 12, 2016)
|
|
|
|
Security
Agreement (Senior Secured Convertible Note), dated February 11,
2016 (incorporated by reference to Exhibit 10.4 to the current
report on Form 8-K filed February 12, 2016)
|
|
|
|
Royalty
Agreement, dated September 6, 2016, between the Company and Imhoff
and Maloof (incorporated by reference to Exhibit 10.1 to the
current report on Form 8-K filed September 8, 2016)
|
|
|
|
Agreement
between Shandong Yaohua Medical Instrument Corporation and Guided
Therapeutics, Inc., Confidential, Final 22 January 2017
(incorporated by reference to Exhibit 10.1 to the current report on
Form 8-K filed January 26, 2017)
|
|
|
|
Guided
Therapeutics-Shenghuo Medical Agreement, 22 Jan 2017 (incorporated
by reference to Exhibit 10.2 to the current report on Form 8-K
filed January 26, 2017)
|
|
|
|
Securities
Purchase Agreement, dated as of February 12, 2018, by and between
Guided Therapeutics, Inc. and Adar Bays, LLC
|
|
|
|
Securities
Purchase Agreement, dated as of February 22, 2018, by and between
Guided Therapeutics, Inc. and Power Up
|
|
|
|
Lease
Modification, dated as of February 23, 2018, by and between Guided
Therapeutics, Inc. and TREA Infill Industrial Atlanta,
LLC
|
|
|
|
Securities
Purchase Agreement, dated as of March 12, 2018, by and between
Guided Therapeutics, Inc. and Eagle Equities, LLC
|
|
|
|
Securities
Purchase Agreement, dated as of May 17, 2018, by and between Guided
Therapeutics, Inc. and GHS Investments, Inc
|
|
|
|
Securities
Purchase Agreement, dated as of March 20, 2018, by and between
Guided Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Securities
Purchase Agreement, dated as of April 30, 2018, by and between
Guided Therapeutics, Inc. and Power Up
|
|
|
|
Securities
Purchase Agreement, dated as of June 7, 2018, by and between Guided
Therapeutics, Inc. and Power Up
|
|
|
|
Securities
Purchase Agreement, dated as of June 22, 2018, by and between
Guided Therapeutics, Inc. and GHS Investments, Inc
|
|
|
|
Securities
Purchase Agreement, dated as of July 3, 2018, by and between Guided
Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Promissory
Note, dated as of August 22, 2018, by and between Guided
Therapeutics, Inc. and Mr. Case
|
|
|
|
Exchange
Agreements, dated as of August 31, 2018, by and between Guided
Therapeutics, Inc. and Series C1 Preferred Stockholders in exchange
for Series C2 Preferred Stock. (incorporated by reference to
Exhibit 10.1 to the current report on Form 8-K filed September 6,
2018)
|
|
|
|
Promissory
Note, dated as of September 19, 2018, by and between Guided
Therapeutics, Inc. and Mr. Gould
|
|
|
|
Exchange
Agreement, dated as of September 30, 2018, by and between Guided
Therapeutics, Inc. and Dr. Faupel
|
|
|
|
Exchange
Agreement, dated as of September 30, 2018, by and between Guided
Therapeutics, Inc. and Dr. Cartwright
|
|
|
|
Equity
Financing Agreement, dated as of March 1, 2018, by and between
Guided Therapeutics, Inc. and GHS Investments, Inc
|
|
|
|
Purchase
and Sale Agreement, dated as of February 14, 2019, by and between
Guided Therapeutics, Inc. and Everest Business Funding
|
|
|
|
Promissory
Note, dated as of February 15, 2019, by and between Guided
Therapeutics, Inc. and Mr. Gould
|
|
|
|
Securities
Purchase Agreement, dated as of March 29, 2019, by and between
Guided Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Securities
Purchase Agreement, dated as of May 15, 2019, by and between Guided
Therapeutics, Inc. and Eagle Equities, LLC
|
|
|
|
Securities
Purchase Agreement, dated as of May 15, 2019, by and between Guided
Therapeutics, Inc. and Adar Bays, LLC
|
|
|
|
Loan
Agreement, dated as of July 1, 2019, by and between Guided
Therapeutics, Inc. and Accilent Capital Management Inc. / Rev
Royalty Trust Income and Growth Trust
|
|
|
|
License
Agreement Modification, dated as of July 24, 2019, by and between
Guided Therapeutics, Inc. and Shandong Medical Instrument
Corporation
|
|
|
|
Addendum
to the Exchange Agreement, dated as of September 30, 2018, by and
between Guided Therapeutics, Inc. and Dr. Faupel
|
|
|
|
Addendum
to the Exchange Agreement, dated as of September 30, 2018, by and
between Guided Therapeutics, Inc. and Dr. Cartwright
|
|
|
|
Exchange
Agreement, dated as of December 5, 2019, by and between Guided
Therapeutics, Inc. and Aquarius
|
|
|
|
Securities
Purchase Agreement, dated as of December 17, 2019, by and between
Guided Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Security
Agreement, dated December 17, 2019, by and between Guided
Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Registration
Rights Agreement, dated December 17, 2019, by and between Guided
Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Form
of Securities Purchase Agreement between the Guided Therapeutics,
Inc. and investors set forth therein
|
|
|
|
Form
of Security Agreement between the Guided Therapeutics, Inc. and
investors set forth therein
|
|
|
|
Securities
Purchase Agreement (Series D), dated December 30, 2019
|
|
|
|
Registration
Rights Agreement (Series D), dated December 30, 2019
|
|
|
|
Form
of Joinder Agreement (Series D), dated December 30,
2019
|
|
|
|
Form
of Exchange Agreement, dated as of December 30, 2019, by and
between Guided Therapeutics, Inc. and Investors
|
|
|
|
Exchange
Agreement, dated as of December 30, 2019, by and between Guided
Therapeutics, Inc. and K2
|
|
|
|
Exchange
Agreement, dated as of December 30, 2019, by and between Guided
Therapeutics, Inc. and Mr. Blumberg
|
|
|
|
Exchange
Agreement, dated as of December 30, 2019, by and between Guided
Therapeutics, Inc. and Dr. Imhoff
|
|
|
|
Exchange
Agreement, dated as of January 6, 2020, by and between Guided
Therapeutics, Inc. and Jones Day Law Firm
|
|
|
|
Finder’s
Fee Agreement, dated as of January 6, 2020, by and between Guided
Therapeutics, Inc. and Iron Stone Capital
|
|
|
|
Promissory
Note, dated as of January 15, 2020, by and between Guided
Therapeutics, Inc. and IRTH Communications, LLC
|
|
|
|
Exchange
Agreement, dated as of January 16, 2020, by and between Guided
Therapeutics, Inc. and GPB Debt Holdings II, LLC
|
|
|
|
Promotional
Agreement, dated as of January 22, 2020, by and between Guided
Therapeutics, Inc. and Blumberg & Bowles Consulting,
LLC
|
|
|
|
Securities
Purchase Agreement, dated as of March 31, 2020, by and between
Guided Therapeutics, Inc. and Auctus Fund, LLC
|
|
|
|
Subsidiaries
(incorporated by reference to Exhibit 21.1 to the registration
statement on Form S-1 (No. 333-169755) filed October 5,
2010)
|
|
|
|
Consent
of UHY LLP
|
|
101.1*
|
|
Interactive
Data File
|
*Filed
herewith
Item 16. Form 10-K Summary
Not
applicable.
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly
authorized.
|
|
GUIDED THERAPEUTICS,
INC.
|
|
|
|
|
|
|
|
Date: April 17,
2020
|
By:
|
/s/ Gene S.
Cartwright
|
|
|
|
|
President, Chief Executive Officer and
Acting
Chief Financial Officer
|
|
|
|
|
|
|
In
accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
|
DATE
|
|
SIGNATURE
|
|
TITLE
|
|
|
|
|
|
|
|
April 17,
2020
|
|
/s/
Gene S. Cartwright
|
|
President,
Chief Executive Officer, Acting Chief Financial Officer (Principal
Executive Officer and Principal Financial and Accounting
Officer)
|
|
|
|
Gene
S. Cartwright
|
|
|
|
|
|
|
|
|
|
April
17, 2020
|
|
/s/ Michael C. James
|
|
Chairman
of the Board and Director
|
|
|
|
Michael
C. James
|
|
|
|
|
|
|
|
|
|
April
17, 2020
|
|
/s/ John E. Imhoff
|
|
Director
|
|
|
|
John
E. Imhoff
|
|
|
|
|
|
|
|
|
|
April
17, 2020
|
|
/s/ Mark Faupel
|
|
Chief
Operating Officer and Director
|
|
|
|
Mark
Faupel
|
|
|
Exhibit 3.4
Delaware
The
First State
I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF DESIGNATION OF “GUIDED THERAPEUTICS,
INC.”, FILED IN THIS OFFICE ON THE THIRTY-FIRST DAY OF MARCH,
A.D. 2020, AT 12:50 O`CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS.
/s/ Jeffrey W. Bullock
Jeffrey W. Bullock, Secretary of State
|
2313878
8100
|
Authentication:
202694178
|
|
SR#
20202489602
|
Date:
04-01-20
|
You may
verify this certificate online at
corp.delaware.gov/authver.shtml
State
of Delaware Secretary
of State
Division
of Corporations
Delivered
12:50PM
03/31/2020
FILED
12:50PM
03/3ln020
SR 20202489602 - File Number 2313878
|
|
GUIDED THERAPEUTICS, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND
LIMITATIONS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
PURSUANT
TO SECTION 151 OF THE DELAWARE GENERAL CORPORATION LAW
The
undersigned, Gene S. Cartwright does hereby certify
that:
1.
He is the President, Chief Executive Officer, and
acting Chief Financial Officer of Guided Therapeutics, Inc., a
Delaware corporation (the "Corporation").
2.
The
Corporation is authorized to issue 5 million shares of preferred
stock.
3.
The following resolutions were duly adopted by the
board of directors of the Corporation (the "Board of
Directors"):
WHEREAS, the certificate of incorporation of the
Corporation provides for a class of its authorized stock known as
preferred stock, consisting of 5
million shares, $0.001 par value per
share, issuable from time to time in one or more
series;
WHEREAS,
the Board of Directors is authorized to fix the dividend rights,
dividend rate, voting rights, conversion rights, rights and terms
of redemption and liquidation preferences of any wholly unissued
series of preferred stock and the number of shares constituting any
series and the designation thereof, of any of them;
and
WHEREAS,
it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the rights, preferences,
restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set
forth in the Purchase Agreement, up to 6,000 shares of the
preferred stock which the Corporation has the authority to issue,
as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby
provide for the issuance of a series of preferred stock for cash or
exchange of other securities, rights or property and does hereby
fix and determine the rights, preferences, restrictions and other
matters relating to such series of preferred stock as
follows:
TERMS OF PREFERRED STOCK
Section
1. Definitions.
For the purposes hereof, the following terms shall have the
following meanings:
"Affiliate"
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 of the Securities Act.
"Bankruptcy
Event" means any of the
following events: (a) the Corporation or any Significant Subsidiary
(as such term is defined in Rule 1-02(w) of Regulation S-X under
the U.S. securities laws) thereof commences a case or other
proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction relating to the
Corporation or any Significant Subsidiary thereof, (b) there is
commenced against the Corporation or any Significant Subsidiary
thereof any such case or proceeding that is not dismissed within 60
days after commencement, (c) the Corporation or any Significant
Subsidiary thereof is adjudicated insolvent or bankrupt or any
order of relief or other order approving any such case or
proceeding is entered, (d) the Corporation or any Significant
Subsidiary thereof suffers any
appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or
stayed within 60 calendar days after such
appointment,
(e) the Corporation or any Significant Subsidiary
thereof makes a general assignment for the benefit of
creditors, (t) the Corporation or any Significant Subsidiary
thereof calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts, or (g) the
Corporation or any Significant Subsidiary thereof, by any act or
failure to act, expressly indicates its consent to, approval of or
acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the
foregoing.
"Business
Day" means any day except any
Saturday, any Sunday, any day which is a federal legal holiday in
the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other
governmental action to close.
"Canadian Trading
Market" means any of the
following markets or exchanges on which the Common Stock is listed
or quoted for trading on a date in question: the TSX Venture
Exchange and the Toronto Stock Exchange (or any successors to any
of the foregoing).
"Closing"
means the closing of the purchase and sale of the Securities
pursuant to Section 2.1 of the Purchase
Agreement.
"Closing
Date" means the Trading Day on
which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto and all
conditions precedent
to (i) each Holder's obligations to pay the Subscription Amount and
(ii) the Corporation's obligations to deliver the Securities have
been satisfied or waived.
"Commission"
means the United States Securities and Exchange Commission.
"Common
Stock" means the
Corporation’s common stock, par value $0.001
per share,
and stock of any other class of securities into which such
securities may hereafter be reclassified or changed.
"Common Stock
Equivalents" means any
securities of the Corporation or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise
entitles the holder thereof to receive, Common
Stock.
"Conversion
Amount" means the sum of the
Stated Value at issue. "Conversion
Date" shall have the meaning
set forth in Section 6(a). "Conversion
Price" shall have the meaning
set forth in Section 6(b).
"Conversion
Shares" means, collectively,
the shares of Common Stock issuable upon conversion of the shares
of Preferred Stock in accordance with the terms
hereof.
"Debentures"
means the 12% Senior Secured Debentures.
"Dividend Conversion
Rate" means the Market Price
(as such term is defined in the policies of the TSX Venture
Exchange) immediately prior to the Dividend Payment Date in
question provided, however, that if the Common Stock is not listed
or quoted for trading on a Canadian Trading Market, then the
Dividend Conversion Rate shall mean the average of the 20 volume
weighted average prices of the Common Stock on the principal
Trading Market immediately prior to the Dividend Payment Date in
question.
"Dividend Conversion
Shares" shall have the meaning
set forth in Section 3(a).
"Dividend Notice
Period" shall have the meaning
set forth in Section 3(a).
"Dividend Payment
Date" shall have the meaning
set forth iSection 3(a).
"Dividend Share
Amount" shall have the meaning
set forth in Section 3(a).
"Effective
Date" means the earliest of the
date that (a) the initial Registration Statement has been declared
effective by the Commission, (b) all of the Conversion Shares have
been sold pursuant to Rule 144 or may be sold pursuant to Rule 144
without the requirement for the Corporation to be in compliance
with the current public information required
under Rule 144 and without volume or manner-of-sale restrictions,
(c) following the one year anniversary of the Closing Date provided
that a holder of the Underlying Shares is not an Affiliate of the
Corporation or (d) all of the Underlying Shares may be sold
pursuant to an exemption from registration under Section 4(1) of
the Securities Act without volume or manner-of-sale
restrictions.
"Equity
Conditions" means, during the
period in question, (a) the Corporation shall have duly honored all
conversions scheduled to occur or occurring by virtue of one or
more Notices of Conversion of the applicable Holder on or prior to
the dates so requested or required, if any, (b)(i) there is an
effective Registration Statement pursuant to which the Holders are
permitted to utilize the prospectus thereunder to resell all of the
shares of Common Stock issuable pursuant to this Certificate of
Designation (and the Corporation believes, in good faith, that such
effectiveness will continue uninterrupted for the foreseeable
future) or (ii) all of the Conversion Shares issuable pursuant to
this Certificate of Designation may be resold pursuant to Rule 144
without volume or manner-of-sale restrictions, (c) the Common Stock
is trading on a Trading Market and all of the shares issuable
pursuant to the Transaction Documents are listed or quoted for
trading on such Trading Market (and the Corporation believes, in
good faith, that trading of the Common Stock on a Trading Market
will continue uninterrupted for the foreseeable future), (d) there
is a sufficient number of authorized, but unissued and otherwise
unreserved, shares of Common Stock for the issuance of all of the
shares then issuable pursuant to the this Certificate of
Designation and (e) the shares issuable upon conversion in full of
the redemption amount to the applicable Holder would not violate
the limitations set forth in Section 6(d)
herein.
"Exchange
Act" means the Securities
Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
"Holder"
shall have the meaning given such term in Section 2.
"Junior
Securities" means the Common
Stock and all other Common Stock Equivalents of the Corporation
other than those securities which are explicitly senior or
pari passu
to the Preferred Stock in dividend
rights or liquidation preference.
"Liens"
means a lien, charge, security interest, encumbrance, right of
first refusal, preemptive right or other
restriction.
"Liquidation"
shall have the meaning set forth in Section 5.
"New York
Courts" shall have the meaning
set forth in Section 9(d). "Notice of
Conversion" shall have the
meaning set forth in Section 6(a). "Optional
Redemption" shall have the
meaning set forth in Section 8(b).
"Optional Redemption
Amount" means the aggregate
Stated Value then outstanding plus accrued but unpaid dividends in
respect of the Preferred Stock.
"Optional Redemption
Date" shall have the meaning
set forth in Section 8(b). "Optional Redemption
Notice" shall have the meaning
set forth in Section 8(b).
"Optional Redemption
Notice Date" shall have the
meaning set forth in Section 8(b).
"Original Issue
Date" means the date of the
first issuance of any shares of the Preferred Stock regardless of
the number of transfers of any particular shares of Preferred Stock
and regardless of the number of certificates which may be issued to
evidence such Preferred Stock.
"Person"
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any
kind.
"Preferred Stock" shall have the meaning set forth in Section
2.
"Purchase
Agreement" means the Securities
Purchase Agreement, dated as of December 30, 2019, among
the Corporation and the original Holders, as amended, modified or
supplemented from time to time in accordance with its
terms.
"Registration
Statement" means a registration
statement filed with the Commission covering the resale of the
Conversion Shares by each Holder.
"Rule
144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Securities"
means Debentures, Preferred Stock, the Warrants, the Warrant Shares
and the Underlying Shares.
"Securities
Act" means the Securities Act
of 1933, as amended, and the rules and regulations promulgated
thereunder.
"Stated
Value" shall have the meaning
set forth in Section 2, as the same may be increased pursuant to
Section 3.
"Subscription
Amount" shall mean, as to each
Holder, the aggregate amount to be paid for the Preferred Stock
purchased pursuant to the Purchase Agreement as specified below
such Holder's name on the signature page of the Purchase Agreement
and next to the
heading "Subscription Amount," in United States dollars and in
immediately available funds.
"Subsidiary"
means any subsidiary of the Corporation as set forth on
Schedule
3.l(a) of the Purchase
Agreement and shall, where applicable, also include any direct or
indirect subsidiary of the Corporation formed or acquired after the
date of the Purchase Agreement.
"Successor
Entity" shall have the meaning
set forth in Section 7(e).
"Trading
Day" means a day on which the
principal Trading Market is open for business.
"Trading
Market" means any of the
following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: the NYSE American,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange, OTCQB, OTCQX,
the Toronto Stock Exchange and the TSX Venture Exchange (or any
successors to any of the foregoing).
"Transaction
Documents" means this
Certificate of Designation, the Purchase Agreement, the Debentures,
the Warrants, the Registration Rights Agreement, all exhibits and
schedules thereto and hereto and any other documents or agreements
executed in connection with the transactions contemplated pursuant
to the Purchase Agreement.
"Transfer
Agent" means Computershare, the
current transfer agent of the Corporation, and any successor
transfer agent of the Corporation.
"Underlying
Shares" means the shares of
Common Stock issued and issuable upon conversion or redemption of
the Preferred Stock, upon conversion of the Debentures, upon
exercise of the Warrants and issued and issuable in lieu of the
cash payment of interest on the Debentures and dividends on the
Preferred Stock in accordance with the terms of this Certificate of
Designation.
"VWAP"
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Stock for such date
(or the nearest preceding date) on OTCQB or OTCQX as applicable,
(c) if the Common Stock is not then listed or quoted for trading on
OTCQB or OTCQX and if prices for the Common Stock are then reported
in the "Pink Sheets" published by OTC Markets Group, Inc. (or a
similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so
reported, or (d) in all other cases,
the fair market value of a share of Common Stock as determined by
an independent appraiser selected in
good faith by the Purchasers of a majority in interest of the
Securities then outstanding and reasonably acceptable to the
Corporation, the fees and expenses of which shall be paid by the
Corporation.
"Warrants"
means, collectively, the Common Stock purchase warrants delivered
to the Holder at the Closing in accordance with Section 2.2(a) of
the Purchase Agreement.
"Warrant
Shares" means the shares of
Common Stock issuable upon exercise of the
Warrants.
Section 2. Designation, Amount
and Par Value. The series of
preferred stock shall be
designated as its Series D Convertible Preferred Stock (the
"Preferred
Stock'') and the number of
shares so designated shall be up to 6,000. Each share of Preferred
Stock shall have a par value of $0.001 per share and a stated value
equal to $750, subject to increase set forth in Section 3 below
(the "Stated
Value").
Section
3. Dividends.
a) Dividends in Cash or
in Kind. Each Holder of
Preferred Stock (each, a "Holder"
and collectively, the "Holders")
shall be entitled to receive, and the Corporation shall pay,
cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) of 10% per annum (subject to increase
pursuant to Section lO(b)), payable quarterly on January 15, April 15, July 15
and October 15, beginning on the first such date after the Original
Issue Date and on each Optional Redemption Date (with respect only
to Preferred Stock being redeemed) (each such date, a
"Dividend Payment
Date") (if any Dividend Payment
Date is not a Trading Day, the applicable payment shall be due on
the next succeeding Trading Day) in cash, or, following the
approval of Canadian Trading Market and at the Corporation's option
(subject to the waterfall below), in duly authorized, validly
issued, fully paid and non-assessable shares of
Common Stock as set forth in this Section 3(a), or a combination
thereof (the dollar amount to be paid in shares of Common Stock,
the "Dividend Share
Amount") based on the Dividend
Conversion Rate; provided,
however, the Corporation's
election to pay the Dividend Share Amount in lieu of cash is
subject to the following order of priority: (i) if funds are
legally available for the payment of dividends and the Equity
Conditions have not been met during on the applicable Dividend
Payment Date, in cash only, (ii) if funds are legally available for
the payment of dividends and the Equity Conditions have been met on
the applicable Dividend Payment Date, at the sole election of the
Corporation, in cash or shares of Common Stock which shall be
valued as determined above, (iii) if funds are not legally
available for the payment of dividends and the Equity Conditions
have been met on the applicable Dividend Payment Date, in shares of
Common Stock which shall be valued as determined above, (iv) if
funds are not legally available for the payment of dividends and
the Equity Condition relating to an effective Registration
Statement has been waived by such Holder, as to such Holder only,
in unregistered shares of Common Stock which shall be valued as
determined above, and (v) if funds are not legally available for the payment of
dividends and the Equity Conditions have not been met on the
applicable Dividend Payment Date, then, at the election of such
Holder, such dividends shall accrue to the next Dividend Payment
Date or shall be accreted to, and increase, the outstanding Stated
Value.
b) Corporation's Ability
to Pay Dividends in Cash or Kind. The Corporation shall promptly notify the
Holders at any time the Corporation shall become able or unable, as
the case may be, to legally pay cash dividends. If at any time the
Corporation has the right to pay dividends in cash or shares of
Common Stock, the Corporation must provide the Holders with at
least 5 Trading Days' notice of its election to pay a regularly
scheduled dividend in shares of Common Stock (the Corporation may
indicate in such
notice that the election contained in
such notice shall continue for later periods until revised by a
subsequent notice).
c) Dividend
Calculations. Dividends on the
Preferred Stock shall be calculated on the basis of a 360-day year,
consisting of twelve 30 calendar day periods, and
shall accrue daily commencing on the Original Issue
Date, and shall be deemed to accrue from such date whether or not
earned or declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of
dividends.
d) Late
Fees. Any dividends, whether
paid in cash or shares
of Common Stock, that are not paid
within three Trading Days following a Dividend Payment Date shall
continue to accrue and shall entail a late fee, which must be paid
in cash, at the rate of 12% per annum or the lesser rate permitted
by applicable law which shall accrue daily from the Dividend
Payment Date through and including the date of actual payment in
full.
Section 4. Voting
Rights. Except as otherwise
provided herein or as otherwise required by law, the Preferred
Stock shall have no voting rights. However, as long as any shares
of Preferred Stock are outstanding, the Corporation shall not,
without the affirmative vote of the Holders of a majority of the
then outstanding shares of the Preferred Stock, (a) alter or change
adversely the powers, preferences or rights given to the Preferred
Stock or alter or amend this Certificate of Designation,
(b)
authorize or create any class of stock
ranking as to dividends, redemption or distribution of assets upon
a Liquidation (as defined in Section 5) senior to, or otherwise
pari passu
with, the Preferred Stock, (c) amend
its certificate of incorporation or other charter documents in any
manner that adversely affects any rights of the Holders, (d)
increase the number of authorized shares of Preferred Stock, or (e)
enter into any agreement with respect to any of the
foregoing.
Section 5. Liquidation.
Upon any liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary (a "Liquidation"),
the Holders shall
be entitled to receive out of the
assets, whether capital or surplus, of the Corporation an amount
equal to the Stated Value, plus any accrued and unpaid dividends
thereon and any other fees or liquidated damages then due and owing
thereon under this Certificate of Designation, for each share of
Preferred Stock before any distribution or payment shall be made to
the holders of any Junior Securities, and if the assets of the
Corporation shall be insufficient to pay in full
such amounts, then the entire assets to be distributed
to the Holders shall be ratably distributed among the
Holders in
accordance with the respective amounts that would be payable on
such shares if all amounts payable thereon were paid in
full.
Section
6. Conversion.
a)
Conversions at Option
of Holder. Each share of
Preferred Stock shall be convertible, at any time and from time to
time from and after the Original Issue Date until the 5-year
anniversary of the Original Issue Date at the option of the Holder
thereof, into that number of shares of Common Stock
(subject to the limitations set forth in Section 6(d))
determined by dividing the Stated Value of such share of
Preferred Stock by the Conversion Price. Holders shall effect
conversions by providing the Corporation with the form of
conversion notice attached hereto as Annex A
(a "Notice of
Conversion"). Each Notice of
Conversion shall specify the number of shares of Preferred Stock to
be converted, the number of shares of Preferred Stock owned prior
to the conversion at issue, the number of shares of Preferred Stock
owned subsequent to the conversion at issue and the date on which
such conversion is to be effected, which date may not be prior to
the date the applicable Holder delivers by facsimile such Notice of
Conversion to the Corporation (such date, the "Conversion
Date"). If no Conversion Date
is specified in a Notice of Conversion, the Conversion Date shall
be the date that such Notice of Conversion to the Corporation is
deemed delivered hereunder. No ink-original Notice of Conversion
shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Conversion form be required. The calculations and
entries set forth in the Notice of Conversion shall control in the
absence of manifest or mathematical error. To effect conversions of
shares of Preferred Stock, a Holder shall not be required to
surrender the certificate(s) representing the shares of Preferred
Stock to the Corporation unless all of the shares of Preferred
Stock represented thereby are so converted, in which case such
Holder shall deliver the certificate representing
such shares of Preferred Stock promptly following the
Conversion Date at issue. Shares of Preferred Stock converted into
Common Stock or redeemed in accordance with the terms hereof shall
be canceled and shall not be reissued.
b) Conversion
Price. The conversion price for
the Preferred Stock shall equal $0.25,
subject to adjustment herein (the
"Conversion
Price").
c)
Mechanics of
Conversion.
i. Delivery
of Conversion Shares Upon Conversion. The Corporation shall deliver, or cause to be
delivered, to the converting Holder the number of Conversion Shares
being acquired upon the conversion of the Preferred
Stock.
ii. Obligation
Absolute; Partial Liquidated Damages. The Corporation's obligation to issue and
deliver the Conversion Shares upon conversion of Preferred Stock in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by a Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by such
Holder or any other Person of any obligation to the Corporation or
any violation or alleged violation of law by such Holder or any
other person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Corporation to such
Holder in connection with the issuance of such Conversion Shares;
provided, however, that such delivery shall not operate as a waiver
by the Corporation of any such action that the Corporation may have
against such Holder.
111. Reservation
of Shares Issuable Upon Conversion. The Corporation covenants that it will at all
times reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon
conversion of the Preferred Stock and payment of dividends on the
Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of Persons
other than the Holder (and the other holders of the Preferred
Stock), not less than such aggregate number of shares of the Common
Stock as shall (subject to the terms and conditions set forth in
the Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 7) upon the conversion of
the then outstanding shares of Preferred Stock and payment of
dividends hereunder.
iv. Fractional
Shares. No fractional shares or
scrip representing fractional shares shall be issued upon the
conversion of the Preferred Stock. As to any fraction of a share
which the Holder would otherwise be entitled to purchase upon such
conversion, the Corporation shall at its election, either pay a
cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Conversion Price or round
up to the next whole share.
v. Transfer
Taxes and Expenses. The
issuance of Conversion Shares on conversion of this Preferred Stock
shall be made without charge to any Holder for any documentary
stamp or similar taxes that may be payable in respect of the issue
or delivery of such Conversion Shares, provided that the
Corporation shall not be required to pay any tax that may be
payable in respect of any transfer involved in the issuance and
delivery of any such Conversion Shares upon conversion in a name
other than that of the Holders of such shares of Preferred Stock
and the Corporation shall not be required to issue or deliver such
Conversion Shares unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Corporation the amount
of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
d) Beneficial
Ownership Limitation. The
Corporation shall not effect any conversion of the Preferred Stock,
and a Holder shall not have the right to convert any portion of the
Preferred Stock, to the extent that, after giving effect to the
conversion set forth on the applicable Notice of Conversion, such
Holder (together with such Holder's Affiliates, and any Persons
acting as a group together with such Holder or
any of such Holder's Affiliates (such Persons, "Attribution
Parties")) would beneficially
own in excess of the Beneficial Ownership Limitation (as defined
below). For purposes of the foregoing sentence, the number of
shares of Common Stock beneficially owned by such Holder and its
Affiliates and Attribution Parties shall include
the number of shares of Common Stock issuable upon conversion of
the Preferred Stock with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock
which are issuable upon (i) conversion of the remaining,
unconverted Stated Value of Preferred Stock beneficially owned by
such Holder or any of its Affiliates or Attribution Parties and
(ii) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Corporation subject to a
limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, the Preferred
Stock or the Warrants) beneficially owned by such Holder or any of
its Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 6(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred
Stock is convertible (in relation to other securities owned by such
Holder together with any Affiliates and Attribution Parties) and of
how many shares of Preferred Stock are convertible shall be in the
sole discretion of such Holder, and the submission of a Notice of
Conversion shall be deemed to be such Holder's determination of
whether the shares of Preferred Stock may be converted (in relation
to other securities owned by such Holder together with any
Affiliates and Attribution Parties) and how many shares of the
Preferred Stock are convertible, in each case subject to the
Beneficial Ownership Limitation. To ensure compliance with this
restriction, each Holder will be deemed to represent to the
Corporation each time it delivers a Notice of Conversion that such
Notice of Conversion has not violated the restrictions set forth in
this paragraph and the Corporation shall have no obligation to
verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. For purposes
of this Section 6(d), in determining the number of outstanding
shares of Common Stock, a Holder may rely on the number of
outstanding shares of Common Stock as stated in the most recent of
the following: (i) the Corporation's most recent periodic or annual
report filed with the Commission, as the case may be, (ii) a more
recent public announcement by the Corporation or (iii) a more
recent written notice by the Corporation or the Transfer Agent
setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of a Holder, the Corporation shall
within one Trading Day confirm orally and in writing to such Holder
the number of shares of Common Stock then outstanding.
In
any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Corporation,
including the Preferred Stock, by such Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
"Beneficial Ownership
Limitation" shall be 4.99% (or,
upon election by a Holder prior to the issuance of any shares of
Preferred Stock, 9.99%) of the number of shares of the Common Stock
outstanding immediately after giving effect to the issuance of
shares of Common Stock issuable upon conversion of Preferred Stock
held by the
applicable Holder. A Holder, upon notice to the Corporation, may
increase or decrease the Beneficial Ownership Limitation provisions
of this Section 6(d) applicable to its Preferred Stock provided
that the Beneficial Ownership Limitation in no event exceeds 9.99%
of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon
conversion of this Preferred Stock held by the Holder and the
provisions of this Section 6(d) shall continue to apply. Any such
increase in the Beneficial Ownership Limitation will not be
effective until the 61st day after such notice is delivered to the
Corporation and shall only apply to such Holder and no other
Holder. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this Section 6(d) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of Preferred
Stock.
Section
7.
Certain
Adjustments.
a) Stock
Dividends and Stock Splits. If the Corporation, at any time while this Preferred
Stock is outstanding: (i) pays a stock dividend or otherwise makes
a distribution or distributions payable in shares of Common Stock
on shares of Common Stock or any other Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Corporation upon conversion of, or
payment of a dividend on, this Preferred Stock), (ii) subdivides
outstanding shares of Common Stock into a larger number of
shares, (iii) combines (including by way of a reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues, in the event of a reclassification of
shares of the Common Stock, any shares of capital stock of the
Corporation, then the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of
Common Stock (excluding any treasury shares of the Corporation)
outstanding immediately before such event, and of which the
denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made
pursuant to this Section 7(a) shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
b) Fundamental
Transaction. If, at any time
while this Preferred Stock is outstanding, (i) the Corporation,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Corporation with or into another
Person, (ii) the Corporation, directly or indirectly, effects any
sale, lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Corporation or another Person) is completed pursuant to which
holders of Common Stock are permitted to sell, tender or exchange
their shares for other securities, cash or property and has been
accepted by the holders of 50% or more of the outstanding Common
Stock, (iv) the Corporation, directly or indirectly, in one or
more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Corporation, directly or indirectly, in one or more
related transactions consummates a stock or share purchase
agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme
of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock
(not including any shares of Common Stock 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) (each a "Fundamental
Transaction"),
then, upon any subsequent conversion of this Preferred Stock, the
Holder shall have the right to receive, for each Conversion Share
that would have been issuable upon such conversion immediately
prior to the occurrence of such Fundamental Transaction (without
regard to any limitation in Section 6(d) on the conversion of this
Preferred Stock), the number of shares of Common Stock of the
successor or acquiring corporation or of the Corporation, if it is
the surviving corporation, and any additional consideration (the
"Alternate
Consideration") receivable as a result of such
Fundamental Transaction by a holder of the number of shares of
Common Stock for which this Preferred Stock is convertible
immediately prior to such Fundamental Transaction (without regard
to any limitation in Section 6(d) on the conversion of this
Preferred Stock). For purposes of any such conversion, the
determination of the Conversion Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the
Corporation shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Preferred Stock following such Fundamental
Transaction.
c) Calculations.
All calculations under this Section 7 shall be made to the nearest
cent or the nearest 11100th of a share, as the case may be. For
purposes of this Section 7, the number of shares of
Common Stock deemed to be issued and outstanding as of a given date
shall be the sum
of the number of shares of Common
Stock (excluding any treasury shares of the Corporation) issued and
outstanding.
d)
Notice to the
Holders.
i. Adjustment
to Conversion Price. Whenever
the Conversion Price is adjusted pursuant to any provision of this
Section 7, the Corporation shall promptly deliver to each Holder by
facsimile or email a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the
facts requiring such adjustment.
ii.
Notice to Allow
Conversion by Holder. If (A)
the Corporation shall declare a dividend (or any other distribution
in whatever form) on the Common Stock, (B) the Corporation shall
declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (C) the Corporation shall authorize the granting
to all holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Corporation shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger
to which the Corporation is a party, any sale or transfer of all or
substantially all of the assets of the Corporation, or any
compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property or (E) the Corporation
shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, then,
in each case, the Corporation shall cause to be filed at each
office or agency maintained for the purpose of conversion of this
Preferred Stock, and shall cause to be delivered by facsimile or
email to each Holder at its last facsimile number or email address
as it shall appear upon the stock books of the Corporation, at
least twenty (20) calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date
on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not
to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange, provided that the failure to
deliver such notice or any defect therein or in the delivery
thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any
notice provided hereunder constitutes, or
contains, material, non-public information regarding the
Corporation or any of the Subsidiaries, the Corporation shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
convert the Conversion Amount of this Preferred Stock (or any part
hereof) during the 20-day period commencing on the date of such
notice through the effective date of the event triggering such
notice except as may otherwise be expressly set forth
herein.
Section 8. Optional Redemption at
Election of Corporation.
Subject to the provisions of this Section 8, at any time following
the Effective Date if the average of the VWAPs for any consecutive
5 Trading Day period ("Measurement
Period") exceeds 200% of the
then Conversion Price and the average daily trading volume of the
Common Stock on the primary Trading Market exceeds 1,000 shares per
Trading Day during the Measurement Period (subject to adjustment
for reverse and forward stock splits and the like), then the
Corporation may deliver a notice to the Holders (an
"Optional Redemption
Notice" and the date such
notice is deemed delivered hereunder, the "Optional Redemption
Notice Date") of its
irrevocable election to redeem some or all of the then outstanding
Preferred Stock, for cash in an amount equal to the Optional
Redemption Amount on the 201h Trading Day following the Optional Redemption
Notice Date (such date, the "Optional Redemption
Date" and such redemption, the
"Optional
Redemption"). The Optional
Redemption Amount is payable in full on the Optional Redemption
Date. The Corporation may only effect an Optional Redemption
if
each of the Equity Conditions shall
have been met on each Trading Day occurring during the period
commencing on the Optional Redemption Notice Date through to the
Optional Redemption Date and through and including the date payment
of the Optional Redemption Amount is actually made.
If
any of the Equity Conditions shall
cease to be satisfied at any time during the 20 Trading Day period,
then a Holder may elect to nullify the Optional Redemption Notice
as to such Holder by notice to the Corporation within 3 Trading
Days after the first day on which any such Equity Condition has not
been met (provided that if, by a provision of the Transaction
Documents, the Corporation is obligated to notify the Holders of
the non-existence of an Equity Condition, such notice
period shall
be extended to the third Trading Day
after proper notice from the Corporation) in which case the
Optional Redemption Notice shall be null and void, ab
initio.
The Corporation covenants and agrees that it will honor all Notices
of Conversion tendered from the time of delivery of the Optional
Redemption Notice through the date the Optional Redemption Amount
is paid in full.
Section
9. Miscellaneous.
a) Notices.
Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation,
any Notice of Conversion, shall be in writing and delivered
personally, by facsimile or e-mail attachment, or sent by a
nationally recognized overnight courier service, addressed to the
Corporation, at the address set forth above Attention: Mark Faupel,
COO, e-mail address mfaupel@guidedinc.com, or such other facsimile number, e-mail address or
address as the Corporation may specify for such purposes by notice
to the Holders delivered in accordance with this Section 11. Any
and all notices or other communications or deliveries to be
provided by the Corporation hereunder shall be in writing and
delivered personally, by facsimile or e-mail attachment, or sent by
a nationally recognized overnight courier service addressed to each
Holder at the facsimile number, e-mail address or address of such
Holder appearing on the books of the Corporation, or if no such
facsimile number, e-mail address or address appears on the books of
the Corporation, at the principal place of business of such Holder,
as set forth in the Purchase Agreement. Any notice or other
communication or deliveries hereunder shall be deemed given and
effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number or e-mail attachment at the e-mail address set forth in this
Section prior to 5:30 p.m. (New York City time) on any date, (ii)
the next Trading Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number
or e-mail attachment at the e-mail address set forth in this
Section on a day that is not a Trading Day or later than 5:30 p.m.
(New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (iv) upon actual receipt
by the party to whom such notice is required to be
given.
b) Absolute
Obligation. Except as expressly
provided herein, no provision of this Certificate of Designation
shall alter or impair the obligation of the Corporation, which is
absolute and unconditional, to pay liquidated damages, accrued
dividends and accrued interest, as applicable, on the shares of
Preferred Stock at the time, place, and rate, and in the coin or
currency, herein prescribed.
c) Lost
or Mutilated Preferred Stock Certificate. If a Holder's Preferred Stock certificate
shall be mutilated, lost, stolen or destroyed, the
Corporation shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated certificate, or in lieu of
or in substitution for a lost, stolen or destroyed certificate, a
new certificate for the shares of Preferred Stock so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of
such loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the
Corporation.
d) Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of this
Certificate of Designation shall be governed by and construed and
enforced in accordance with the internal laws of the State of
Delaware, without regard to the principles of conflict of laws
thereof. All legal proceedings concerning the interpretation,
enforcement and defense of the transactions contemplated by any of
the Transaction Documents (whether brought against a party hereto
or its respective Affiliates, directors, officers, shareholders,
employees or agents) shall be commenced in the state and federal
courts sitting in the City of New York, Borough of Manhattan (the
"New York
Courts"). The Corporation and
each Holder hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), 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 such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. The Corporation
and each Holder hereby irrevocably waives personal service of
process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
applicable law. The Corporation and each Holder hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of
or relating to this Certificate of Designation or the transactions
contemplated hereby. If the Corporation or any Holder shall
commence an action or proceeding to enforce any provisions of this
Certificate of Designation, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its
attorneys' fees and other costs and expenses incurred in the
investigation, preparation and prosecution of such action or
proceeding.
e) Waiver.
Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as
or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The
failure of the Corporation or a Holder to insist upon strict
adherence to any term of this Certificate of Designation on one or
more occasions shall not be considered a waiver or deprive that
party (or any other Holder) of the right thereafter to insist upon
strict adherence to that term or any other term of this Certificate
of Designation on any other occasion. Any waiver by the Corporation
or a Holder must be in writing.
f) Severability.
If any provision of this Certificate of Designation is invalid,
illegal or unenforceable, the balance of this Certificate of
Designation shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law.
g) Next
Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h) Headings.
The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not
be deemed to limit or affect any of the provisions
hereof.
i) Status
of Converted or Redeemed Preferred Stock. Shares of Preferred Stock may only be issued
pursuant to the Purchase Agreement. If any shares of Preferred
Stock shall be converted, redeemed or
reacquired by the Corporation, such shares shall resume the status
of authorized but issued shares of preferred stock and shall no
longer be designated as Series D Convertible Preferred
Stock.
j)
Non-Transferrable.
The Preferred Stock may not be transferred.
*********************
RESOLVED, FURTHER,
that the Chai1man, the president or any vice-president, and the
secretary or any assistant secretary, of the Corporation be and
they hereby are authorized and directed to prepare and file this
Certificate of Designation of Preferences, Rights and Limitations
in accordance with the foregoing resolution and the provisions of
Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate
this 31st day
of
March, 2020.
|
/s/
Gene Cartwright
|
/s/
Mark Faupel
|
|
Name:
Gene Cartwright
|
Name:
Mark Faupel
|
|
Title:
President and CEO
|
Title:
Secretary and COO
|
ANNEX
A
NOTICE
OF CONVERSION
(TO BE
EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF
PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of Series
D Convertible Preferred Stock indicated below into shares of common
stock, par value $0.001 per share (the "Common Stock"), of Guided
Therapeutics, Inc., a Delaware corporation (the "Corporation"), according to the
conditions hereof, as of the date written below. If shares of Common Stock are to be issued
in the name of a Person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as may be
required by the Corporation in accordance with the Purchase
Agreement. No fee will be charged to the Holders for any
conversion, except for any such transfer taxes.
Conversion
calculations:
Date to
Effect Conversion:-------------------- Number of shares of
Preferred Stock owned prior to Conversion:------
Number of shares of Preferred Stock to be
Converted:----------- Stated
Value of shares of Preferred Stock to be
Converted:---------
Number of shares of Common Stock to
be Issued:------------
Applicable
Conversion
____________________________________________
Number
of shares of Preferred Stock subsequent to
Conversion: ___________________
Address
for Delivery:----------
or
DWAC
Instructions:
Broker no:----
Account no:-----
|
|
[HOLDER]
_______________________
Name:
Title:
|
NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED
(I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR
(II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
|
Principal Amount: US$700,000.00
Purchase Price: US$700,000.00
|
Issue Date: December 17, 2019
|
SENIOR SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, GUIDED
THERAPEUTICS, INC., a Delaware
corporation (hereinafter called the "Borrower") (Trading Symbol:
GTHP), hereby promises to pay to the order of AUCTUS FUND, LLC,
a Delaware limited liability company,
or registered assigns (the "Holder") the sum of US$700,000.00
together with any interest as set forth herein, on December
17,2021
(the "Maturity Date"), and to pay
interest on the unpaid principal balance hereof at the rate often
percent (10%) (the "Interest Rate") per annum from the date hereof
(the "Issue Date") until the same becomes due and payable, whether
at maturity or upon acceleration or by prepayment or otherwise.
This Note may not be prepaid in whole or in part except as
otherwise explicitly set forth herein. Any amount of principal or
interest on this Note which is not paid when due shall bear
interest at the rate of the lesser of (i) twenty-four
percent (24%) per annum
and (ii) the maximum amount
permitted under law from the due date thereof until the same is
paid (the "Default Interest"). Interest shall commence accruing on
the date that the Note is funded by the Holder and shall be
computed on the basis of a 360-day year and the actual number of
days elapsed. All
payments due hereunder (to the extent
not converted into common stock, $0.001 par value per share (the
"Common Stock") in accordance with the terms hereof) shall be made
in lawful money of the United States of America. All payments shall
be made at such address as the Holder shall hereafter give to the
Borrower by written notice made in accordance with the provisions
of this Note. Whenever any amount expressed to be due by the terms
of this Note is due on any day which is not a business day, the
same shall instead be due on the next succeeding day which is a
business day and, in the case of any interest payment date which is
not the date on which this Note is paid in full, the extension of
the due date thereof shall not be taken into account for purposes
of determining the amount of interest due on such date. As used in
this Note, the term "business day" shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not
otherwise defined, shall have the meaning ascribed thereto in that
certain securities purchase agreement dated the date hereof;
pursuant to which this Note was originally issued (the "Purchase
Agreement'').
This
Note is free from all taxes, liens, claims and encumbrances with
respect to the issue thereof and shall not be subject to preemptive
rights or other similar rights of shareholders of the Borrower and
will not impose personal liability upon the holder
thereof.
This
Note shall be a senior secured obligation of the Borrower, with
priority over all existing and future Indebtedness (as defined
below) of the Borrower as provided for herein. The obligations of
the Borrower under this Note are secured pursuant to the terms of
the security agreement of even date (the "Security Agreement) by
and among the Borrower and Holder, and such security interest
includes but is not limited to all of the assets of the Borrower
and its subsidiaries (including but not limited to Interscan,
Inc.). So long as the Borrower shall have any obligation under this
Note, except with respect to Permitted Indebtedness and Permitted
Liens, the Borrower shall not (directly or indirectly through any
subsidiary or affiliate) incur or suffer to exist or guarantee any
Indebtedness that is senior to or pari passu with (in priority of
payment and performance) the Borrower's obligations hereunder.
"Indebtedness" shall mean (a) all indebtedness of the Borrower for
borrowed money or for the deferred purchase price of property or
services, including any type of letters of credit, but not
including deferred purchase price obligations in place as of the
Issue Date or obligations to trade creditors incurred in the
ordinary course of business, (b) all obligations of the Borrower
evidenced by notes, bonds, debentures or other similar instruments,
(c) purchase money indebtedness hereafter incurred by the Borrower
to finance the purchase of fixed or capital assets, including all
capital lease obligations of the Borrower which do not exceed the
purchase price of the assets funded, (d) all guarantee obligations
of the Borrower in respect of obligations of the kind referred to
in clauses (a) through
(c)
above that the Borrower would not be permitted to incur or enter
into, and ( e) all obligations of the kind referred to in clauses
(a) through (d) above that the Borrower is not permitted to incur
or enter into that are secured and/ or unsecured by (or for which
the holder of such obligation has an existing right, contingent or
otherwise, to be secured and/ or unsecured by) any lien or
encumbrance on property (including accounts and contract rights)
owned by the Borrower, whether or not the Borrower has assumed or
become liable for the payment of such obligation. "Permitted
Indebtedness" means (a) the indebtedness evidenced by any
convertible notes issued by the Borrower to the Holder (the
"Notes"), (b) lease obligations and purchase money indebtedness
incurred in .connection with the acquisition of capital assets and
lease obligations with respect to newly acquired or leased assets,
(c) indebtedness that is expressly subordinate to the Notes
pursuant to a written subordination agreement with the Holder that
is acceptable to each Holder in its sole and absolute discretion
and (d) indebtedness pursuant to which the proceeds thereof are
first used to repay the Notes in the entirety within one (1)
business day of the closing of the respective transaction.
"Permitted Lien" means the individual and collective reference to
the following: (a) liens for taxes, assessments and other
governmental charges or levies not yet due or liens for taxes,
assessments and other governmental charges or levies being
contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of
the Company) have been established in accordance with GAAP, (b)
liens imposed by law which were incurred in the ordinary course of
the Company's business, such as carriers', warehousemen's and
mechanics' liens, statutory landlords' Liens, and other similar
Liens arising in the ordinary course of the Company's business, and
which (x) do not individually or in the aggregate materially
detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the
Company and its consolidated Subsidiaries or (y) are being
contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing for the foreseeable
future the forfeiture or sale of the property or asset subject to
such lien, ( c) Liens incurred in connection with Permitted
Indebteduess under clauses (a), (b), (d) and (e) thereunder, and
(d) Liens incurred in connection with Permitted Indebtedness under
clause ( c) thereunder, provided that such Liens are not secured by
assets ofthe Company or its Subsidiaries other than the assets so
acquired or leased.
The
following terms shall also apply to this Note:
ARTICLE
I. CONVERSION RlGHTS
1.1 Conversion Right. The Holder shall have the
right from time to time, and at any time following the Issue Date,
and ending on the later of (i) the Maturity Date and (ii) the date
of payment of the Default Amount (as defined in Article III)
pursuant to Section 1.6(a) or Article
III, each in respect of the
remaining outstanding principal amount of this Note to convert all
or any part of the outstanding and unpaid principal, interest,
penalties, and all other amounts under this Note into fully paid
and non-assessable shares of Common Stock, as such Common Stock
exists on the Issue Date, or any shares of capital stock or other
securities of the Borrower into which such Common Stock shall
hereafter be changed or reclassified at the Conversion Price (as
defined below) determined as provided herein (a "Conversion");
provided, however, that in no event shall the Holder be entitled to
convert any portion of this Note in excess of that portion of this
Note upon conversion of which the sum of (1) the number of shares
of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Notes
or the unexercised or unconverted portion of any other security of
the Borrower subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the conversion of the
portion of this Note with respect to which the determination of
this proviso is being made, would result in beneficial ownership by
the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock (the "Beneficial Ownership Limitations").
For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Regulations 13D-G thereunder, except as
otherwise provided in clause (1) of such proviso. The number of
shares of Common Stock to be issued upon each conversion of this
Note shall be determined by dividing the Conversion Amount (as
defined below) by the applicable Conversion Price then in effect on
the date specified in the notice of conversion, in the form
attached hereto as Exhibit A (the "Notice of Conversion"),
delivered to the Borrower by the Holder in accordance with Section
1.4 below; provided that the Notice of Conversion is submitted by
facsimile or e-mail (or by other means resulting in, or reasonably
expected to result in, notice) to
the Borrower before 11:59 p.m., New
York, New York time on such conversion date (the "Conversion
Date"). The term "Conversion Amount" means, with respect to any
conversion of this Note, the sum of (1) the principal amount of
this Note to be converted in such conversion plus (2) at the
Holder's option, accrued and unpaid interest, if any, on such
principal amount at the interest rates provided in this Note to the
Conversion Date, provided however, that the Borrower shall have the
right to
pay any or all interest in cash plus
(3) at the Holder's option, Default Interest, if any, on the
amounts referred to in the immediately preceding clauses (1) and/or
(2) plus (4) at the Holder's option, any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof.
1.2
Conversion Price.
Calculation of Conversion Price. Subject to the
adjustments described herein, the conversion price (the "Conversion
Price") shall equal the lesser of: (i) the lowest Trading Price (as
defined below) on the Issue Date, and (ii) the Variable Conversion
Price (as defined herein) (subject to equitable adjustments for
stock splits, stock dividends or rights offerings by the Borrower
relating to the Borrower's securities or the securities Of any
subsidiary of the Borrower, combinations, recapitalization,
reclassifications, extraordinary distributions and similar events).
The "Variable Conversion Price" shall mean 95% multiplied by the
Market Price (as defined herein) (representing a discount rate of
5%), minus $0.04 per share, provided, however, that in no event
shall the Variable Conversion Price be less than $0.15 (the "Floor
Price") (subject to equitable adjustment as set forth above) except
as provided in this Note. If (i) an Event of Default (as defined in
this Note) under this Note occurs and/ or (ii) the Note is not
extinguished in its entirety prior to December 17, 2020, the Floor
Price shall no longer apply. "Market Price" means the average of
the five (5) lowest Trading Prices (as defined below) for the
Common Stock during the period beginning on the Issue Date and
ending on the Maturity Date. "Trading Price" means, for any
security as of any date, the closing bid price on the OTC Pink,
OTCQB or applicable trading market as reported by a Reporting
Service designated by the Holder-or, if the OTC Pink is not the
principal trading market for such security, the closing bid price
of such security on the principal securities exchange or trading
market where such security is listed or traded or, if no closing
bid price of such security is available in any of the foregoing
manners, the average of the closing bid prices of any market makers
for such security that are listed in the "pink sheets" by the
National Quotation Bureau, Inc. To the extent the Conversion Price
of the Borrower's Common Stock closes below the par value per
share, the Borrower will take all steps necessary to solicit
the· consent of the stockholders to reduce the par value to
the lowest value possible under law. The Borrower agrees to honor
all conversions submitted pending this adjustment. If the shares of
the Borrower's Common Stock have not been delivered within three
(3) business days to the Borrower, the Notice of Conversion may be
rescinded. At any time after the Closing Date, if in the case that
the Borrower's Common Stock is not deliverable by DWAC (including
if the Borrower's transfer agent has a policy prohibiting or
limiting delivery of shares of the Borrower's Common Stock
specified in a Notice of Conversion), an additional 10% discount
will apply for all future conversions under all Notes. If in the
case that the Borrower's Common Stock is "chilled" for deposit into
the DTC system and only eligible for clearing deposit, an
additional 15% discount shall apply for all future conversions
under all Notes while the "chill" is in effect. If in the case of
both of the above, an additional cumulative 25% discount shall
apply. Additionally, if the Borrower ceases to
be a reporting company pursuant to the
1934 Act or if the Note cannot be converted into free trading
shares after one hundred eighty-one (181) days from the Issue Date,
an additional 15% discount will be attributed to the Conversion
Price. If
the Trading Price cannot be calculated
for such security on such date in the manner provided above, the
Trading Price shall be the fair market value as mutually determined
by the Borrower and the holders of a majority in interest of the
Notes being converted for which the calculation of the Trading
Price is required in order to determine the Conversion Price of
such Notes. "Trading Day" shall mean any day on which the Common
Stock is tradable for any period on the OTC Pink, OTCQB or on the
principal securities exchange or other securities market on which
the Common Stock is then being traded. The Borrower shall be
responsible for the fees of its transfer agent and all DTC fees
associated with any such issuance. Holder shall be entitled to
deduct $500.00 from the conversion amount in each Notice of
Conversion to cover Holder's deposit fees associated with each
Notice of Conversion.
While this Note is outstanding, each time any
3rd
party has the right to convert monies
owed to that 3rd party
(or receive shares pursuant to a settlement or otherwise),
including but not limited to under Section 3(a)(9) and Section
3(a)(1O), at a discount to market greater than the Conversion Price
in effect at that time (prior to all other applicable adjustments
in the Note), then the H1older, in Holder's sole discretion, may
utilize such greater discount percentage (prior to all applicable
adjustments in this Note) until this Note is no longer outstanding.
While this Note is outstanding, each time any 3rd party has a look
back period greater than the look back period in effect under the
Note at that time, including but not limited to under Section
3(a)(9) and Section 3(a)(10), then the Holder, in Holder's sole
discretion, may utilize such greater number of look back days until
this Note is no longer outstanding. The Borrower shall give written
notice to the Holder within one (1) business day of becoming aware
of any event that could permit the Holder to make any adjustment
described in the two immediately preceding
sentences.
(a)
Conversion Price During Major Announcements. Notwithstanding
anything contained in Section 1.2(a) to the contrary, in the event
the Borrower (i) makes a public announcement that it intends to
consolidate or merge with any other corporation (other than a
merger in which the Borrower is the surviving or continuing
corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Borrower or (ii) any
person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower's Common
Stock (or any other takeover scheme) (the date of the announcement
referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement Date"), then the Conversion Price shall, effective
upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to
the lower of (x) the Conversion Price which would have been
applicable for a Conversion occurring on the Announcement Date and
(y) the Conversion Price that would otherwise be in effect. From
and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in this Section
1.2(a). For purposes hereof, "Adjusted Conversion Price Termination
Date" shall mean, with respect to any proposed transaction or
tender offer (or takeover scheme) for which a public announcement
as contemplated by this Section 1.2(b) has been made, the date upon
which the Borrower (in the case of clause (i) above) or the person,
group or entity (in the case of clause (ii) above) consummates or
publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this
Section 1.2(b) to become operative.
(b) Pro Rata Conversion; Disputes.
In
the event of a dispute as to the
number of shares of Common Stock issuable to the Holder in
connection with a conversion of this Note,
the Borrower shall issue to the Holder the number of shares of
Common Stock not in dispute and resolve such dispute in accordance
with Section 4.13.
(c)
If at any time the Conversion Price as determined hereunder for any
conversion would be less than the par value of the Common Stock,
then the Conversion Price hereunder shall equal such par value for
such conversion and the Conversion Amount for such conversion shall
be increased to include Additional Principal, where "Additional
Principal" means such additional amount to be added to the
Conversion Amount to the extent necessary to cause the number of
conversion shares issuable upon such conversion to equal the same
number of conversion shares as would have been issued had the
Conversion Price not been subject to the minimum price set forth in
this Section 1.2( c).
1.3 Authorized Shares. The Borrower covenants that
during the period the conversion right exists, the Borrower will
reserve from its authorized and unissued Common Stock a sufficient
number of shares, free from preemptive rights, to provide for the
issuance of Common Stock upon the full conversion of this Note
issued pursuant to the Purchase Agreement. The Borrower is required
at all times to have authorized and reserved five times the number
of shares that is actually issuable upon full conversion of the
Note (based on the Conversion Price of the Notes in effect from
time to time without regard to the Floor Price) (the "Reserved
Amount"). The Reserved Amount shall be increased from time to time
in accordance with the Borrower's obligations pursuant to Section
3(d) of the Purchase Agreement. The Borrower represents that upon
issuance, such shares will be du1y and validly issued, fully paid
and nonassessable. In
addition, if the Borrower shall issue
any securities or make any change to its capital structure which
would change the number of shares of Common Stock into which the
Notes shall be convertible at the then current Conversion Price,
the Borrower shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Notes. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue
certificates for the Common Stock issuable upon conversion of this
Note, and (ii)
agrees that its issuance of this Note shall constitute full
authority to its officers and agents who are charged with the duty
of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock in accordance with the
terms and conditions of this Note. Notwithstanding the foregoing,
in no event shall the Reserved Amount be lower than the initial
Reserved Amount, regardless of any prior conversions.
If,
at any time the Borrower does not maintain or replenish the
Reserved Amount within three (3) business days of the request of
the Holder, the principal amount of the Note shall increase by Five
Thousand and No/IOO United States Dollars ($5,000) (under Holder's
and Borrower's expectation that any principal amount increase will
tack back to the Issue Date) per occurrence.
1.4
Method of Conversion.
(a)
Mechanics of Conversion. Subject to Section 1.1, this Note may be
converted by the Holder in whole or in part at any time from time
to time after the Issue Date, by (A)
submitting to the Borrower a Notice of Conversion (by facsimile,
e-mail or other reasonable means of communication dispatched on the
Conversion Date prior to 11:59 p.m., New York, New York time) and
(B) subject to Section 1.4(b), surrendering this Note at the
principal office of the Borrower.
(b) Surrender of Note Upon Conversion.
Notwithstanding anything to the contrary set forth herein, upon
conversion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to
the Borrower unless the entire unpaid principal amount of this Note
is so converted. The Holder and the Borrower shall maintain records
showing the principal amount so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory
to the Holder and the Borrower, so as not to require physical
surrender of this Note upon each such conversion.
In
the event of any dispute or
discrepancy, such records of the Borrower shall,
prima
facie, be controlling and
determinative in the absence of manifest error. Notwithstanding the
foregoing, if any portion of this Note is converted as aforesaid,
the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon
payment by the Holder of any applicable transfer taxes) may
request, representing in the aggregate the remaining unpaid
principal amount of this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of
the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note represented by this Note may be less than the amount stated on
the face hereof.
(c) Payment of Taxes. The Borrower shall not be
required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common
Stock or other securities or property on conversion of this Note in
a name other than that of the Holder (or in street name), and the
Borrower shall not be required to
issue or deliver any such shares or
other securities or property unless and until the person or persons
(other than the Holder or the custodian in whose street name such
shares are to be held for the Holder's account) requesting the
issuance thereof shall have paid to the Borrower the amount of any
such tax or shall have established to the satisfaction of the
Borrower that such tax has been paid.
(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the
Borrower from the Holder of a facsimile transmission or e-mail (or
other reasonable means of communication) of a Notice of Conversion
meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and
delivered to or upon the order of the Holder certificates for the
Common Stock issuable upon such conversion within three (3)
business days after such receipt (the "Deadline") (and, solely in
the case of conversion of the entire unpaid principal amount
hereof, surrender of this Note) in accordance with the terms hereof
and the Purchase Agreement.
(e) Obligation of Borrower to Deliver Common
Stock. Upon receipt by the Borrower of a Notice of Conversion, the
Holder shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, the outstanding principal
amount and the amount of accrued and unpaid interest on this Note
shall be reduced to reflect such conversion, and, unless the
Borrower defaults on its obligations under this Article I, all
rights with respect to the portion of this Note being so converted
shall forthwith terminate except the right to receive the Common
Stock or other securities, cash or other assets, as herein
provided, on such conversion. If the Holder shall have given a
Notice of Conversion as provided herein, the Borrower's obligation
to issue and deliver the certificates for Common' Stock shall be
absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure
or delay in the enforcement of any other obligation of the Borrower
to the holder of record, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder of any obligation to the Borrower, and irrespective of any
other circumstance which might otherwise limit such obligation of
the Borrower to the Holder in connection with such conversion. The
Conversion Date specified in the Notice of Conversion shall be the
Conversion Date so long as the Notice of Conversion is received by
the Borrower before 11:59
p.m., New York, New York time, on such date.
(f) Deliverv of Common Stock by Electronic
Transfer. In
lieu of delivering physical
certificates representing the Common Stock issuable upon
conversion, provided the Borrower is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer
("FAST") program, upon request of the Holder and its compliance
with the provisions contained in Section 1.1 and in this Section
lA, the Borrower shall use its commercially reasonable best efforts
to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the
account of Holder's Prime Broker with DTC through its Deposit
Withdrawal At Custodian ("DWAC") system.
(g) DTC Eligibility Market Loss. If the Borrower fails to maintain its
status as "DTC Eligible" for any reason, or, if the Conversion
Price is less than $0.05 at any time after the Issue Date, the
principal amount of the Note shall increase by Fifteen Thousand and
No/l00 United States Dollars ($15,000) and the Variable Conversion
Price shall be redefined to mean thirty percent (30%) multiplied by
the Market Price, subject to adjustment as provided in this
Note.
(h)
Failure to Deliver Common Stock Prior to Delivery Deadline. Without
in any way limiting the Holder's right to pursue other remedies,
including actual damages and/or equitable relief, the parties agree
that if delivery of the Common Stock issuable upon conversion of
this Note is not delivered by the Deadline (other than a failure
due to the circumstances described in Section 1.3 above, which
failure shall be governed by such Section) the Borrower shall pay
to the Holder $2,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock until
the Borrower issues and delivers a certificate to the Holder or
credit the Holder's balance account with OTC for the number of
shares of Common Stock to which the Holder is entitled upon such
Holder's conversion of any Conversion Amount (under Holder's and
Borrower's expectation that any damages will tack back to the Issue
Date).. Such cash amount shall be paid to Holder by the fifth day
of the month following the month in which it has accrued or, at the
option of the Holder (by written notice to the Borrower by the
first day of the month following the month in which it has
accrued), shall be added to the principal amount of this Note, in
which event interest shall accrue thereon in accordance with the
terms of this Note and such additional principal amount shall be
convertible into Common Stock in accordance with the terms of this
Note. The Borrower agrees that the right to convert is a valuable
right to the Holder. The damages resulting from a failure, attempt
to frustrate, interference with such conversion right are difficult
if not impossible to qualify. Accordingly the parties acknowledge
that the liquidated damages provision contained in this Section
1.4(h) are justified.
(i) Rescindment of a Notice of Conversion. If (i)
the Borrower fails to respond to Holder within one (1) business day
from the Conversion Date confirming the details of Notice of
Conversion-, (ii) the Borrower fails to provide any of the shares
of the Borrower's Common Stock requested in the Notice of
Conversion within three (3) business days from the date of receipt
of the Note of Conversion, (iii) the Holder is unable to procure a
legal opinion required to have the shares of the Borrower's Common
Stock issued unrestricted and/or deposited to sell for any reason
related to the Borrower's standing, (iv) the Holder is unable to
deposit the shares of the Borrower's Common Stock requested in the
Notice of Conversion for any reason related to the Borrower's
standing, (v) at any time after a missed Deadline, at the Holder's
sole discretion, or (vi) if OTC Markets changes the Borrower's
designation to 'Limited Information' (Yield), 'No Information'
(Stop Sign), 'Caveat Emptor' (Skull &
Crossbones), 'OTC', 'Other OTC' or
'Grey Market' (Exclamation Mark Sign) or other trading restriction
on the day of or any day after the Conversion Date, the Holder
maintains the option and sole discretion to rescind the Notice of
Conversion ("Rescindment") with a "Notice of
Rescindment."
1.5
Concerning the Shares. The shares of Common Stock issuable upon
conversion of this Note may not be sold or transferred unless (i)
such shares are sold pursuant to an effective registration
statement under the Act or (ii) the Borrower or its transfer agent
shall have been furnished with an opinion of counsel (which opinion
shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that the shares
to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (iii) such shares are sold or
transferred pursuant to Rule 144 under the Act (or a successor
rule) ("Rule 144") or (iv) such shares are transferred to an
"affiliate" (as defined in Rule 144) of the Borrower who agrees to
sell or otherwise transfer the shares only in accordance with this
Section 1.5 and who is an Accredited Investor (as defined in the
Purchase Agreement). Except as otherwise provided in the Purchase
Agreement (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon
conversion of this Note have been registered under the Act or
otherwise may be sold pursuant to Rule 144 without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, each certificate for shares of Common
Stock issuable upon conversion of this Note that has not been so
included in an effective registration statement or that has not
been sold pursuant to an effective registration statement or an
exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY TIDS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1~33,
AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (1) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
The
legend set forth above shall be removed and the Borrower shall
issue to the Holder a new certificate therefore free of any
transfer legend if (i) the Borrower or its transfer agent shall
have received an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to
the effect that a public sale or transfer of such Common Stock may
be made without registration under the Act, which opinion shall be
reasonably accepted by the Borrower so that the sale or transfer is
effected or (ii) in the case of the Common Stock issuable upon
conversion of this Note, such security is registered for sale by
the Holder under an effective registration statement filed under
the Act or otherwise may be sold pursuant to Rule 144 without any
restriction as to the number of securities as of a particular date
that can then be immediately sold.
1.6
Effect of Certain Events.
(a)
Effect of Merger, Consolidation, Etc. At the option of the Holder,
the sale, conveyance or disposition of all or substantially all of
the assets of the Borrower, the effectuation by the Borrower of a
transaction or series of related transactions in which more than
50% of the voting power of the Borrower is disposed of, or the
consolidation, merger or other business combination of the Borrower
with or into any other Person (as defined below) or Persons when
the Borrower is not the survivor shall either: (i) be deemed to be
an Event of Default (as defined in Article ill) pursuant to which
the Borrower shall be required to pay to the Holder upon the
consummation of and as a condition to such transaction an amount
equal to the Default Amount (as defined in Article ill) or (ii) be
treated pursuant to Section 1.6(b) hereof. "Person" shall mean any
individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation,
Etc. I~
at any time when this Note is issued
and outstanding and prior to conversion of all of the Notes, there
shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a
result of which shares of Common Stock of the Borrower shall be
changed into the same or a different number of shares of another
class or classes of stock or securities of the Borrower or another
entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in
connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to
receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder would have been
entitled to receive in such transaction had this Note been
converted in full immediately prior to such transaction (without
regard to any limitations on conversion set forth herein), and in
any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder of this Note to the end that
the provisions hereof (including, without limitation, provisions
for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be
applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion
hereof. The Borrower shall not affect any transaction described in
this Section 1.6(b) unless (a) it first gives, to the extent
practicable, thirty
(30) days prior written notice (but in
any event at least fifteen (15) days prior written notice) of the
record date of the special meeting of shareholders to approve, or
if there is no such record date, the consummation of, such merger,
consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the
Holder shall be entitled to convert this Note) and (b) the
resulting successor or acquiring entity (if not the Borrower)
assumes by written instrument the obligations of this Section
1.6(b). The above provisions shall similarly apply to successive
consolidations, mergers, sales, transfers or share
exchanges.
(c)
Adjustment Due to Distribution. If the Borrower shall declare or
make any distribution of its assets (or rights to acquire its
assets) to holders of Common Stock as a dividend, stock repurchase,
by way of return of capital or otherwise (including any dividend or
distribution to the Borrower's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the Holder of this Note shall
be entitled, upon any conversion of this Note after the date of
record for determining shareholders entitled to such Distribution,
to receive the amount of such assets which would have been payable
to the Holder with respect to the shares of Common Stock issuable
upon such conversion had such Holder been the holder of such shares
of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes
are issued and outstanding, the Borrower issues or sells, or in
accordance with this Section 1.6( d) hereof is deemed to have
issued or sold, except for shares of Common Stock issued directly
to vendors or suppliers of the Borrower in satisfaction of amounts
owed to such vendors or suppliers (provided, however, that such
vendors or suppliers shall not have an arrangement to transfer,
sell or assign such shares of Common Stock prior to the issuance of
such shares), any shares of Common Stock for no consideration or
for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in
connection therewith) less than the Conversion Price in effect on
the date of such issuance (or deemed issuance) of such shares of
Common Stock (a "Dilutive Issuance"), then immediately upon the
Dilutive Issuance, the Conversion Price will be reduced to the
amount of the consideration per share received by the Borrower in
such Dilutive Issuance.
The Borrower shall be deemed to have issued or
sold shares of Common Stock if the Borrower in any manner issues or
grants any warrants, rights or options (not including employee
stock option plans), whether or not immediately exercisable, to
subscribe for or to purchase Common Stock or other securities
convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as
"Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the
Conversion Price then in effect, then the Conversion Price shall be
equal to
such price per share. For purposes of
the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by
the Borrower as consideration for the issuance or granting of all
such Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the exercise of
all such Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or
exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all
such Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such
Options.
Additionally,
the Borrower shall be deemed to have issued or sold shares of
Common Stock if the Borrower in any manner issues or sells any
Convertible Securities, whether or not immediately convertible
(other than where the same are issuable upon the exercise of
Options), and the price per share for which Common Stock is
issuable upon such conversion or exchange is less than the
Conversion Price then in effect, then the Conversion Price shall be
equal to such price per share. For the purposes of the preceding
sentence, the "price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Borrower as
consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Borrower upon the conversion
or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities. No further adjustment
to the Conversion Price will be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible
Securities.
(e)
Purchase Rights. If, at any time when any Notes are issued and
outstanding, the Borrower issues any convertible securities or
rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of any class
of Common Stock, then the Holder of this Note will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such Holder could have acquired if
such Holder had held the number of shares of Common Stock
acquirable upon complete conversion of this Note (without regard to
any limitations on conversion contained herein) immediately before
the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights or, if no such record is taken, the date as
of which the record holders of Common Stock are to be determined
for the grant, issue or sale of such Purchase Rights.
(f)
Notice of Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion
Price as a result of the events described in this Section 1.6, the
Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate
setting forth such adjustment or readjustment and
showing in
detail the facts upon which such adjustment or readjustment is
based. The Borrower shall, upon the written request at any time of
the Holder, furnish to such Holder a like certificate setting forth
(i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect and (iii) the number of shares of Common Stock
and the amount, if any, of other securities or property which at
the time would be received upon conversion of the
Note.
1.7
[Intentionally Omitted
1.8
Status as Shareholder. Upon submission of a Notice of Conversion by
a Holder, (i) the shares covered thereby (other than the shares, if
any, which cannot be issued because their issuance would exceed
such Holder's allocated portion of the Reserved Amount or Maximum
Share Amount) shall be deemed converted into shares of Common Stock
and (ii) the Holder's rights as a Holder of such converted portion
of this Note shall cease and terminate, excepting only the right to
receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the Borrower to comply with
the terms of this Note. Notwithstanding the foregoing, if a Holder
has not received certificates for all shares of Common Stock prior
to the tenth (10th) business day after the expiration of the
Deadline with respect to a conversion of any portion of this Note
for any reason, then (unless the Holder otherwise elects to retain
its status as a holder of Common Stock by so notifying the
Borrower) the Holder shall regain the rights of a Holder of this
Note with respect to such unconverted portions of this Note and the
Borrower shall, as soon as practicable, return such unconverted
Note to the Holder or, if the Note has not been surrendered, adjust
its records to reflect that such portion of this Note has not been
converted. In all cases, the Holder shall retain all of its rights
and remedies (including, without limitation, (i) the right to
receive Conversion Default Payments pursuant to Section 1.3 to the
extent required thereby for such Conversion Default and any
subsequent Conversion Default and (ii) the right to have the
Conversion Price with respect to subsequent conversions determined
in accordance with Section 1.3) for the Borrower's failure to
convert this Note.
1.9
Prepayment. The Borrower may prepay the amounts outstanding
hereunder pursuant to the following terms and conditions and
subject to the terms of this Note:
(a)
At any time during the period beginning on the Issue Date and
ending on the date which is sixty (60) calendar days following the
Issue Date, the Borrower shall have the right, exercisable on not
less than three (3) Trading Days prior written notice to the Holder
of the Note, to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to the Holder of an amount
in cash equal to 115%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note plus
(y) Default Interest, if any.
(b)
At any time during the period beginning the day which is sixty
one
(61)
calendar days following the Issue Date and ending on the date which
is one hundred twenty (120) calendar days following the Issue Date,
the Borrower shall have the right, exercisable on not less than
three (3) Trading Days prior written notice to the Holder of the
Note, to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to the Holder of an amount
in cash equal to 125%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note plus
(y) Default Interest, if any.
(c)
At any time during the period beginning the day which is one
hundred twenty one (121) calendar days following the Issue Date and
ending on the last Trading Day immediately preceding the Maturity
Date, the Borrower shall have the right, exercisable on not less
than three (3) Trading Days prior written notice to the Holder of
the Note, to prepay the outstanding Note (principal and accrued
interest), in full by making a payment to the Holder of an amount
in cash equal to 150%, multiplied by the sum of: (w) the then
outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note plus
(y) Default Interest, if any
1.10
Any notice of prepayment hereunder (an "Optional Prepayment
Notice") shall be delivered to the Holder of the Note at its
registered addresses by physical mail and shall state: (1) that the
Borrower is requesting to prepay the Note, and (2) the date of the
requested prepayment which shall be not more than three (3) Trading
Days from the date of the Optional Prepayment Notice. On the date
fixed for prepayment (the "Optional Prepayment Date"), the Borrower
shall make payment of the applicable prepayment amount to or upon
the order of the Holder as specified by the Holder in writing to
the Borrower. If the Borrower delivers an Optional Prepayment
Notice, and Borrower fails to pay the applicable prepayment amount
due to the Holder of the Note within two (2) business days
following the Optional Prepayment Date, the Borrower shall forever
forfeit its right to request a prepayment pursuant to Section
1.9.
ARTICLE
II. CERTAIN COVENANTS
2.1
Distributions on Capital Stock. So long as the Borrower shall have
any obligation under this Note, the Borrower shall not without the
Holder's written consent (a) pay, declare or set apart for such
payment, any dividend or other distribution (whether in cash,
property or other securities) on shares of capital stock other than
dividends on shares of Common Stock solely in the form of
additional shares of Common Stock or (b) directly or indirectly or
through any subsidiary make any other payment or distribution in
respect of its capital stock except for distributions pursuant to
any shareholders' rights plan which is approved by a majority of
the Borrower's disinterested directors.
2.2
Restriction on Stock Repurchases. So long as the Borrower shall
have any obligation under this Note, the Borrower shall not without
the Holder's written consent redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other
securities or otherwise) in anyone transaction or series of related
transactions any shares of capital stock of the Borrower or any
warrants, rights or options to purchase or acquire any such
shares.
2.3 Borrowings. Other than Permitted Indebtedness,
so long as the Borrower shall have any obligation under this Note,
the Borrower shall not, without the Holder's written consent,
create, incur, assume guarantee, endorse, contingently agree to
purchase or otherwise become liable upon the obligation of any
person, firm, partnership, joint venture or corporation, except by
the endorsement of negotiable instruments for deposit or
collection, or suffer to exist any liability for borrowed money,
except (a) borrowings in existence or committed on the date hereof
and of which the Borrower has informed Holder in writing prior to
the date hereof, (b) indebtedness to trade creditors financial
institutions or other Holders incurred in the ordinary course of
business or (c) borrowings, the proceeds of which shall
be
used to repay this
Note.
2.4
Sale of Assets. So long as the Borrower shall have any obligation
under this Note, the Borrower shall not, without the Holder's
written consent, sell, lease or otherwise dispose of any
significant portion of its assets outside the ordinary course of
business. Any consent to the disposition of any assets shall be
conditioned on a specified use of the proceeds towards the
repayment ofthis Note.
2.5
Advances and Loans. So long as the Borrower shall have any
obligation under this Note, the Borrower shall not, without the
Holder's written consent, lend money, give credit or make advances
to any person, firm, joint venture or corporation, including,
without limitation, officers, directors, employees, subsidiaries
and affiliates of the Borrower, except loans, credits or advances
(a) in existence or committed on the date hereof and which the
Borrower has informed Holder in writing prior to the date hereof,
(b) made in the ordinary course of business or (c) not in excess
of$100,000.
2.6
Section 3(a)(9) or 3(a)(l0) Transaction. So long as this Note is
outstanding, the Borrower shall not enter into any transaction or
arrangement structured in accordance with, based upon, or related
or pursuant to, in whole or in part, either Section 3(a)(9) of the
Securities Act (a "3(a)(9) Transaction") or Section 3(a)(IO) of the
Securities Act (a "3(a)(lO) Transaction"). In the event that the
Borrower does enter into, or makes any issuance of Common Stock
related to a 3(a)(9) Transaction or a 3(a)(IO) Transaction while
this note is outstanding, a liquidated damages charge of 25% of the
outstanding principal balance of this Note, but not less than
Fifteen Thousand Dollars $15,000, will be assessed and will become
immediately due and payable to the Holder at its election in the
form of cash payment or addition to the balance of this
Note.
2.7
Preservation of Existence, etc. The Borrower shall maintain and
preserve, and cause each of its Subsidiaries to maintain and
preserve, its existence, rights and privileges, and become or
remain, and cause each of its Subsidiaries (other than dormant
Subsidiaries that have no or minimum assets) to become or remain,
duly qualified and in good standing in each jurisdiction in which
the character of the properties owned or leased by it or in which
the transaction of its business makes such qualification
necessary.
2.8
Non-circumvention. The Borrower hereby covenants and agrees that
the Borrower will not, by amendment of its Certificate or Articles
of Incorporation or Bylaws, or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement,
dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Note, and will at all times in good faith
carry out all the provisions of this Note and take all action as
may be required to protect the rights of the Holder.
3.1
Failure to Pay Principal or Interest. The Borrower fails to pay the
principal hereof or interest thereon when due on this Note, whether
at maturity, upon acceleration or otherwise.
ARTICLE IIl.
EVENTS OF DEFAULT
If
any of the following events of default (each, an "Event of
Default") shall occur:
3.2 Conversion and the Shares. The Borrower (i)
fails to issue shares of Common Stock to the Holder (or announces
or threatens in writing that it will not honor its obligation to do
so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Note, (ii) fails to
transfer or cause its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for shares
of Common Stock issued to the Holder upon conversion of or
otherwise pursuant to this Note as and when required by this Note,
(iii) directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or
issuing) (electronically or in certificated form) any certificate
for shares of Common Stock to be issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when
required by this Note, (iv) fails to remove (or directs its
transfer agent not to remove or impairs, delays, and/or hinders its
transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any shares of Common Stock issued to the Holder
upon conversion of or otherwise pursuant to this Note as and when
required by this Note (or makes any written announcement, statement
or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to
honor its obligations shall not be rescinded in writing) for three
(3) business days after the Holder shall have delivered a Notice of
Conversion, (v) fails to remain current in its obligations to its
transfer agent, (vi) causes a conversion of this Note is delayed,
hindered or frustrated due to a balance owed by the Borrower to its
transfer agent, (vii) fails to repay Holder, within forty eight
(48) hours of a demand from the Holder, any amount of funds
advanced by Holder to Borrower's transfer ~gent
in order to process a conversion,
(viii) fails to reserve sufficient amount of shares of common stock
to satisfy the Reserved Amount at all times, (ix) fails to provide
a Rule 144 opinion letter from the Borrower's legal counsel to the
Holder, covering the Holder's resale into the public market of the
respective conversion shares under this Note, within two (2)
business days of the Holder's submission of a Notice of Conversion
to the Borrower (provided that the Holder must request the opinion
from the Borrower at the time that Holder submits the respective
Notice of Conversion and the date of the respective Notice of
Conversion must be on or after the date which follows the date that
the shares may be sold pursuant to Rule 144), and/or (x) an
exemption under Rule 144 is unavailable for the Holder's deposit
into Holder's brokerage account and resale into the public market
of any of the conversion shares under this Note at any time after
the date which is six (6) months after the date that the Holder
funded the Purchase Price under this Note.
3.3
Failure to Deliver Transaction Expense Amount. The Borrower fails
to deliver the Transaction Expense Amount (as defined in the
Purchase Agreement) to the Holder within three (3) business days of
the date such amount is due.
3.4
Breach of Covenants. The Borrower breaches any material covenant or
other material term or condition contained in this Note and any
collateral documents including but not limited to the Purchase
Agreement and such breach continues for a period often (10) days
after written notice thereof to the Borrower from the
Holder.
3.5
Breach of Representations and Warranties. Any representation or
warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection
herewith (including, without limitation, the Purchase Agreement),
shall be false or misleading in any material respect when made and
the breach of which has (or with the passage of time will have) a
material adverse effect on the rights ofthe Holder with respect to
this Note or the Purchase Agreement.
3.6
Receiver or Trustee. The Borrower or any subsidiary of the Borrower
shall make an assignment for the benefit of creditors or commence
proceedings for its dissolution, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee
shall otherwise be appointed for the Borrower or for a substantial
part of its property or business without its consent and shall not
be discharged within sixty (60) days after such
appointment.
3.7
Judgments. Any money judgment, writ or similar process shall be
entered or filed against the Borrower or any subsidiary of the
Borrower or any of its property or other assets for more than
$50,000, and shall remain unvacated, unbonded or unstated for a
period of twenty (20) days unless otherwise consented to by the
Holder, which consent will not be unreasonably
withheld.
3.8
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings, voluntary or involuntary, for
relief under any bankruptcy law or any law for the relief of
debtors shall be instituted by or against the Borrower or any
subsidiary of the Borrower, or the Borrower admits in writing its
inability to pay its debts generally as they mature, or have filed
against it an involuntary petition for bankruptcy relief, all under
federal or state laws as applicable or the Borrower admits in
writing its inability to pay its debts generally as they mature, or
have filed against it an involuntary petition for bankruptcy
relief, all under international, federal or state laws as
applicable.
3.9
Delisting of Common Stock. The Borrower shall fail to maintain the
listing of the Common Stock on at least one of the OTC Pink, OTCQB,
Nasdaq National Market, Nasdaq Small Cap Market, New York Stock
Exchange, NYSE MKT, or an equivalent replacement
exchange
3.10
Failure to Comply with the Exchange Act. The Borrower shall fail to
comply with the reporting requirements of the Exchange Act
(including but not limited to becoming delinquent in its filings);
and/or the Borrower shall cease to be subject to the reporting
requirements of the Exchange Act.
3.11
Liquidation. Any dissolution, liquidation, or winding up of
Borrower or any substantial portion of its business.
3.12 Cessation of Operations. Any cessation of
operations by Borrower or Borrower admits it is otherwise generally
unable to
pay its debts as such debts become
due, provided, however, that any disclosure of the Borrower's
ability to continue as a "going concern" shall not be an admission
that the Borrower cannot pay its debts as they become
due.
3.13
Maintenance of Assets. The failure by Borrower to maintain any
material intellectual property rights, personal, real property or
other assets which are necessary to conduct its business (whether
now or in the future), or any disposition or conveyance of any
material asset of the Borrower.
3.14
Financial Statement Restatement. The restatement of any financial
statements filed by the Borrower with the SEC for any date or
period from two years prior to the Issue Date of this Note and
until this Note is no longer outstanding, if the result of such
restatement would, by comparison to the undrestated financial
statement, have constituted a material adverse effect on the rights
of the Holder with respect to this Note or the Purchase
Agreement.
3.15
Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the
Holder.
3.16 Replacement of Transfer Agent.
In
the event that the Borrower proposes
to replace its transfer agent, the Borrower fails to provide,
prior to
the effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to
the provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower
and the Borrower.
3.17
Cessation of Trading. Any cessation of trading of the Common Stock
on at least one of the OTC Pink, OTCQB, Nasdaq National Market,
Nasdaq Small Cap Market, New York Stock Exchange, NYSE MKT, or an
equivalent replacement exchange, and such cessation of trading
shall continue for a period of five consecutive (5) Trading
Days.
3.18
Cross-Default. Notwithstanding anything to the contrary contained
in this Note or the other related or companion documents, a breach
or default by the Borrower of any covenant or other term or
condition contained in any of the Other Agreements (as defined
herein), after the passage of all applicable notice and cure or
grace periods, shall, at the option of the Holder, be considered a
default under this Note and the Other Agreements, in which event
the Holder shall be entitled (but in no event required) to apply
all rights and remedies of the Holder under the terms of this Note
and the Other Agreements by reason of a default under said Other
Agreement or hereunder. "Other Agreements" means, collectively, all
agreements and instruments between, among or by: (l) the Borrower,
and, or for the benefit of, (2) the Holder (and any affiliate of
the Holder) or any other third party, including, without
limitation, promissory notes; provided, however, the term "Other
Agreements" shall not include the agreements and instruments
defined as the Documents. Each of the loan transactions will be
cross-defaulted with each other loan transaction and with all other
existing and future debt of Borrower to the Holder. 3.19 Bid Price.
The Borrower shall lose the ''bid'' price for its Common Stock
($0.000 I on the "Ask" with zero market makers on the "Bid" per
Level 2) and/or a market (including the OTC Pink, OTCQB or an
equivalent replacement exchange).
3.20
OTC Markets Designation. OTC Markets changes the Borrower's
designation to 'No Information' (Stop Sign), 'Caveat Emptor' (Skull
and Crossbones), or 'OTC', 'Other OTC' or 'Grey Market'
(Exclamation Mark Sign).
3.21
Inside Information. Any attempt by the Borrower or its officers,
directors, and/or affiliates to transmit, convey, disclose, or any
actual transmittal, conveyance, or disclosure by the Borrower or
its officers, directors, and/or affiliates of, material non-public
information concerning the Borrower, to the Holder or its
successors and assigns, which is not immediately cured by
Borrower's filing of a Form 8-K pursuant to Resignation FD on that
same date.
3.22
Unavailability of Rule 144. If, at any time on or after the date
which is six
(6)
months after the Issue Date, the Holder is unable to (i) obtain a
standard "144 legal opinion letter" from an attorney reasonably
acceptable to the Holder, the Holder's brokerage firm (and
respective clearing firm), and the Borrower's transfer agent in
order to facilitate the Holder's conversion of any portion of the
Note into free trading shares of the Borrower's Common Stock
pursuant to Rule 144, and (ii) thereupon deposit such shares into
the Holder's brokerage account.
3.23
Delisting or Suspension of Trading of Common Stock. If, at any time
on or after the Issue Date, the Borrower's Common Stock (i) is
suspended from trading, (ii) halted from trading, andlor (iii)
fails to be quoted or listed (as applicable) on any level of the
OTC Markets, any tier of the NASDAQ Stock Market, the New York
Stock Exchange, or the NYSE American.
3.24
Failure to Register. The Borrower fails to (I) file a registration
statement covering the Holder's resale at prevailing market prices
(and not fixed prices) of all of the Common Stock (the
"Registration Statement") underlying the Note and Common Stock
underlying the Warrant (as defined in the Purchase Agreement) (the
"Warrant") within ninety (90)
calendar days following the Issue Date, (ii) cause the Registration
Statement to become effective within one hundred fifty (150)
calendar days following the Issue Date, (iii) cause the
Registration Statement to remain effective until the Note is
extingnished in full and the Warrant is exercised in full, (iv)
comply with the registration rights agreement between the Borrower
and Holder entered into in connection with the issuance of this
Note, and/or (v) immediately amend the Registration Statement or
file a new Registration Statement (and cause such Registration
Statement to become immediately effective) if there are no longer
sufficient shares registered under the initial Registration
Statement for the Holder's resale at prevailing market prices (and
not fixed prices) of all of the Common Stock underlying the Note
and Common Stock underlying the Warrant.
UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT
SPECIFIED IN SECTION 3.2, 3.22, AND/OR 3.24 OF THIS NOTE, THE NOTE
SHALL BECOME IMMEDIATELY AND AUTOMATICALLY DUE AND PAYABLE WITHOUT
DEMAND, PRESENTMENT, OR NOTICE AND THE BORROWER SHALL PAY TO THE
HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER,
AN
AMOUNT EQUAL TO: (Y)
THE DEFAULT SUM (AS DEFINED HEREIN)
MULTIPLIED BY (Z)
TWO (2). Upon the occurrence of any
Event of Default specified in Sections 3.1, 3.3, 3.4, 3.5, 3.6,
3.7, 3.8, 3.9, 3.10,
3.11,3.12,3.13,3.14,3.15,3.16.3.17,3.18,3.19,3.20, 3.21, and/or
3.23, the Note shall become immediately and automatically due and
payable without demand, presentment or notice and the Borrower
shall pay to the Holder, in full satisfaction of its obligations
hereunder, an amount equal to (i) 130% times the sum of (w) the
then outstanding principal amount of this Note plus (x) accrued and
unpaid interest on the unpaid principal amount of this Note to the
date of payment (the "Mandatory Prepayment Date") plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and/or
(x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof (the then outstanding principal amount of
this Note to the date of payment plus the amounts referred to in
clauses (x), (y) and (z) shall collectively be known as the
"Default Sum") or (ii) at the option of the Holder, the "parity
value" of the Default Sum to be prepaid, where parity value means
(a) the highest number of shares of Common Stock issuable upon
conversion of or otherwise pursuant to such Default Sum in
accordance with Article I, treating the Trading Day immediately
preceding the Mandatory Prepayment Date as the "Conversion Date"
for purposes of determining the lowest applicable Conversion Price,
unless the Default Event arises as a result of a breach in respect
of a specific Conversion Date in which case such Conversion Date
shall be the Conversion Date), multiplied by (b) the highest
Trading Price for the Common Stock during the period beginning on
the date of first occurrence of the Event of Default and ending one
day prior to the Mandatory Prepayment Date (the "Default Amount")
and all other amounts payable hereunder shall immediately become
due and payable, all without demand, presentment or notice, all of
which hereby are expressly waived, together with all costs,
including, without limitation, legal fees and expenses, of
collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity. Further, if a
breach of Sections 3.9, 3.10 and/or 3.19 occurs or is continuing
after the six (6) month anniversary of this Note, then the
principal amount of the Note shall increase by Fifteen Thousand and
No/IOO United States Dollars ($15,000) and the Holder shall be
entitled to use the lowest Trading Price during the delinquency
period as a base price for the conversion with the Variable
Conversion Price shall be redefined to mean forty percent (40%)
multiplied by the Market Price, subject to adjustment as provided
in this Note. For example, of the lowest Trading Price during the
delinquency period is $0.50 per share and the conversion discount
is 50%, then the Holder may elect to convert future conversions at
$0.25 per share. If this Note is not paid at Maturity Date, then
the outstanding principal due under this Note shall increase by
Fifteen Thousand and No/IOO United States Dollars
($15,000).
The
Holder shall have the right at any time after an Event of Default
occurs under this Note to require the Borrower, to immediately
issue, in lieu of the Default Amount and/or Default Sum, the number
of shares of Common Stock of the Borrower equal to the Default
Amount and/or Default Sum divided by the Conversion Price then in
effect, pursuant to the terms of this Note (including but not
limited to any beneficial ownership limitations contained herein).
This requirement by the Borrower shall automatically apply upon the
occurrence of an Event of Default without the need for any party to
give any notice or take any other action.
IN
WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the date first above
written.
GUIDED
THERAPEUTICS, INC.
By:
/s/ Gene
Cartwright
Name:
Gene Cartwright
Title:
Chief Executive Officer
NEITHER THIS SECURITY NOR THE SECURITIES AS TO
WHICH THIS SECURITY MAY BE EXERCISED HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAYBE PLEDGED
IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
Warrant Shares: 7,500,000 Date of Issuance:
December 17,
2019 ("Issuance Date")
This COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for value received (in
connection with the issuance
of the $700,000.00 senior secured
convertible promissory note to the Holder (as defined
below) of even date) (the "Note"), Auctus Fund, LLC, a
Delaware limited liability company (including any
permitted and
registered assigns, the "Holder"), is
entitled, upon the terms and subject to the
limitations on exercise and the
conditions hereinafter set forth, at
any time on or after the
date of issuance
hereof, to purchase from Guided Therapeutics, Inc., a Delaware
corporation (the
"Company"), up to
7,500,000 shares
of Common Stock
(as defined below) (the "Warrant Shares")
(whereby such number may be adjusted from time to time pursuant
to the terms and conditions of this Warrant) at the
Exercise Price per share then in
effect. This Warrant
is issued by the Company as of
the date hereof in connection with that certain securities purchase agreement
dated December 17,2019,
by and among the
Company and the Holder
(the "Purchase Agreement").
Capitalized terms used in this Warrant
shall
have the meanings
set forth in the Purchase Agreement
unless otherwise defined in the body of this
Warrant or in Section 12 below. For purposes of this Warrant, the
term "Exercise Price" shall mean $0.20, subject to adjustment as provided herein
(including but not limited to cashless exercise), and the term "Exercise Period" shall mean the period
commencing
on the Issuance Date
and ending on 5:00 p.m. eastern standard
time on the
five-year anniversary thereof.
I. EXERCISE OF WARRANT.
(a) Mechanics of Exercise. Subject to the terms and
conditions hereof, the rights represented by this
Warrant may be exercised in whole or in part at any time or times during the
Exercise
Period by delivery of
a written notice, in the form attached hereto as Exhibit A (the
"Exercise Notice"),
of the
Holder's election to exercise this Warrant. The Holder
shall
not be required to
deliver the original Warrant in order to effect an
exercise hereunder. Partial exercises of this Warrant resulting in
purchases of a portion of the total number of
Warrant Shares available hereunder shall have the effect of
lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to
the applicable number of Warrant Shares
purchased.
On or before
the second Trading Day (the "Warrant Share Delivery Date") following
the date on which the Holder
sent
the Exercise Notice
to the
Company or the
Company's transfer agent, and upon receipt
by the Company of payment to the
Company
of
an
amount equal to
the applicable Exercise Price multiplied by the
number of Warrant Shares as to which all or a portion of this
Warrant is being exercised (the "Aggregate Exercise
Price" and together
with the Exercise Notice,
the
"Exercise
Delivery Documents")
in cash or by wire transfer of immediately available funds (or by
cashless exercise, in which case there shall be no Aggregate Exercise Price
provided), the Company shall (or direct its transfer agent to)
issue and dispatch by overnight
courier to the address as specified in the
Exercise Notice, a certificate, registered in the
Company's
share register in
the name of the Holder or its designee, for the number
of shares of Common Stock to which the Holder is entitled pursuant
to such exercise (or deliver such shares of Common Stock
in electronic format if requested by the Holder). Upon delivery of
the Exercise Delivery Documents, the Holder shall be deemed
for all corporate purposes to have
become the holder of record of the Warrant Shares with
respect to which this Warrant has been
exercised, irrespective of the date of delivery of the
certificates evidencing such Warrant
Shares. If this
Warrant is submitted
in connection with any exercise and the number of
Warrant Shares represented by
this Warrant submitted
for exercise is greater than
the number of Warrant Shares being acquired upon an
exercise, then the Company shall
as soon as practicable and in no event later than three Business Days after any
exercise and at its own expense, issue a new Warrant (in accordance
with Section
6) representing the right to purchase
the number of Warrant Shares purchasable immediately prior
to such exercise under this
Warrant, less the number of Warrant Shares with respect to which
this
Warrant is exercised.
If the Company
fails to cause
its transfer agent to transmit to the
Holder the respective shares of Common Stock by the respective
Warrant Share Delivery Date, then the Holder will have the right to
rescind such
exercise in Holder's sole
discretion, and such failure
shall be deemed
an event of default under the Note.
If the Market Price of one share of
Common Stock is greater
than the Exercise Price, then, unless there
is an effective
non-stale registration statement of
the Company covering the Holder's immediate resale of the
Warrant Shares at prevailing market prices (and not fixed
prices) without any limitation, the
Holder may elect to
receive Warrant
Shares pursuant to a cashless
exercise, in lieu
of a cash exercise, equal to
the value of this Warrant determined in the manner described below
(or of any portion thereof remaining unexercised) by surrender of
this Warrant and a Notice of Exercise, in which event the
Company shall issue to
Holder a number of Common Stock computed using the following formula:
X=Y
(A-B)
A
Where
X= the
number of Shares to be
issued to Holder.
Y=
the number ofW3ITant Shares that the Holder elects
to purchase under this Warrant (at
the date of such calculation).
A=
the Market Price (at the date
of such calculation).
B=
Exercise Price
(as adjusted to the date of such calculation).
(b) No Fractional
Shares. No fractional shares
shall be issued upon the exercise of this Warrant as a consequence of
any adjustment pursuant hereto.
All Warrant Shares (including
fractions) issuable upon
exercise of this
Warrant may be aggregated for
purposes of determining whether the exercise would result
in the issuance of any
fractional share. If,
after aggregation, the exercise would
result in the
issuance of a fractional share, the Company shall,
in lieu of issuance of any fractional share,
pay the Holder
otherwise entitled to such fraction a sum in cash
equal to the
product resulting from
multiplying the
then-current fair market value of a
Warrant Share by such fraction.
(c) Holder's Exercise
Limitations. The
Company shall
not effect any exercise of this Warrant, and a Holder shall
not have the right to exercise any
portion of this Warrant, to the extent that after giving
effect to issuance
of Warrant Shares upon
exercise as set
forth on the applicable Notice of Exercise, the Holder (together with the
Holder's Affiliates, and any other
persons acting as a group together with the Holder or any of the
Holder's Affiliates), would beneficially own in excess of
the Beneficial Ownership Limitation, as defined below.
For purposes of the foregoing sentence, the number of shares
of Common Stock beneficially owned by the Holder and its
Affiliates shall include
the number of shares
of Common Stock issuable upon exercise of this
Warrant with respect
to which such
determination is being made,
but shall exclude
the number of shares of Common Stock which would be issuable upon
(i) exercise of
the remaining, non-exercised portion of this
Warrant beneficially owned by the
Holder or any of
its Affiliates and (ii) exercise or conversion
of the unexercised or
non-converted portion
of any other
securities of the
Company (including without limitation any other Common Stock Equivalents) subject to a
limitation on conversion or exercise analogous
to the limitation contained
herein beneficially owned by the Holder or any
of its Affiliates. Except as set
forth in the preceding
sentence, for purposes of this
paragraph (d),
beneficial ownership shall be
calculated in accordance with Section 13(
d) of the
Exchange Act, it being acknowledged by the Holder
that the Company is not
representing to the Holder
that such calculation is in
compliance with Section 13{d) of the
Exchange Act and the Holder is solely
responsible for any
schedules required
to be filed in accordance therewith. To
the extent that the limitation
contained in this paragraph applies, the
determination of whether
this Warrant is
exercisable (in
relation to
other securities
owned by the Holder together
with any affiliates) and of which portion of this
Warrant is exercisable
shall be in the
sole discretion
of the Holder, and
the submission of a
Notice of Exercise shall
be deemed to be the
Holder's determination of
whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each
case subject
to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm
the accuracy of such
determination.
For purposes of this
paragraph, in determining the number of outstanding shares
of Common Stock, a Holder may rely on the
number of outstanding shares of Common Stock as reflected
in (A) the Company's most
recent periodic
or annual report filed with the Commission, as the case may
be, (8)
a more recent public announcement by the Company or
(C) a more recent written notice by the
Company or its transfer agent setting forth the number of
shares of Common Stock
outstanding.
Upon the
request of a
Holder, the Company shall within two Trading
Days confirm to the Holder the
number of shares of Common Stock then outstanding. In any case,
the number of outstanding
shares of Common Stock shall be determined after giving effect to the
conversion or exercise of
securities of the Company, including this Warrant, by the Holder or
its affiliates since
the date as of which such number of outstanding
shares of Common
Stock was reported. The
"Beneficial Ownership Limitation" shall be 4.99% of
the number of shares of the Common Stock
outstanding immediately
after giving effect to the
issuance of shares of Common Stock
issuable upon exercise
of this Warrant.
The limitations
contained in this paragraph shall apply
to a successor Holder of
this Warrant.
2. ADJUSTMENTS. The Exercise Price and the number of
Warrant Shares shall
be adjusted from
time to time as
follows:
(a) Distribution
of Assets.
If the
Company shall
declare
or
make
any
dividend or
other
distribution of its
assets (or rights to acquire its assets) to
holders of shares
of Common Stock,
by way of return of capital or
otherwise (including
without limitation any distribution of cash, stock or
other securities, property or
options by way of a
dividend, spin
off, reclassification, corporate rearrangement or other similar transaction) (a "Distribution"), at any time after the issuance of
this Warrant, then, in each
such case:
(i) any Exercise Price in effect immediately prior to the
close of business on the record date fixed for the
determination of holders of shares of Common Stock entitled
to
receive the
Distribution shall be reduced,
effective
as
of
the close
of business on
such record
date, to
a price
determined by multiplying such Exercise Price by a fraction (i) the numerator of which shall be the Closing Sale Price of the shares
of
Common
Stock
on
the
Trading
Day
immediately preceding such record date
minus
the value
of
the
Distribution (as determined in good faith by the Company's Board of Directors)
applicable to
one share of Common Stock, and (ii)
the
denominator
of
which shall be the
Closing Sale Price of the shares of Common Stock on the
Trading Day immediately preceding such
record date;and
(ii) the number of Warrant
Shares shall be increased to
a number of shares equal to
the number
of shares of Common
Stock obtainable immediately prior to
the close of business on the record date fixed for the
determination of holders of shares of Common
Stock
entitled
to receive the
Distribution multiplied by the reciprocal of the fraction
set forth
in the
immediately
preceding
clause (i);provided, however, that in the event that
the Distribution is of shares of common stock of a company (other
than the Company)
whose common stock is traded on
a national securities exchange or a national
automated
quotation
system ("Other
Shares of
Common
Stock"), then the Holder may elect to
receive a warrant to purchase
Other
Shares of
Common Stock
in lieu of an
increase
in the number
of
Warrant Shares, the
terms of which shall be identical to those of this Warrant, except that such warrant shall be exercisable into the number of
shares
of Other Shares of
Common Stock that would have been payable to the Holder pursuant to
the Distribution had the Holder exercised this Warrant immediately
prior to such record date and with an aggregate exercise price equal to the product of the
amount by which the exercise price of this Warrant was decreased with
respect
to the Distribution
pursuant to the terms of the immediately
preceding clause (i) and the number of Warrant Shares calculated in
accordance with the first part of this clause
(ii).
(b) Anti-Dilution
Adjustments to
Exercise Price. If the Company
or any Subsidiary
thereof, as applicable, at any time while
this Warrant is outstanding,
shall sell or grant any option
to purchase, or sell or
grant any right to reprice, or
otherwise dispose of or
issue (or announce
any offer, sale, grant or any option to
purchase or other disposition) any Common Stock or securities entitling any person
or entity to
acquire shares of Common Stock (upon conversion, exercise or otherwise) during the period beginning on the
Issuance Date and ending
on December 17,2021 (provided,
however, that
December 17,2021 shall automatically be replaced with December 17,2024 if an
Event of Default (as defined in
the Note) occurs under the Note), at an
effective price per share less
than the then Exercise
Price (such lower
price, the "Base Share Price" and such issuances collectively, a "Dilutive Issuance") (if the holder
of the Common Stock or
Common Stock
Equivalents so issued shall
at any time, whether by operation of
purchase price adjustments, elimination of an
applicable floor price for any reason in the future
(including but not limited to the
passage of time or satisfaction of certain condition(s» , reset
provisions, floating conversion,
exercise or exchange prices or
otherwise, or due to
warrants, options or
rights per share which
are issued in connection with
such issuance, be entitled or
potentially entitled to receive shares of Common Stock
at an effective
price per share which is less
than the Exercise Price
at any time while
such Common Stock or
Common Stock Equivalents
are in existence, such issuance shall be
deemed to have occurred
for less than the Exercise Price
on such date of the Dilutive Issuance (regardless of whether the Common Stock or
Common Stock Equivalents
are (i) subsequently
redeemed or retired by the
Company after the date of the Dilutive Issuance or (ii) actually converted or exercised at
such Base Share
Price), then the Exercise Price shall be reduced at the option of the Holder and only
reduced to equal the Base Share Price, and the
number of Warrant Shares issuable hereunder shall be
increased such
that the aggregate Exercise Price payable hereunder, after taking
into account the decrease in the Exercise Price, shall be equal to the
aggregate Exercise Price prior to such
adjustment (for the
avoidance of doubt, the aggregate
Exercise Price prior to such
adjustment is calculated as
follows: the total number of Warrant Shares issuable upon
exercise of this
Warrant immediately prior to
such adjustment (without regard
to the Beneficial Ownership Limitation) multiplied by the Exercise Price
in effect immediately prior to such adjustment)_ By way of
example, if E is the
total number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such
adjustment (without
regard to the Beneficial Ownership
Limitation),
F is the Exercise Price
in effect immediately prior to such adjustment, and G is the
Base Share Price,
the adjustment to the number
of Warrant Shares can be expressed in the following formula: Total
number of Warrant Shares after such Dilutive
Issuance =
the number obtained from dividing [E x
F] by G.
Such adjustment
shall be made whenever such Common Stock
or Common Stock Equivalents are issued, regardless of whether the Common Stock
or Common Stock Equivalents are (i) subsequently redeemed
or retired by the
Company after the date of the
Dilutive Issuance or (ii) actually converted or exercised at such Base Share Price by the bolder
thereof (for the avoidance of doubt, the Holder may
utilize the Base Share Price even if
the Company did
not actually issue shares of its
common stock at the Base Share Price under the respective
Common stock Equivalents)_ The Company shall notify the Holder in writing, no
later than the
Trading Day following the issuance of
any Common Stock or Common Stock Equivalents subject to this Section 2(b), indicating therein the
applicable issuance price, or
applicable reset price, exchange price, conversion price and other
pricing terms (such notice the "Dilutive Issuance Notice"). For
purposes of clarification, whether or
not the Company provides a Dilutive Issuance Notice
pursuant to this Section 2(b), upon the Occurrence of any
Dilutive Issuance,
after the date of
such Dilutive Issuance the Holder is
entitled to receive a number of
Warrant Shares based
upon the Base Share
Price regardless
of whether the Holder accurately refers to the Base Share
Price in the Notice of Exercise.
(c) Subdivision or Combination of
Common Stock. If the Company at
any time on or after
the Issuance Date subdivides (by
any stock split, stock dividend, recapitalization or otherwise) one
or more classes of its outstanding shares
of Common Stock
into a greater number of shares, the Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Warrant Shares will be
proportionately increased. If
the Company at any time on or after the Issuance Date
combines (by combination, reverse stock split or
otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in
effect immediately prior to
such combination
will be proportionately increased and the number of Warrant Shares
will be proportionately decreased.
Any adjustment under this Section 2(
c) shall become effective at the close of business on the date the
subdivision or combination becomes effective. Each such adjustment
of the Exercise
Price shall be calculated
to the nearest one-hundredth of a cent. Such adjustment shall be
made successively whenever any event covered by
this Section 2(c) shall occur.
3. FUNDAMENTAL TRANSACTIONS. If, at any
time while this
Warrant is outstanding, (i) the Company effects any merger of the
Company with or into another entity
and the Company
is not the surviving entity (such
surviving entity,
the "Successor
Entity"),
(ii) the Company effects any
sale of all or
substantially all of its
assets in one or
a series of related
transactions, (iii)
any tender offer or exchange offer (whether by the Company
or by another
individual or entity,
and approved by the
Company) is completed pursuant to which holders of Common Stock
are permitted
to tender or exchange
their shares of Common
Stock for other securities, cash or property and the holders
of at least
50% of the Common Stock accept such offer, or (iv) the
Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property (other
than as a result of a subdivision or
combination of shares of Common Stock) (in any such
case, a "Fundamental Transaction"), then, upon any subsequent exercise of this Warrant, the Holder shall
have the right to receive the number of shares of
Common Stock of the Successor Entity or of the Company and any
additional consideration (the
"Alternate Consideration") receivable
upon or as a result
of such
reorganization, reclassification,
merger, consolidation or disposition of assets
by a holder of the number of shares
of Common Stock for which this
Warrant is exercisable immediately prior to such event
(disregarding any limitation on exercise contained herein
solely for
the purpose of such determination). For
purposes of any such exercise, the
determination of the Exercise Price
shall be appropriately adjusted to apply to such
Alternate Consideration
based on the amount of Alternate Consideration issuable in
respect of one share
of Common Stock in such Fundamental
Transaction, and the Company shall apportion the
Exercise
Price among the
Alternate Consideration in a reasonable
manner
reflecting the
relative value of any different components of the Alternate
Consideration. [holders of Common Stock are
given any choice as to the
securities, cash or property to be received in
a Fundamental Transaction, then the Holder shall
be given the
same choice as to the Alternate Consideration
it receives upon any exercise of
this Warrant following
such Fundamental Transaction.
To the extent necessary to effectuate the
foregoing provisions, any
Successor Entity in
such
Fundamental Transaction shall
issue to the Holder a new warrant consistent with
the foregoing provisions and
evidencing the
Holder's right to exercise such
warrant into
Alternate
Consideration.
4. NON-CIRCUMVENTION. The
Company covenants and agrees that it will
not, by amendment of its certificate of incorporation, bylaws or
through any reorganization, transfer of assets, consolidation,
merger, scheme of arrangement,
dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, and will
at
all times in
good faith carry out all the provisions of this Warrant and take all action
as may be required to protect the rights of the Holder.
Without limiting the generality of the foregoing, the
Company (i) shall not increase the par value of any
shares of Common Stock receivable upon the exercise of this Warrant
above the Exercise 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
non-assessable shares of Common Stock upon
the
exercise of this
Warrant, and (iii) shall, for so long as this Warrant is
outstanding, have authorized
and reserved, free from preemptive rights, ten times the number
of shares of Common Stock that is actually
issuable upon full exercise of
the Warrant (based 00 the Exercise Price in
effect from time
to time, and without regard to any
limitations on exercise).
5. WARRANT HOLDER NOT DEEMED A
STOCKHOLDER.
Except as otherwise specifically provided herein, this
Warrant, io and of itself,
shall not entitle the Holder to
any voting rights or other rights as a stockholder of
the Company. In addition, nothing contained
in this Warrant shall
be construed as
imposing any
liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the
Company, whether such
liabilities
are asserted by the Company or by
creditors of
the Company.
6.
REISSUANCE.
(a) Lost, Stolen
or Mutilated Warrant. If
this Warrant is lost,
stolen, mutilated or destroyed, the
Company will, on such
terms as to indemnity
or otherwise as it may reasonably impose (which
shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as this Warrant so lost, stolen,
mutilated or destroyed.
(b) Issuance
of New
Warrants. Whenever the
Company is
required to issue
a new Warrant pursuant to the
terms of this
Warrant, such new Warrant shall be of
like tenor with this Warrant, and
shall have an
issuance date, as indicated on the
face of such new
Warrant which is the same as
the Issuance Date.
1. TRANSFER.
This Warrant shall be binding upon the
Company and its successors and
assigns, and shall inure to be the benefit of
the Holder and its successors and assigns. Notwithstanding anything
to the contrary herein, the rights, interests or obligations of
the Company hereunder may not be assigned, by operation of law
or otherwise, in whole or in part, by the Company without the
prior signed written
consent of the Holder, which consent may be withheld at
the sole discretion of the Holder (any such assignment
or transfer shall
be null and void if the
Company does not
obtain the prior signed written consent of the Holder). This
Warrant or any of the severable rights and obligations
inuring to the
benefit of or to be performed by Holder hereunder may be assigned
by Holder to
a third party, in whole
or in part, without the need to obtain the
Company's consent thereto.
2. NOTICES.
Whenever notice is required to be given under
this Warrant, unless otherwise provided herein, such notice
shall be given in accordance with the
notice provisions contained in the Purchase Agreement. The Company
shall provide
the Holder with prompt written
notice (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail,
the calculation
of such adjustment and (ii) at least
20 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 shares
of Common
Stock, (B) with respect to any grants,
issuances or sales of any stock or other securities directly or
indirectly convertible into or exercisable or exchangeable
for shares of
Common Stock or other property, pro
rata to the holders of shares of
Common Stock or (C) 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.
3. AMENDMENT
AND WAIVER. The terms of this Warrant may
be amended or waived (either generally
or in a particular
instance and either retroactively or
prospectively) only with the written consent of the
Company and the Holder.
4. GOVERNING LAW
AND VENUE. This Warrant shall be governed by and
construed in accordance with the laws of the State of Nevada
without regard to principles of conflicts of laws. Any action
brought by either party
against the other concerning the
transactions contemplated by this Warrant shall be
brought only in the state courts
located in the Commonwealth of
Massachusetts or in the
federal courts located in the
Commonwealth of
Massachusetts. The parties
to this Warrant hereby irrevocably waive any objection to
jurisdiction and
venue of any action instituted hereunder and
shall not assert any defense based on lack of jurisdiction or venue or
based upon a forum
non conveniens.
THE BORROWER HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION
CONTEMPLATED
HEREBY.
The prevailing party shall be
entitled to recover from the other party its
reasonable attorney's
fees and costs. In
the event that any provision
of this Warrant or any other agreement delivered in connection herewith is invalid or
unenforceable under any
applicable statute or
rule of law,
then such provision shall
be deemed inoperative to the extent
that it may conflict
therewith and shall be
deemed modified to conform with
such statute or rule of
law. Any
such provision which may
prove invalid or
unenforceable under any law
shall not affect
the validity
or enforceability of any other
provision of any agreement.
Each party hereby
irrevocably waives personal
service
of process and
consents
to process
being served in any suit, action or proceeding in
connection
with this Agreement or
any other Transaction Document by mailing a copy
thereof via registered or
certified mail or overnight
delivery (with
evidence of delivery) to such
party at the address in effect for notices to it under
this Agreement and
agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to
limit in any way
any right to serve
process in any
other manner permitted by
law.
II. ACCEPTANCE. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to
all of the terms and conditions
contained herein.
12. CERTAIN DEFINITIONS. For purposes of this
Warrant, the
following terms shall have the
following meanings:
(a) ''Nasdaq'' means www.Nasdaq.com.
(b) "Closing Sale Price" means,
for any security as of any
date, (i) the last
closing trade
price for such
security on the Principal
Market, as reported by Nasdaq, or,
if the Principal Market begins to
operate on an extended hours basis and does not designate the closing
trade price,
then the last trade price of such
security prior to 4:00
p.m., New York time, as
reported by Nasdaq, or (ii) if
the foregoing does not
apply, the last trade price of such security in
the over-the-counter market for
such security as
reported by Nasdaq, or
(iii) if no last trade price
is reported for such
security by Nasdaq, the average
of the bid and
ask prices of any market makers for such security as reported by the OTC
Markets. If the Closing Sale Price cannot be calculated for
a security on a
particular date on any of the
foregoing bases,
the Closing Sale
Price of such
security on such date shall be the
fair market value as mutually
determined hy the Company
and the Holder. All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or
other similar transaction
during the applicable
calculation period.
(c) "Common Stock" means the Company's common stock, and any
other class of securities into which such securities may hereafter be reclassified or
changed.
(d) "Common Stock Equivalents" means any
securities of the Company that would
entitle the holder thereof
to acquire at any time Common Stock,
including without limitation
any debt, preferred stock, rights,
options, warrants or
other instrument that is
at any time convertible into or
exercisable or
exchangeable for, or otherwise
entitles the holder thereof to
receive, Common Stock.
(e) "Dilutive Issuance" is any issuance of Common Stock or Common Stock
Equivalents described in Section 2(b)
above;provided, however,
that a Dilutive
Issuance shall not include any
Exempt Issuance.
(t)
"Exempt Issuance" means
the issuance of (i) shares of Common Stock or
options to employees,
officers, or directors
of the Company
pursuant to any stock or option plan duly adopted by a
majority of the
non-employee members of the
Board of Directors of the Company or a
majority of the
members of a committee of non-employee directors established for such purpose,
and (ii) shares
of Common Stock issued pursuant
to real property leasing arrangement
from a bank approved
by the Board
of Directors of the Company; (iii)
securities upon the conversion
of the Note, and (iv)
securities issued
pursuant to acquisitions or
strategic transactions approved
by a majority
of the disinterested directors
of the Company.
(g) "Principal Market" means the primary
national securities exchange on which the Common
Stock is then traded.
(h) "Market
Price" means
the highest traded price
of the Common Stock on the
Trading Day immediately
prior to the date of the
respective Exercise Notice.
(i) "Trading Day" means (i) any
day on which the Common Stock is listed or
quoted and traded on its
Principal Market, (ii)
if the Common Stock is not then listed or
quoted and traded on any national securities exchange,
then a day on which trading occurs on any over-the-counter markets,
or (iii) if trading does not occur on the over-the-counter markets,
any Business
Day.
* *
* * * * *
IN WITNESS WHEREOF, the Company
has caused this Warrant to be
duly executed as
of the Issuance Date set forth
above.
GUIDED THERAPEUTICS, INC.
Name: Gene Cartwright
Title:
Chief Executive Officer
EXHIBIT
A
EXERCISE NOTICE
(To be executed by the registered holder to
exercise this Common
Stock Purchase
Warrant)
THE UNDERSIGNED holder hereby
exercises the right to purchase of the shares of
Common Stock ("Warrant Shares") of Guided Therapeutics, loc.,
a Delaware corporation (the "Company"), evidenced by
the attached copy of
the Common Stock
Purchase Warrant (the "Warrant"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in
the Warrant.
1. Form
of Exercise Price. The Holder intends that payment of the
Exercise Price shall be
made as (check
one):
a. o
a cash exercise with respect to _
_ _ _
_ ___ Warrant
Shares; or
b. o
by cashless exercise
pursuant to the Warrant.
1. Payment
of Exercise Price. If cash exercise is selected above, the holder shall pay the
applicable Aggregate Exercise Price in the sum
of$ to the Company in
accordance with the terms of the
Warrant.
2. Delivery
of Warrant Shares. The Company
shall deliver
to the holder ____
_ _ _
_ Warrant Shares in accordance with the terms of
the Warrant.
Date:
(Print Name of
Registered Holder)
By: Name:
Title: ____ _________ _ _ _ EXHIBITB
ASSIGNMENT OF WARRANT
(To be
signed only upon
authorized transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto the
right to purchase shares
of common stock of
Guided Therapeutics,
Inc., to which the within
Common Stock
Purchase Warrant relates and appoints , as attorney-in-fact, to
transfer said
right on the hooks of
Guided Therapeutics, Inc. with full power of substitution and re-substitution in the premises. By
accepting such transfer,
the transferee has agreed to
be bound in all
respects by the terms and conditions
of the within Warrant.
Dated:
(Signature) *
(Name)
(Address)
(Social Security or Tax Identification No.)
● The signature on this
Assignment of
Warrant must correspond to the name as written upon the face of
the Common Stock Purchase Warrant
in
every
particular without
alteration or enlargement or any change whatsoever.
When signing
on behalf of a corporation, partnership, trust
or other
entity, please
indicate your position(s) and title(s)
with such
entity.
NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
|
Warrant
Shares:
|
Initial Exercise
Date:
|
THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, ____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on ____________, 20__ (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to ______
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section
1. Definitions. Capitalized terms
used and not otherwise defined herein shall have the meanings set
forth in that certain Securities Purchase Agreement (the
“Purchase
Agreement”), dated December 30, 2019, among the
Company and the purchasers signatory thereto.
Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). The Holder shall deliver the aggregate
Exercise Price for the shares specified in the applicable Notice of
Exercise by wire transfer or cashier’s check drawn on a
United States bank unless the cashless exercise procedure specified
in Section 2(c) below is specified in the applicable Notice of
Exercise. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise be required. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has
purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date on which the final Notice of Exercise
is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within two (2) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.20 (the
“Exercise
Price”).
c) Cashless Exercise. If at any
time after the six-month anniversary of the Closing Date, there is
no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) = the
VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
As used herein,
“VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets Group, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price
per share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the
Company.
d) Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
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) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
4. Transfer
of Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
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 Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GUIDED
THERAPEUTICS, INC.
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By:
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/s/
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Name
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Title
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NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, INC.
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take
the form of (check applicable box):
[ ] in
lawful money of the United States; or
[ ] if
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
ASSIGNMENT
FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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Name:
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______________________________________
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(Please
Print)
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Address:
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______________________________________
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Dated:
_______________ __, ______
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Holder’s Signature:
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Holder’s Address: ______________________________________
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NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
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Warrant
Shares:
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Initial Exercise
Date:
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THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, ____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on _____________ (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to ____
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated December 30, 2019, among the Company and the purchasers
signatory thereto.
Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). The Holder shall deliver the aggregate
Exercise Price for the shares specified in the applicable Notice of
Exercise by wire transfer or cashier’s check drawn on a
United States bank unless the cashless exercise procedure specified
in Section 2(c) below is specified in the applicable Notice of
Exercise. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise be required. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has
purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date on which the final Notice of Exercise
is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within two (2) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.25 (the
“Exercise
Price”).
c) Cashless Exercise. If at any
time after the six-month anniversary of the Closing Date, there is
no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) = the
VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
As used
herein, “VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the
Common Stock is not then listed or quoted for trading on OTCQB or
OTCQX and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets Group, Inc. (or
a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
d)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
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) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
4. Transfer
of Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
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 Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GUIDED
THERAPEUTICS, INC.
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By:
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/s/
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Name
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Title
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NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, INC.
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take
the form of (check applicable box):
[ ] in
lawful money of the United States; or
[ ] if
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
ASSIGNMENT
FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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______________________________________
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(Please
Print)
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Address:
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______________________________________
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Phone
Number:
Email
Address:
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______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s Signature:
______________________________________
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Holder’s Address: ______________________________________
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Exhibit
4.31
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Original Issue
Date: December __, 2019
$_______________
12%
SENIOR SECURED DEBENTURE
DUE
__________ ___, 20221
THIS
12% SENIOR SECURED DEBENTURE is one of a series of duly authorized
and validly issued 12% Senior Secured Debentures of Guided
Therapeutics, Inc., a Delaware corporation, (the
“Company”),
having its principal place of business at 5835 Peachtree Corners East, Suite D,
Norcross, Georgia 30092, designated as its 12% Senior Secured
Debenture due ______________ __, 2022 (this debenture, the
“Debenture” and,
collectively with the other debentures of such series, the
“Debentures”).
FOR
VALUE RECEIVED, the Company promises to pay to
________________________ or its registered assigns (the
“Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of
$_______________ on December __, 2020 (the “Maturity Date”) or such
earlier date as this Debenture is required or permitted to be
repaid as provided hereunder, and to pay interest to the Holder on
the then outstanding principal amount of this Debenture in
accordance with the provisions hereof. This Debenture is subject to
the following additional provisions:
Section 1. Definitions. For the purposes
hereof, in addition to the terms defined elsewhere in this
Debenture, (a) capitalized terms not otherwise defined herein shall
have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings:
“Bankruptcy Event” means
any of the following events: (a) the Company or any Significant
Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction relating to the Company or any Significant
Subsidiary thereof, (b) there is commenced against the Company or
any Significant Subsidiary thereof any such case or proceeding that
is not dismissed within 60 days after commencement, (c) the Company
or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such
case or proceeding is entered, (d) the Company or any Significant
Subsidiary thereof suffers any appointment of any custodian or the
like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such
appointment, (e) the Company or any Significant Subsidiary thereof
makes a general assignment for the benefit of creditors, (f) the
Company or any Significant Subsidiary thereof calls a meeting of
its creditors with a view to arranging a composition, adjustment or
restructuring of its debts, (g) the Company or any Significant
Subsidiary thereof admits in writing that it is generally unable to
pay its debts as they become due, (h) the Company or any
Significant Subsidiary thereof, by any act or failure to act,
expressly indicates its consent to, approval of or acquiescence in
any of the foregoing or takes any corporate or other action for the
purpose of effecting any of the foregoing.
“Business Day” means any
day except any Saturday, any Sunday, any day which is a federal
legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by
law or other governmental action to close.
1 3 years
from issue date.
“Change of Control
Transaction” means the occurrence after the date
hereof of any of (a) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 50%
of the voting securities of the Company, (b) the Company merges
into or consolidates with any other Person, or any Person merges
into or consolidates with the Company and, after giving effect to
such transaction, the stockholders of the Company immediately prior
to such transaction own less than 50% of the aggregate voting power
of the Company or the successor entity of such transaction, (c) the
Company sells or transfers all or substantially all of its assets
to another Person and the stockholders of the Company immediately
prior to such transaction own less than 50% of the aggregate voting
power of the acquiring entity immediately after the transaction,
(d) a replacement at one time or within a three year period of more
than one-half of the members of the Board of Directors which is not
approved by a majority of those individuals who are members of the
Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on
any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members
on the date hereof), or (e) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.
“Event of
Default” shall have the
meaning set forth in Section 8(a).
“Interest Conversion Rate”
means the average of the 20 VWAPs
immediately prior to the Interest Payment Date.
“Interest Conversion
Shares” shall have the meaning set forth in Section
2(a).
“Interest Payment Date”
shall have the meaning set forth in Section 2(a).
“Interest Share Amount”
shall have the meaning set forth in Section 2(a).
“Late Fees” shall have the
meaning set forth in Section 2(c).
“Mandatory Default Amount”
means the sum of the outstanding principal amount of this
Debenture, plus all accrued and unpaid interest
hereon.
“New York Courts” shall
have the meaning set forth in Section 9(d).
“Original Issue Date”
means the date of the first issuance of the Debentures, regardless
of any transfers of any Debenture and regardless of the number of
instruments which may be issued to evidence such
Debentures.
“Purchase Agreement” means
the Securities Purchase Agreement, dated as of July __, 2019 among
the Company and the original Holders, as amended, modified or
supplemented from time to time in accordance with its
terms.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Trading Day” means a day
on which the principal Trading Market is open for
trading.
“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE
American, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange, OTCQB or
OTCQX (or any successors to any of the foregoing).
“VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the
Common Stock is not then listed or quoted for trading on OTCQB or
OTCQX and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets, Inc. (or a
similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
Section 2.
Interest.
a) Payment of Interest. The
Company shall pay interest to the Holder on the aggregate
unconverted and then outstanding principal amount of this Debenture
at the rate of 10% per annum, payable quarterly on January 15,
April 15, July 15 and October 15, beginning on the first such date
after the Original Issue Date, on each Conversion Date (as to that
principal amount then being converted) and on each Optional
Redemption Date (as to that principal amount then being redeemed)
(each such date, an “Interest Payment Date”)
(if any Interest Payment Date is not a Business Day, then the
applicable payment shall be due on the next succeeding Business
Day), in cash or, at the Company’s option, in duly
authorized, validly issued, fully paid and non-assessable shares of
Common Stock at the Interest Conversion Rate (the dollar amount to
be paid in shares, the “Interest Share Amount”
and such shares, the “Interest Conversion
Shares”)) or a combination thereof; provided, however, that payment in shares
of Common Stock may only occur if (i) the Company shall have given
the Holder notice in accordance with the notice requirements set
forth below, and (ii) as to such Interest Payment Date, prior to
such Interest Notice Period (but not more than five (5) Trading
Days prior to the commencement of such Interest Notice
Period).
b) Interest Calculations. Interest
shall be calculated on the basis of a 360-day year, consisting of
twelve 30 calendar day periods, and shall accrue daily commencing
on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest, and other
amounts which may become due hereunder, has been made. Interest
hereunder will be paid to the Person in whose name this Debenture
is registered on the records of the Company regarding registration
and transfers of this Debenture (the “Debenture
Register”).
c) Late
Fee. All overdue accrued and unpaid interest to be paid
hereunder shall entail a late fee at an interest rate equal to the
lesser of 12% per annum or the maximum rate permitted by applicable
law (the “Late
Fees”) which shall accrue daily from the date such
interest is due hereunder through and including the date of actual
payment in full.
d) Prepayment. The Company may
prepay any portion of the principal amount of this Debenture
without the prior written consent of the Holder.
Section
3. Registration
of Transfers and Exchanges.
a) Different Denominations. This
Debenture is exchangeable for an equal aggregate principal amount
of Debentures of different authorized denominations, as requested
by the Holder surrendering the same. No service charge will be
payable for such registration of transfer or exchange.
b) Investment Representations.
This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance
with the Purchase Agreement and applicable federal and state
securities laws and regulations.
c) Reliance on Debenture Register.
Prior to due presentment for transfer to the Company of this
Debenture, the Company and any agent of the Company may treat the
Person in whose name this Debenture is duly registered on the
Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or
not this Debenture is overdue, and neither the Company nor any such
agent shall be affected by notice to the contrary.
Section
4. [INTENTIONALLY
DELETED].
Section 5.
[INTENTIONALLY
DELETED].
Section
7. Negative Covenants. As long as
any portion of this Debenture remains outstanding, unless the
holders of at least 50.1% in principal amount of the then
outstanding Debentures shall have otherwise given prior written
consent, the Company shall not, and shall not permit any of the
Subsidiaries to, directly or indirectly:
a) amend
its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that
materially and adversely affects any rights of the
Holder;
b) repay, repurchase
or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its
Common Stock or Common Stock Equivalents other than (i) as
permitted or required under the Transaction Documents and (ii)
repurchases of Common Stock or Common Stock Equivalents of
departing officers and directors of the Company, provided that such
repurchases shall not exceed an aggregate of $100,000 for all
officers and directors during the term of this
Debenture;
c) repay,
repurchase or offer to repay, repurchase or otherwise acquire any
Indebtedness, other than the Debentures if on a pro-rata basis,
other than regularly scheduled principal and interest payments as
such terms are in effect as of the Original Issue Date, provided
that such payments shall not be permitted if, at such time, or
after giving effect to such payment, any Event of Default exist or
occur;
d) pay
cash dividends or distributions on any equity securities of the
Company; or
e) enter
into any agreement with respect to any of the foregoing.
Section 8.
Events of
Default.
a) “Event of Default” means,
wherever used herein, any of the following events (whatever the
reason for such event and whether such event shall be voluntary or
involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental
body):
i. any
default in the payment of (A) the principal amount of any Debenture
or (B) interest and other amounts owing to a Holder on any
Debenture, as and when the same shall become due and payable which
default, solely in the case of an interest payment or other default
under clause (B) above, is not cured within 10 Business
Days;
ii. the
Company shall fail to observe or perform any other covenant or
agreement contained in the Debentures or in any Transaction
Document, which failure is not cured, if possible to cure, within
the earlier to occur of
(A) 10 Business Days after notice of such failure
sent by the Holder or by any other Holder to the Company and (B) 15 Business Days after
the Company has become or should have become aware of such
failure;
iii. a
default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall
occur under (A) any of the Transaction Documents or (B) any other
material agreement, lease, document or instrument to which the
Company or any Subsidiary is obligated (and not covered by clause
(vi) below);
iv. any representation or warranty made in this Debenture, any
other Transaction Documents, any written statement pursuant hereto
or thereto or any other report, financial statement or certificate
made or delivered to the Holder or any other Holder shall be untrue
or incorrect in any material respect as of the date when made or
deemed made;
v. the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of
Regulation S-X) shall be subject to a Bankruptcy
Event;
vi. the Company or any
Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement that (a) involves an obligation
greater than $250,000, whether such indebtedness now exists or
shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
vii. any
monetary judgment, writ or similar final process shall be entered
or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $250,000, and
such judgment, writ or similar final process shall remain
unvacated, unbonded or unstayed for a period of 90 calendar
days.
b) Remedies Upon Event of Default.
If any Event of Default occurs, the outstanding principal amount of
this Debenture, plus accrued but unpaid interest, and other amounts
owing in respect thereof through the date of acceleration, shall
become, at the Holder’s election, immediately due and payable
in cash at the Mandatory Default Amount. Commencing 5 days after
the occurrence of any Event of Default that results in the eventual
acceleration of this Debenture, the interest rate on this Debenture
shall accrue at an interest rate equal to the lesser of 15% per
annum or the maximum rate permitted under applicable law. Upon the
payment in full of the Mandatory Default Amount, the Holder shall
promptly surrender this Debenture to or as directed by the Company.
In connection with such acceleration described herein, the Holder
need not provide, and the Company hereby waives, any presentment,
demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies
available to it under applicable law. Such acceleration may be
rescinded and annulled by Holder at any time prior to payment
hereunder and the Holder shall have all rights as a holder of the
Debenture until such time, if any, as the Holder receives full
payment pursuant to this Section 8(b). No such rescission or
annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
Section 9.
Miscellaneous.
a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holder
hereunder shall be in writing and delivered personally, by
facsimile, by email attachment, or sent by a nationally recognized
overnight courier service, addressed to the Company, at the address
set forth above, or such other facsimile number, email address, or
address as the Company may specify for such purposes by notice to
the Holder delivered in accordance with this Section 9(a).
Any and all notices or other communications or deliveries to be
provided by the Company hereunder shall be in writing and delivered
personally, by facsimile, by email attachment, or sent by a
nationally recognized overnight courier service addressed to each
Holder at the facsimile number, email address or address of the
Holder appearing on the books of the Company, or if no such
facsimile number or email attachment or address appears on the
books of the Company, at the principal place of business of such
Holder, as set forth in the Purchase Agreement. Any notice or
other communication or deliveries hereunder shall be deemed given
and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number or email attachment to the email address set forth
on the signature pages attached hereto prior to 5:30 p.m. (New York
City time) on any date, (ii) the next Business Day after the date
of transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment to the email
address set forth on the signature pages attached hereto on a day
that is not a Business Day or later than 5:30 p.m. (New York City
time) on any Business Day, (iii) the second Business Day following
the date of mailing, if sent by U.S. nationally recognized
overnight courier service or (iv) upon actual receipt by the party
to whom such notice is required to be given.
b) Absolute Obligation. Except as
expressly provided herein, no provision of this Debenture shall
alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and accrued interest,
as applicable, on this Debenture at the time, place, and rate, and
in the coin or currency, herein prescribed. This Debenture is a
direct debt obligation of the Company. This Debenture ranks
pari passu with all other Debentures
now or hereafter issued under the terms set forth
herein.
c) Lost or Mutilated Debenture. If
this Debenture shall be mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for
and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed Debenture, a new
Debenture for the principal amount of this Debenture so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence of
such loss, theft or destruction of such Debenture, and of the
ownership hereof, reasonably satisfactory to the
Company.
d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Debenture shall be governed by and construed
and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflict of laws
thereof. Each party agrees that all legal proceedings concerning
the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York,
Borough of Manhattan (the “New York Courts”). Each
party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any
dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), 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 such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party
hereby irrevocably waives personal service of process and consents
to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Debenture and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by applicable law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Debenture or the transactions
contemplated hereby. If any party shall commence an action or
proceeding to enforce any provisions of this Debenture, then the
prevailing party in such action or proceeding shall be reimbursed
by the other party for its attorneys’ fees and other costs
and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.
e) Waiver. Any waiver by the
Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the
Holder to insist upon strict adherence to any term of this
Debenture on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Debenture on any
other occasion. Any waiver by the Company or the Holder must be in
writing.
f) Severability. If any provision
of this Debenture is invalid, illegal or unenforceable, the balance
of this Debenture shall remain in effect, and if any provision is
inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it
shall be found that any interest or other amount deemed interest
due hereunder violates the applicable law governing usury, the
applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum rate of interest permitted under
applicable law. The Company covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law or other law which would
prohibit or forgive the Company from paying all or any portion of
the principal of or interest on this Debenture as contemplated
herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this
Debenture, and the Company (to the extent it may lawfully do so)
hereby expressly waives all benefits or advantage of any such law,
and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the
Holder, but will suffer and permit the execution of every such as
though no such law has been enacted.
g) Next Business Day. Whenever any
payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next
succeeding Business Day.
h) Headings. The headings
contained herein are for convenience only, do not constitute a part
of this Debenture and shall not be deemed to limit or affect any of
the provisions hereof.
i) Secured Obligation. The
obligations of the Company under this Debenture are secured by all
assets of the Company and each Subsidiary pursuant to the Security
Agreement, dated as of July __, 2019 between the Company, the
Subsidiaries of the Company and the Secured Parties (as defined
therein).
Section
10. Disclosure.
Upon receipt or delivery by the Company of any notice in accordance
with the terms of this Debenture, unless the Company has in good
faith determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Company
or its Subsidiaries, the Company shall within two (2) Business Days
after such receipt or delivery publicly disclose such material,
nonpublic 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 its
Subsidiaries, the Company so shall indicate to the 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,
nonpublic information relating to the Company or its
Subsidiaries.
*********************
(Signature Pages Follow)
IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above
indicated.
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GUIDED
THERAPEUTICS, INC.
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By:__________________________________________
Name:
Title:
Facsimile No. for
delivery of Notices: _______________
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NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
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Warrant
Shares:
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Initial Exercise
Date:
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THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, ____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on _____________ (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to ____
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated December 30, 2019, among the Company and the purchasers
signatory thereto.
Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). The Holder shall deliver the aggregate
Exercise Price for the shares specified in the applicable Notice of
Exercise by wire transfer or cashier’s check drawn on a
United States bank unless the cashless exercise procedure specified
in Section 2(c) below is specified in the applicable Notice of
Exercise. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise be required. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has
purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date on which the final Notice of Exercise
is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within two (2) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.75 (the
“Exercise
Price”).
c) Cashless Exercise. If at any
time after the six-month anniversary of the Closing Date, there is
no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) = the
VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
As used herein,
“VWAP”
means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg L.P. (based on a
Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New
York City time)), (b) if OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for
such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Stock is not then listed or quoted
for trading on OTCQB or OTCQX and if prices for the Common Stock
are then reported in the “Pink Sheets” published by OTC
Markets Group, Inc. (or a similar organization or agency succeeding
to its functions of reporting prices), the most recent bid price
per share of the Common Stock so reported, or (d) in all other
cases, the fair market value of a share of Common Stock as
determined by an independent appraiser selected in good faith by
the Purchasers of a majority in interest of the Securities then
outstanding and reasonably acceptable to the Company, the fees and
expenses of which shall be paid by the
Company.
d)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
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) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
4. Transfer
of Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
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 Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GUIDED
THERAPEUTICS, INC.
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By:
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/s/
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Name
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Title
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NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, INC.
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take
the form of (check applicable box):
[ ] in
lawful money of the United States; or
[ ] if
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
ASSIGNMENT
FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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Name:
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Address:
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______________________________________
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Phone
Number:
Email
Address:
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______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s Signature: ______________________________________
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Holder’s Address: ______________________________________
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NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES
COMMON
STOCK PURCHASE WARRANT
GUIDED
THERAPEUTICS, INC.
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Warrant
Shares:
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Initial Exercise
Date:
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THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that,
for value received, ____________ or its assigns (the
“Holder”) is entitled,
upon the terms and subject to the limitations on exercise and the
conditions hereinafter set forth, at any time on or after the date
hereof (the “Initial
Exercise Date”) and on or prior to 5:00 p.m. (New York
City time) on _____________ (the “Termination Date”) but
not thereafter, to subscribe for and purchase from Guided
Therapeutics, Inc., a Delaware corporation (the “Company”), up to ____
shares (as subject to adjustment hereunder, the “Warrant Shares”) of
Common Stock. The purchase price of one share of Common Stock under
this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).
Section
1. Definitions.
Capitalized terms used and not otherwise defined herein shall have
the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”),
dated December 30, 2019, among the Company and the purchasers
signatory thereto.
Section
2. Exercise.
a) Exercise
of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the
Termination Date by delivery to the Company of a duly executed
facsimile copy or PDF copy submitted by e-mail (or e-mail
attachment) of the Notice of Exercise in the form annexed hereto
(the “Notice of
Exercise”). The Holder shall deliver the aggregate
Exercise Price for the shares specified in the applicable Notice of
Exercise by wire transfer or cashier’s check drawn on a
United States bank unless the cashless exercise procedure specified
in Section 2(c) below is specified in the applicable Notice of
Exercise. No
ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of
any Notice of Exercise be required. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has
purchased all of the Warrant Shares available hereunder and the
Warrant has been exercised in full, in which case, the Holder shall
surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date on which the final Notice of Exercise
is delivered to the Company. Partial exercises of this Warrant
resulting in purchases of a portion of the total number of Warrant
Shares available hereunder shall have the effect of lowering the
outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased.
The Holder and the Company shall maintain records showing the
number of Warrant Shares purchased and the date of such purchases.
The Company shall deliver any objection to any Notice of Exercise
within two (2) Business Days of receipt of such notice.
The Holder and any assignee, by
acceptance of this Warrant, acknowledge and agree that, by reason
of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant
Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
b) Exercise Price. The exercise
price per share of the Common Stock under this Warrant shall be
$0.75 (the
“Exercise
Price”).
c) Cashless Exercise. If at any
time after the six-month anniversary of the Closing Date, there is
no effective Registration Statement registering, or no current
prospectus available for, the resale of the Warrant Shares by the
Holder, then this Warrant may also be exercised, in whole or in
part, at such time by means of a “cashless exercise” in
which the Holder shall be entitled to receive a number of Warrant
Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:
(A) = the
VWAP on the Trading Day immediately preceding the date on which
Holder elects to exercise this Warrant by means of a
“cashless exercise,” as set forth in the applicable
Notice of Exercise;
(B) =
the Exercise Price of this Warrant, as adjusted hereunder;
and
(X) =
the number of Warrant Shares that would be issuable upon exercise
of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a
cashless exercise.
As used
herein, “VWAP” means, for any
date, the price determined by the first of the following clauses
that applies: (a) if the Common Stock is then listed or quoted on a
Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the
Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30
a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if OTCQB or OTCQX is not a Trading Market, the volume
weighted average price of the Common Stock for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the
Common Stock is not then listed or quoted for trading on OTCQB or
OTCQX and if prices for the Common Stock are then reported in the
“Pink Sheets” published by OTC Markets Group, Inc. (or
a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an
independent appraiser selected in good faith by the Purchasers of a
majority in interest of the Securities then outstanding and
reasonably acceptable to the Company, the fees and expenses of
which shall be paid by the Company.
d)
Mechanics of
Exercise.
i. Delivery of Warrant Shares Upon
Exercise. The Company shall deliver to the Holder the number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the address specified by the Holder in the Notice of
Exercise. Upon delivery of the Notice of Exercise, the Holder shall
be deemed for all corporate purposes to have become the holder of
record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of the Warrant
Shares, provided that payment of the aggregate Exercise Price is
received.
ii. Delivery of New Warrants Upon
Exercise. If this Warrant shall have been exercised in part,
the Company shall, at the request of a Holder and upon surrender of
this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights
of the Holder to purchase the unpurchased Warrant Shares called for
by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
iii. Rescission
Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section
2(d)(i) by the Warrant Share Delivery Date, then the Holder will
have the right to rescind such exercise.
iv. No Fractional Shares or Scrip.
No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. As to any fraction of
a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay
a cash adjustment in respect of such final fraction in an amount
equal to such fraction multiplied by the Exercise Price or round up
to the next whole share.
v. Charges, Taxes and Expenses.
Issuance of Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes
and expenses shall be paid by the Company, and such Warrant Shares
shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event that
Warrant Shares are to be issued in a name other than the name of
the Holder, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by
the Holder and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto.
vi. Closing of Books. The Company
will not close its stockholder books or records in any manner which
prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
e) Holder’s
Exercise Limitations. The Company shall not effect any
exercise of this Warrant, and a Holder shall not have the right to
exercise any portion of this Warrant, pursuant to Section 2 or
otherwise, to the extent that after giving effect to such issuance
after exercise as set forth on the applicable Notice of Exercise,
the Holder (together with the Holder’s Affiliates, and any
other Persons acting as a group together with the Holder or any of
the Holder’s Affiliates (such Persons, “Attribution Parties”)),
would beneficially own in excess of the Beneficial Ownership
Limitation (as defined below). For purposes of the foregoing
sentence, the number of shares of Common Stock beneficially owned
by the Holder and its Affiliates and Attribution Parties shall
include the number of shares of Common Stock issuable upon exercise
of this Warrant with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which
would be issuable upon (i) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or
conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other
Common Stock Equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for
any schedules required to be filed in accordance therewith. To the
extent that the limitation contained in this Section 2(e) applies,
the determination of whether this Warrant is exercisable (in
relation to other securities owned by the Holder together with any
Affiliates and Attribution Parties) and of which portion of this
Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed
to be the Holder’s determination of whether this Warrant is
exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which
portion of this Warrant is exercisable, in each case subject to the
Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
In addition, a determination as to any group status as contemplated
above shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder.
For purposes of this Section 2(e), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number
of outstanding shares of Common Stock as reflected in (A) the
Company’s most recent periodic or annual report filed with
the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. Upon the written or oral
request of a Holder, the Company shall within one Trading Day
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates or
Attribution Parties since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 4.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation
provisions of this Section 2(e), provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock upon exercise of
this Warrant held by the Holder and the provisions of this Section
2(e) shall continue to apply. Any increase in the Beneficial
Ownership Limitation will not be effective until the 61st day after such
notice is delivered to the Company. The provisions of this
paragraph shall be construed and implemented in a manner otherwise
than in strict conformity with the terms of this Section 2(e) to
correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Beneficial Ownership
Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a
successor holder of this Warrant.
Section
3. Certain
Adjustments.
a) Stock Dividends and Splits. If
the Company, at any time while this Warrant is outstanding: (i)
pays a stock dividend or otherwise makes a distribution or
distributions on shares of its Common Stock or any other equity or
equity equivalent securities payable in shares of Common Stock
(which, for avoidance of doubt, shall not include any shares of
Common Stock issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding shares of Common Stock into a larger
number of shares, (iii) combines (including by way of reverse stock
split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common
Stock any shares of capital stock of the Company, then in each case
the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event
and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the
number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant
to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or re-classification.
b) Fundamental Transaction. If, at
any time while this Warrant is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another
Person, (ii) the Company, directly or indirectly, effects any sale,
lease, license, assignment, transfer, conveyance or other
disposition of all or substantially all of its assets in one or a
series of related transactions, (iii) any, direct or indirect,
purchase offer, tender offer or exchange offer (whether by the
Company or another Person) is completed pursuant to which holders
of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted
by the holders of 50% or more of the outstanding Common Stock, (iv)
the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person or group of Persons whereby such
other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock
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) (each a “Fundamental
Transaction”), then, upon any subsequent exercise of
this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental
Transaction, at the option of the Holder (without regard to any
limitation in Section 2(e) on the exercise of this Warrant), the
number of shares of Common Stock of the successor or acquiring
corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 2(e) on the exercise
of this Warrant). For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common
Stock are given any choice as to the securities, cash or property
to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such
Fundamental Transaction.
c) Calculations. All calculations
under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding treasury shares, if
any) issued and outstanding.
d) Notice to Holder.
i. Adjustment to Exercise Price.
Whenever the Exercise Price is adjusted pursuant to any provision
of this Section 3, the Company shall promptly deliver to the Holder
by facsimile or email a notice setting forth the Exercise Price
after such adjustment and any resulting adjustment to the number of
Warrant Shares and setting forth a brief statement of the facts
requiring such adjustment.
ii. Notice to Allow Exercise by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class
or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property, or (E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs
of the Company, then, in each case, the Company shall cause to be
delivered by facsimile or email to the Holder at its last facsimile
number or email address as it shall appear upon the Warrant
Register of the Company, at least 10 calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. The Holder shall remain entitled to exercise this Warrant
during the period commencing on the date of such notice to the
effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
Section
4. Transfer
of Warrant.
a) Transferability. Subject to
compliance with any applicable securities laws and the conditions
set forth in Section 4(d) hereof and to the provisions of Section
4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights)
are transferable, in whole or in part, upon surrender of this
Warrant at the principal office of the Company or its designated
agent, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee
or assignees, as applicable, and in the denomination or
denominations specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be
cancelled. Notwithstanding anything
herein to the contrary, the Holder shall not be required to
physically surrender this Warrant to the Company unless the Holder
has assigned this Warrant in full, in which case, the Holder shall
surrender this Warrant to the Company within three (3) Trading Days
of the date on which the Holder delivers an assignment form to the
Company assigning this Warrant in full. The Warrant, if properly assigned in
accordance herewith, may be exercised by a new holder for the
purchase of Warrant Shares without having a new Warrant
issued.
b) New Warrants. This Warrant may
be divided or combined with other Warrants upon presentation hereof
at the aforesaid office of the Company, together with a written
notice specifying the names and denominations in which new Warrants
are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which
may be involved in such division or combination, the Company shall
execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with
such notice. All Warrants issued on transfers or exchanges shall be
dated the Initial Exercise Date and shall be identical with this
Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant Register. The Company
shall register this Warrant, upon records to be maintained by the
Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.
d) Transfer
Restrictions. If, at the
time of the surrender of this Warrant
in connection with any transfer of this Warrant, the transfer of
this Warrant shall not be either (i) registered pursuant to an
effective registration
statement under the
Securities Act and under
applicable state securities or blue sky laws or (ii) eligible for
resale without volume or manner-of-sale restrictions or current
public information requirements pursuant to Rule 144, the Company
may require, as a condition of allowing such transfer, that the
Holder or transferee of this Warrant, as the case may be, comply
with the provisions of Section 5.7 of the Purchase
Agreement.
e) Representation by the Holder.
The Holder, by the acceptance hereof, represents and warrants that
it is acquiring this Warrant and, upon any exercise hereof, will
acquire the Warrant Shares issuable upon such exercise, for its own
account and not with a view to or for distributing or reselling
such Warrant Shares or any part thereof in violation of the
Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities
Act.
Section
5. Miscellaneous.
a) No Rights as Stockholder Until
Exercise. This Warrant does not entitle the Holder to any
voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section
2(d)(i), except as expressly set forth in Section 3.
b) Loss, Theft, Destruction or Mutilation
of Warrant. The Company covenants that upon receipt by the
Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss,
theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not
include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in
lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such
right may be exercised on the next succeeding Business
Day.
d) Authorized Shares.
The
Company covenants that, during the period the Warrant is
outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of issuing the necessary
Warrant Shares upon the exercise of the purchase rights under this
Warrant. The Company will take all such reasonable action as may be
necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or
regulation, or of any requirements of the Trading Market upon which
the Common Stock may be listed. The Company covenants that all
Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of
the purchase rights represented by this Warrant and payment for
such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the
issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the
Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger,
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 Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of
all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to
such increase in par value, (ii) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations
under this Warrant.
Before
taking any action which would result in an adjustment in the number
of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from
any public regulatory body or bodies having jurisdiction
thereof.
e) Jurisdiction. All questions
concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.
f) Restrictions. The Holder
acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered and the Holder does not utilize
cashless exercise, will have restrictions upon resale imposed by
state and federal securities laws.
g) Nonwaiver and Expenses. No
course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such
right or otherwise prejudice the Holder’s rights, powers or
remedies. Without limiting any other provision of this Warrant or
the Purchase Agreement, if the Company willfully and knowingly
fails to comply with any provision of this Warrant, which results
in any material damages to the Holder, the Company shall pay to the
Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’
fees, including those of appellate proceedings, incurred by the
Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices. Any notice, request or
other document required or permitted to be given or delivered to
the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation of Liability. No
provision hereof, in the absence of any affirmative action by the
Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall
give rise to any liability of the Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the
Company.
j) Remedies. The Holder, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific
performance of its rights under this Warrant. The Company agrees
that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this
Warrant and hereby agrees to waive and not to assert the defense in
any action for specific performance that a remedy at law would be
adequate.
k) Successors and Assigns. Subject
to applicable securities laws, this Warrant and the rights and
obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company
and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the
Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be
modified or amended or the provisions hereof waived with the
written consent of the Company and the
Holder.
m) Severability. Wherever
possible, each provision of this Warrant shall be interpreted in
such manner as to be effective and valid under applicable law, but
if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provisions or the remaining provisions of this
Warrant.
n) Headings. The headings used in
this Warrant are for the convenience of reference only and shall
not, for any purpose, be deemed a part of this
Warrant.
********************
(Signature Page Follows)
IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized as of the date first above
indicated.
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GUIDED
THERAPEUTICS, INC.
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By:
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/s/
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Name
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Title
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NOTICE
OF EXERCISE
TO:
GUIDED
THERAPEUTICS, INC.
(1) The undersigned
hereby elects to purchase ________ Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full,
together with all applicable transfer taxes, if any.
(2) Payment shall take
the form of (check applicable box):
[ ] in
lawful money of the United States; or
[ ] if
permitted the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number
of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3) Please issue said
Warrant Shares in the name of the undersigned or in such other name
as is specified below:
_______________________________
The
Warrant Shares shall be delivered to the following DWAC Account
Number:
_______________________________
_______________________________
_______________________________
(4)
Accredited
Investor. The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the
Securities Act of 1933, as amended.
[SIGNATURE OF
HOLDER]
Name of
Investing Entity:
________________________________________________________________________
Signature of Authorized Signatory of Investing
Entity:
_________________________________________________
Name of
Authorized Signatory:
___________________________________________________________________
Title
of Authorized Signatory:
____________________________________________________________________
Date:
________________________________________________________________________________________
EXHIBIT
B
ASSIGNMENT
FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to purchase
shares.)
FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
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Address:
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______________________________________
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Phone
Number:
Email
Address:
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______________________________________
______________________________________
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Dated:
_______________ __, ______
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Holder’s Signature:
______________________________________
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Holder’s Address: ______________________________________
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SECURITIES PURCHASE
AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the
"Agreement"), dated as of February 12, 2018, by and between
Guided
Therapeutics, Inc.,
a Delaware corporation, with
headquarters located at 5835 Peachtree Comers East, Suite D,
Norcross, GA 30092, (the "Company"), and ADAR BAYS,
LLC, a Florida limited
liability company,
with its address at 3411 Indian Creek
Drive, Suite 403, Miami Beach, FL 33140
(the "Buyer").
WHEREAS:
A. The Company and the Buyer are executing and
delivering this Agreement in reliance upon the exemption from
securities registration afforded by the rules and regulations as
promulgated by the United States Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended
(the "1933 Act");
B. Buyer desires to purchase and the Company
desires to issue and sell, upon the terms and conditions set forth
in this Agreement three 8% convertible notes of the Company, in the
forms attached hereto as Exhibit A, B, and C in the aggregate
principal amount of $285,862.50 (with all three notes being
in the amount of $95,287.50
each) (together with any note(s) issued in replacement
thereof or as a dividend thereon or otherwise with respect
thereto in accordance with the terms thereof, the
"Notes"), convertible into shares of common stock,
par value $0.001 per
share, of the Company (the "Common Stock"), upon the terms and subject to the
limitations and conditions set forth in such Note.
Each note shall contain an original issue
discount of 10% such that the purchase price of each note shall be
$86,625.00. The
first of the three Notes (the
"First Note") shall be paid for by the Buyer as set forth
herein. Each
of the two following
$95,287.50 notes ("Note 2" and "Note 3",
respectively) shall initially be paid for by the issuance of an
offsetting $86,625.00 secured note issued to the
Company by the Buyer (a "Buyer Note"),
provided that prior to conversion of a particular back end note
("Back End Note"), the Buyer must have paid off that particular
Buyer Note in cash such that the particular Back
End Note may not be converted until it has been paid
for in cash by Buyer.
C. The
Buyer wishes
to purchase, upon the terms
and conditions stated in this Agreement, such principal amount of Note as is set
forth immediately below its name on the signature pages hereto;
and
NOW
THEREFORE, the Company and the
Buyer severally (and not jointly) hereby agree as
follows:
1. Purchase and Sale of
Note.
a. Purchase of Note. On each Closing Date
(as defined below), the Company shall
issue and sell to the Buyer and the Buyer agrees to purchase from
the Company such principal amount of Note as is
set forth immediately below the Buyer's
name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as
defined below), (i) the Buyer shall pay the purchase price for the
First Note to be issued and sold to it at the Closing (as defined
below) (the "Purchase Price") by wire transfer of immediately
available funds to the Company, in accordance with the Company's
written wiring instructions, against delivery of the First Note in
the principal amount equal to the Purchase Price as is set forth
immediately below the Buyer's name on the signature pages
hereto, and (ii) the Company shall deliver such duly
executed First Note on behalf of the Company, to the Buyer, against
delivery of such Purchase Price.
c.
Closing Date. The date and time of the
first issuance and sale of the First Note
pursuant to this Agreement (the "Closing Date") shall be on or about February 12,
2018, or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "Closing") shall
occur on the Closing Date at such location as may be agreed to by
the parties. The subsequent closing of the Second Note shall occur
on or before the date specified in the Buyer Note.
The Company may
reject the closing of the back end financing by giving the Buyer
written notice at least 30 days prior to the 6 month anniversary of
the Notes o[its intent to reject the
funding of each of the Buyer Notes. In such base both the Buyer
Notes and the back end notes shall be
terminated.
Company Initials
2.
Buyer's Representations and Warranties. The Buyer represents and
warrants to the Company that:
a.
Investment Purpose. As of the
date hereof, the Buyer is purchasing the Notes and the shares of
Common Stock issuable upon conversion of or otherwise pursuant to
the Notes, such shares of Common Stock being collectively referred
to herein as the "Conversion Shares" and, collectively
with the Notes, the "Securities") for its own account and not with a present view
towards the public sale or distribution thereof, except
pursuant to sales registered or exempted from registration under
the 1933 Act; provided, however, that by making the representations
herein, the Buyer does not agree to hold any of the Securities for
any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or
pursuant to a registration statement or an exemption under the 1933
Act.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of
Regulation D (an "Accredited Investor"). Any of Buyer's transferees, assignees,
or purchasers must be "accredited investors" in order to qualify as prospective
transferees, permitted assignees in the case of Buyer's or Holder's
transfer, assignment or sale of the
Note.
c.
Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if
any, have been, and for so long as the Note remain outstanding will
continue to be, furnished with all materials relating to the
business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have been
reasonably requested by the Buyer or its advisors. The Buyer and
its advisors, if any, have been, and for so long as the Note remain
outstanding will continue to be, afforded the opportunity to ask
questions of the Company. Notwithstanding the foregoing, the
Company has not disclosed to the Buyer any material nonpublic
information and will not disclose such information unless such
information is disclosed to the public prior to or promptly
following such disclosure to the Buyer or Buyer agrees to be
subject to a nondisclosure agreement in form and substance
reasonably satisfactory to the Company. In no event shall the
Company be forced to disclose such information publicly solely by
reason of the Buyer's request for such
information.
Neither such inquiries nor any other
due diligence investigation conducted by Buyer or any of its
advisors or representatives shall modify, amend or affect Buyer's
right to rely on the Company's representations and warranties
contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
The Buyer is not aware of any facts that may constitute a breach of
any of the Company's representations and warranties made
herein.
e.
Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of
the Securities.
f. Transfer or Re-sale. The Buyer
understands that (i) the sale or re-sale of the
Securities has not been and is not being registered under the 1933 Act or any applicable state
securities laws, and the Securities may not be transferred unless
(a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) in the case of subparagraphs (c),
(d) and (e) below, the Buyer shall have delivered to the Company,
at the cost of the Buyer, an opinion of counsel that shall be in
form, substance and scope customary for opinions of counsel in
comparable transactions (an "Opinion of
Counsel") to the effect that the Securities to be sold or
transferred may be sold, or transferred pursuant to an exemption
from such registration, including the removal of any restrictive
legend which opinion shall be accepted by the Company, (c) the
Securities are sold or transferred to an "affiliate" (as defined in Rule 144 promulgated under the 1933
Act (or a successor rule) ("Rule 144") of the Buyer who agrees to
sell or otherwise transfer the Securities only in accordance with
this Section 2(±) and who is an Accredited Investor, ( d) the
Securities are sold pursuant to Rule 144, or ( e) the Securities
are sold pursuant to Regulation Sunder the 1933 Act (or a successor
rule) ("Regulation S"); (ii) any sale of such Securities made in
reliance on Rule 144 may be made only in accordance with the terms
of said Rule and further, if said Rule is not applicable, any
re-sale of such Securities under circumstances in which the seller
( or the person through whom the sale is made) may be deemed to be
an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other person is under any obligation to
register such Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder (in each case). Notwithstanding the foregoing or
anything else contained herein
to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending
arrangement.
g.
Legends. The Buyer understands that the Note and, until such time
as the Conversion Shares have been registered under the 1933 Act or
otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular
date that can then be immediately sold, the Conversion Shares may
bear a restrictive legend in substantially the following form (and
a stop-transfer order may be placed against transfer of the
certificates for such Securities):
"NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN
THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES."
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, and (b)
such holder provides the Company with an Opinion of Counsel, to the
effect that a public sale or transfer of such Security may be made
without registration under the 1933 Act, and that legend removal is
appropriate, which opinion shall be accepted by the Company so that
the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept such Opinion of Counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S,
within 2 business days, it will be considered an Event of Default
under the Note.
h. Authorization; Enforcement. The Buyer is a
validly existing corporation, limited partnership or limited
liability company and has all requisite
corporate, partnership or limited liability company power and
authority to invest in the Securities pursuant to this Agreement. The execution, delivery and
performance of this Agreement has
been duly and validly authorized by the Buyer. This Agreement has
been duly executed and delivered on behalf of the Buyer, and this
Agreement constitutes a valid and binding agreement of the Buyer
enforceable in accordance with its terms.
i.
Residency. The Buyer is a resident of
the jurisdiction set forth immediately below the Buyer's name on
the signature pages hereto.
j .
No Short Sales. Buyer/Holder, its
successors and assigns, agrees that so long as the Note remains
outstanding, neither the Buyer/Holder nor any of its affiliates
shall not enter into or effect "short sales"
of the Common Stock or hedging transaction which establishes a
short position with respect to the Common Stock of the
Company. The Company acknowledges and agrees that upon
delivery of a Conversion Notice by the Buyer/Holder, the
Buyer/Holder immediately owns the shares of Common Stock described
in the Conversion Notice and any sale of those shares issuable
under such Conversion Notice would not be considered short
sales.
3. Representations and Warranties of
the Company.
The Company represents and warrants to
the Buyer that, except as otherwise disclosed in the Company's
filings with the SEC:
a.
Organization and Qualification. The Company and each of its
subsidiaries, if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used,
operated and conducted.
b.
Authorization;Enforcement. (i) The Company has all reqms1te corporate power
and authority to enter into and perform this Agreement, the Note
and to consummate the transactions contemplated hereby and thereby
and to issue the Securities, in accordance with
the
terms hereof and
thereof, (ii) the execution and delivery of this Agreement,
the Note by the Company
and the consummation by it of the transactions contemplated hereby
and thereby (including without limitation, the issuance of the Note
and the issuance and reservation for issuance of the Conversion
Shares issuable upon conversion or exercise thereof) have been duly
authorized by the Company's Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or
its shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its tem1s, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors' rights
generally.
c. Issuance of Shares. The Conversion Shares are
duly authorized and reserved for issuance and, upon conversion of
the Note in accordance with its respective terms, will be validly
issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances with respect to the
issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company and will not
impose personal liability upon the holder
thereof.
d. Acknowledgment of Dilution. The Company
understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Conversion Shares upon
conversion of the Note.
The Company further
acknowledges that its obligation to issue Conversion Shares upon
conversion of the Note in accordance with this
Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may
have on the ownership interests of other shareholders of the
Company.
e. No Conflicts. The execution, delivery and
performance of this Agreement, the Note by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance of the
Conversion Shares) will not (i) conflict with or result in a
violation of any provision of the Certificate of Incorporation or
By-laws, or (ii) violate or conflict with,
or result in a breach of any provision
of, or constitute a default ( or an event which with
notice or lapse of time or both could become a default) under, or
give to others any rights of termination,
amendment, acceleration or cancellation of, any
agreement, indenture,
patent, patent license or instrument
to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any
law, rule,
regulation, order, judgment or
decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any prope1iy or asset of the
Company or any of its Subsidiaries is bound or affected ( except,
with respect to clauses (ii) and (iii), for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would
not, individually or
in the aggregate, have a Material Adverse Effect). All
consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date
hereof. The Company is not in violation of the listing
requirements of the OTC Markets Exchange (the "OTC
MARKETS") and does not reasonably anticipate that the
Common Stock will be delisted by the OTC MARKETS in the foreseeable
future, nor are the Company's
securities "chilled" by FINRA. The Company and its
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing. "Material Adverse
Effect" means a material adverse effect on (i) the assets,
liabilities,
results of
operations, condition (financial or otherwise),
business, or prospects of the Company and its subsidiaries
taken as a whole, or (ii) the ability of the Company to perform its
obligations under this Agreement or the Notes.
f. Absence of Litigation. There is no
action, suit,
claim, proceeding, inquiry or
investigation before or by any court, public
board, government agency, self-regulatory organization or body pending or,
to the knowledge of the Company or any of its
subsidiaries,
threatened against or affecting the
Company or any of its subsidiaries, or their
officers or directors in their capacity as such, that could have a
Material Adverse Effect. The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.
g. Acknowledgment
Regarding Buyer' Purchase of Securities. The Company acknowledges
and agrees that the Buyer is acting solely in the capacity of arm's
length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of
the Company ( or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any
statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer' purchase of the
Securities. The Company further represents to the Buyer that
the Company's decision to enter into this Agreement has been based
solely on the independent evaluation of the Company and its
representatives.
h.
No Integrated Offering. Neither the
Company, nor any of its affiliates, nor any
person acting on its or their behalf, has directly or indirectly
made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the Securities
to the Buyer.
i.
Title to Property. The Company and its
subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as are described in
Schedule 3(i) or such as would not have a Material Adverse Effect.
Any real property and facilities held under lease by the Company
and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such
exceptions as would not have a Material Adverse
Effect.
j.
Bad Actor. No officer or director of
the Company would be disqualified under Rule 506( d) of the
Securities Act as amended on the basis of being a
"bad actor" as that term is established in the
September 19, 2013 Small Entity Compliance Guide published by the
Securities and Exchange Commission.
k. Breach of Representations and Warranties by the
Company. If the Company breaches any of the representations or
warranties set forth in this Section 3 in any material respect, and
in addition to any other remedies available to the Buyer pursuant
to this Agreement, it will be considered an Event of default under
the Note.
4. COVENANTS.
a.
Expenses. Excluding transfer agent and
other fees set forth in the First Note, and except with respect to
the $4,125.00 per Note to be withheld from the Purchase
Price for the Buyer's legal fees,
each party shall be responsible for its own expenses incurred in
connection with this Agreement.
b. Listing. The Company shall
promptly secure the listing of the Conversion Shares upon each
national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to
official notice of issuance) and, so long as
the Buyer owns any of the Note Securities, shall maintain, so long
as any other shares of Common Stock shall be so
listed, such listing of all Conversion Shares from time to
time issuable upon conversion of the Note. The Company will obtain
and, so long as the Buyer owns any of the
Securities, maintain the listing and trading of its Common
Stock on the OTC MARKETS or any equivalent replacement market, the
Nasdaq stock market ("Nasdaq") or
the New York Stock Exchange ("NYSE"),
and will comply in all respects with
the Company's reporting, filing and other obligations under the
bylaws or rules of the Financial Industry Regulatory Authority
("FINRA") and such exchanges, as
applicable. The Company shall promptly provide to the Buyer
copies of any notices it receives from the OTC MARKETS and any
other markets on which the Common Stock is then listed regarding
the continued eligibility of the Common Stock for listing on such
markets.
c.
Corporate Existence. So long as
the Buyer beneficially owns the Note, the Company shall maintain
its corporate existence and shall not sell all or substantially all
of the Company'
s assets, except in
the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTC
MARKETS, Nasdaq or NYSE.
d.
No Integration. The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
e. Filings. The Company
shall include all of the Notes in its next scheduled SEC filing
whether that shall be a 1 OQ or a 1 OK.
f. Breach of Covenants. If the Company breaches any of the covenants set
forth in this Section 4,
and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will
be considered an event of default under the Note.
5.
Governing Law; Miscellaneous.
a.
Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or
in the federal courts located in the state and county of
New York. The
parties to this Agreement hereby
irrevocably waive any objection to jurisdiction and venue of any
action instituted hereunder and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens.
The Company and Buyer waive trial by
jury. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and
costs. Each party hereby irrevocably waives personal service
of process and consents to process being served in any suit, action
or proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.
b. Counterparts; Signatures by
Facsimile. This Agreement
may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the
same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party. This
Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement,
or electronic mail transmission of a ".pdf' copy of
this Agreement, bearing the signature of the party so delivering
this Agreement.
c.
Headings. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. In the event that any provision
of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall
be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or
enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This
Agreement and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the
waiving party, in the case of a waiver, or by the Company and a
majority in interest of the Buyer, in the case of an
amendment.
f. Notices. All notices,
demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless
otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air
courier service with charges prepaid, (iv) via electronic mail or
(v) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall
have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile, with accurate confirmation
generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during
normal business hours where such notice is to be received) or
delivery via electronic mail, or the first business day following
such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b)
on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall
be:
If to the Company, to:
Guided
Therapeutics, Inc.
5835
Peachtree Corners East, Suite D
Norcross,
GA 30092
Attn:
Gene S. Cartwright, CEO
If to the Buyer:
ADAR
BAYS, LLC
3411
Indian Creek Drive,
Suite
403
Miami Beach, FL 3
3140
Attn:
Samuel Eisenberg
Each
party shall provide notice to the other party of any change in
address.
g.
Successors and Assigns. This Agreement
shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Neither the Company nor the Buyer
shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other. Notwithstanding the
foregoing, the Buyer may assign its rights hereunder to any
of its "affiliates,"
as that term is defined under the
1934 Act, without the consent of the Company with Buyer's
Opinion of Counsel.
h. Third Party Beneficiaries. This
Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. The representations and warranties of
the Company and the agreements and covenants set forth in this
Agreement shall survive the closing hereunder notwithstanding any
due diligence investigation conducted by or on behalf of the Buyer.
The Company agrees to indemnify and hold harmless the Buyer and all
their officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach by
the Company of any of its representations, warranties
and covenants set forth in this Agreement or any of its covenants
and obligations under this Agreement, including advancement of
expenses as they are incurred.
j.
Further Assurances. Each party shall
do and perform, or cause to be done and
performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request
in
order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
k. No Strict
Construction.
The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction
will be applied against any party.
l. Remedies. The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyer by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of
this Agreement, that the Buyer shall be entitled, in addition
to all other available remedies at law or in equity, and in
addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach ofthis
Agreement and to enforce specifically the terms and provisions
hereof, without the necessity of showing economic loss and
without any bond or other security being
required.
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above
written.
GUIDED THERAPEUTICS, INC.
/s/ Gene S. Cartwright
Name: Gene S. Cartwright
Title: CEO
ADAR BAYS, LLC
/s/ Samuel Eisenberg
Name: Samuel Eisenberg
Title: Manager
AGGREGATE SUBSCRIPTION AMOUNT:
$285,862.50 Aggregate Principal Amount of Notes:
Aggregate Purchase Price: Note 1:
$95,287.50.00, less
$8,662.50 in OID,
less $4,125.00 in
legal fees, less $7,500.00 in
fees to Moody Capital Solutions, Inc.
Note 2: $95,287.50.00, less $8,662.50 in
OID, less $4,125.00 in
legal fees, less $7,500.00 in
fees to Moody Capital Solutions, Inc. Note 3: $95,287.50.00, less
$8,662.50 in
OID, less $4,125.00 in
legal fees, less $7,500.00 in fees to Moody Capital Solutions,
Inc.
EXHIBIT A 144 NOTE -$95,287.50
EXHIBITB
BACK END NOTE 1-$95,287.50
EXHIBITC BACK END NOTE 2 -$95,287.50
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the
“Agreement”), dated as of February 22, 2018, by and
between Guided Therapeutics,
Inc., a Delaware corporation,
with its address at 5835 Peachtree Corners East, Suite D, Norcross,
Georgia 30092 (the “Company”), and POWER UP LENDING GROUP
LTD., a Virginia corporation,
with its address at 111 Great Neck Road, Suite 216, Great Neck, NY
11021 (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933
Act”); and
B. Buyer
desires to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement a convertible
note of the Company, in the form attached hereto as Exhibit A, in
the aggregate principal amount of $53,000.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible into shares of common
stock, $0.001 par value per share, of the Company (the
“Common Stock”), upon the terms and subject to the
limitations and conditions set forth in such
Note.
NOW
THEREFORE, the Company and the
Buyer severally (and not jointly) hereby agree as
follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On the Closing Date (as defined below), the Company shall
issue and sell to the Buyer and the Buyer agrees to purchase from
the Company such principal amount of Note as is set forth
immediately below the Buyer’s name on the signature pages
hereto.
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer
shall pay the purchase price for the Note to be issued and sold to
it at the Closing (as defined below) (the “Purchase
Price”) by wire transfer of immediately available funds to
the Company, in accordance with the Company’s written wiring
instructions, against delivery of the Note in the principal amount
equal to the Purchase Price as is set forth immediately below the
Buyer’s name on the signature pages hereto, and (ii) the
Company shall deliver such duly executed Note on behalf of the
Company, to the Buyer, against delivery of such Purchase
Price.
c. Closing
Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the
date and time of the issuance and sale of the Note pursuant to this
Agreement (the “Closing Date”) shall be 12:00 noon,
Eastern Standard Time on or about February 23, 2018, or such other
mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date at such location as may be agreed to by
the parties.
2. Buyer’s
Representations and Warranties. The Buyer represents and warrants
to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note
and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Note (such shares of Common Stock being
collectively referred to herein as the “Conversion
Shares” and, collectively with the Note, the
“Securities”) for its own account and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales registered or exempted from registration
under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D (an
“Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. Information.
The Company has not disclosed to the Buyer any material nonpublic
information and will not disclose such information unless such
information is disclosed to the public prior to or promptly
following such disclosure to the Buyer.
e. Legends.
The Buyer understands that the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act; or may
be sold pursuant to an applicable exemption from registration, the
Conversion Shares may bear a restrictive legend in substantially
the following form:
"THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE
ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
ACCEPTABLE TO THE ISSUER’S TRANSFER AGENT, THAT SUCH
SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS."
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to an exemption from
registration without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144, at the Deadline, it
will be considered an Event of Default pursuant to Section 3.2 of
the Note.
f. Authorization;
Enforcement. This Agreement has been duly and validly authorized.
This Agreement has been duly executed and delivered on behalf of
the Buyer, and this Agreement constitutes a valid and binding
agreement of the Buyer enforceable in accordance with its
terms.
3. Representations
and Warranties of the Company. The Company represents and warrants
to the Buyer that:
a. Organization
and Qualification. The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used,
operated and conducted. “Subsidiaries” means any
corporation or other organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly,
any equity or other ownership interest.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and
authority to enter into and perform this Agreement, the Note and to
consummate the transactions contemplated hereby and thereby and to
issue the Securities, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement, the
Note by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the
issuance of the Note and the issuance and reservation for issuance
of the Conversion Shares issuable upon conversion or exercise
thereof) have been duly authorized by the Company’s Board of
Directors and no further consent or authorization of the Company,
its Board of Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered by the Company by
its authorized representative, and such authorized representative
is the true and official representative with authority to sign this
Agreement and the other documents executed in connection herewith
and bind the Company accordingly, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of the
Note, each of such instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms.
c. Capitalization.
As of the date hereof, the authorized common stock of the Company
consists of 1,000,000,000 authorized shares of Common Stock, $0.001
par value per share, of which 19,453,469 shares are issued and
outstanding; and 64,125,832 shares are reserved for issuance upon
conversion of the Note. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly
issued, fully paid and non-assessable.
d. Issuance
of Shares. The Conversion Shares are duly authorized and reserved
for issuance and, upon conversion of the Note in accordance with
its respective terms, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability
upon the holder thereof.
e. No
Conflicts. The execution, delivery and performance of this
Agreement, the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. “Material Adverse Effect” means
any material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be
entered into in connection herewith.
f. SEC
Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the “1934
Act”) (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC Documents”). Upon
written request the Company will deliver to the Buyer true and
complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates or if amended,
as of the dates of the amendments schedules thereto and documents
(other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the “SEC
Documents”). Upon written request the Company will deliver to
the Buyer true and complete copies of the SEC Documents, except for
such exhibits and incorporated documents. As of their respective
dates or if amended, as of the dates of the amendments schedules
thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to
herein as the “SEC Documents”). Upon written request
the Company will deliver to the Buyer true and complete copies of
the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates or if amended, as of the
dates of the amendments schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein,
being hereinafter referred to herein as the “SEC
Documents”). Upon written request the Company will deliver to
the Buyer true and complete copies of the SEC Documents, except for
such exhibits and incorporated documents. As of their respective
dates or if amended, as of the dates of the
amendments
g. Absence
of Certain Changes. Since September 30 2017, except as set forth in
the SEC Documents, there has been no material adverse change and no
material adverse development in the assets, liabilities, business,
properties, operations, financial condition, results of operations,
prospects or 1934 Act reporting status of the Company or any of its
Subsidiaries.
h. Absence
of Litigation. Except as set forth in the SEC Documents, there is
no action, suit, claim, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse
Effect. The Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the
foregoing.
i. No
Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or
its securities.
j. No
Brokers. Except with respect to Moody Capital Solutions, Inc., the
Company has taken no action which would give rise to any claim by
any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions
contemplated hereby.
k. No
Investment Company. The Company is not, and upon the issuance and
sale of the Securities as contemplated by this Agreement will not
be an “investment company” required to be registered
under the Investment Company Act of 1940 (an “Investment
Company”). The Company is not controlled by an Investment
Company.
l. Breach
of Representations and Warranties by the Company. If the Company
breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the
Buyer pursuant to this Agreement, it will be considered an Event of
default under Section 3.4 of the Note.
4. COVENANTS.
a. Best
Efforts. The Company shall use its best efforts to satisfy timely
each of the conditions described in Section 7 of this
Agreement.
b. Form
D; Blue Sky Laws. The Company agrees to timely make any filings
required by federal and state laws as a result of the closing of
the transactions contemplated by this
Agreement.
c. Use
of Proceeds. The Company shall use the proceeds for general working
capital purposes.
d. Expenses.
At the Closing, the Company’s obligation with respect to the
transactions contemplated by this Agreement is to reimburse
Buyer’ expenses shall be $3,000.00 for Buyer’s legal
fees and due diligence fee.
e. Corporate
Existence. So long as the Buyer beneficially owns any Note, the
Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company’s assets, except with
the prior written consent of the Buyer.
f. Breach
of Covenants. If the Company breaches any of the covenants set
forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be
considered an event of default under Section 3.4 of the
Note.
g. Failure
to Comply with the 1934 Act. So long as the Buyer beneficially owns
the Note, the Company shall comply with the reporting requirements
of the 1934 Act; and the Company shall continue to be subject to
the reporting requirements of the 1934 Act.
h. Trading
Activities. Neither the Buyer nor its affiliates has an open short
position in the common stock of the Company and the Buyer agrees
that it shall not, and that it will cause its affiliates not to,
engage in any short sales of or hedging transactions with respect
to the common stock of the Company, its affiliates not to, engage
in any short sales of or hedging transactions with respect to the
common stock of the Company.
i. Right
of First Refusal. Unless it shall have first delivered to the
Buyer, at least forty eight (48) hours prior to the closing of such
Future Offering (as defined herein), written notice describing the
proposed Future Offering (“ROFR Notice”), including the
terms and conditions thereof, identity of the proposed purchaser
and proposed definitive documentation to be entered into in
connection therewith, and providing the Buyer an option during the
forty eight (48) hour period following delivery of such notice to
purchase the securities being offered in the Future Offering on the
same terms as contemplated by such Future Offering (the limitations
referred to in this sentence and the preceding sentence are
collectively referred to as the “Right of First
Refusal”), the Company will not conduct any equity (or debt
with an equity component) financing in an amount less than $150,000
(“Future Offering(s)”) during the period beginning on
the Closing Date and ending nine (9) months following the Closing
Date. In the event the terms and conditions of a proposed Future
Offering are amended in any respect after delivery of the notice to
the Buyer concerning the proposed Future Offering, the Company
shall deliver a new notice to the Buyer describing the amended
terms and conditions of the proposed Future Offering and the Buyer
thereafter shall have an option during the forty eight (48) hour
period following delivery of such new notice to purchase its pro
rata share of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended.
Notwithstanding anything contained herein to the contrary, any
subsequent offer by an investor, or an affiliate of such investor,
identified on an ROFR Notice is subject to this Right of First
Refusal.
5. Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the
Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance
with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Company proposes to
replace its transfer agent, the Company shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to this Agreement (including but not limited to the
provision to irrevocably reserve shares of Common Stock in the
Reserved Amount as such term is defined in the Note) signed by the
successor transfer agent to Company and the Company. Prior to
registration of the Conversion Shares under the 1933 Act or the
date on which the Conversion Shares may be sold pursuant to an
exemption from registration, all such certificates shall bear the
restrictive legend specified in Section 2(e) of this Agreement. The
Company warrants that: (i) no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section
5, will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this
Agreement and the Note; (ii) it will not direct its transfer agent
not to transfer or delay, impair, and/or hinder its transfer agent
in transferring (or issuing)(electronically or in certificated
form) any certificate for Conversion Shares to be issued to the
Buyer upon conversion of or otherwise pursuant to the Note as and
when required by the Note and this Agreement; and (iii) it will not
fail to remove (or directs its transfer agent not to remove or
impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any
Conversion Shares issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note
and/or this Agreement. If the Buyer provides the Company and the
Company’s transfer, at the cost of the Buyer, with an opinion
of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under
the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares, promptly instruct its transfer agent
to issue one or more certificates, free from restrictive legend, in
such name and in such denominations as specified by the Buyer. The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 may be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyer shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond
or other security being required.
6. Conditions
to the Company’s Obligation to Sell. The obligation of the
Company hereunder to issue and sell the Note to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions thereto, provided that
these conditions are for the Company’s sole benefit and may
be waived by the Company at any time in its sole
discretion:
a. The
Buyer shall have executed this Agreement and delivered the same to
the Company.
b. The
Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.
c. The
representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing
Date.
d. No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
7. Conditions
to The Buyer’s Obligation to Purchase. The obligation of the
Buyer hereunder to purchase the Note at the Closing is subject to
the satisfaction, at or before the Closing Date of each of the
following conditions, provided that these conditions are for the
Buyer’s sole benefit and may be waived by the Buyer at any
time in its sole discretion:
a. The
Company shall have executed this Agreement and delivered the same
to the Buyer.
b. The
Company shall have delivered to the Buyer the duly executed Note
(in such denominations as the Buyer shall request) in accordance
with Section 1(b) above.
c. The
Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company’s Transfer
Agent.
d. The
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, but not limited to
certificates with respect to the Board of Directors’
resolutions relating to the transactions contemplated
hereby.
e. No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f. No
event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g. The
Conversion Shares shall have been authorized for quotation on an
exchange or electronic quotation system and trading in the Common
Stock on such exchange or electronic quotation system shall not
have been suspended by the SEC or an exchange or electronic
quotation system.
h. The
Buyer shall have received the fully executed (with notary
Confession of Judgment) dated as of the Closing
Date.
8. Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Virginia without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or
in the federal courts located in the Eastern District of New York.
The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens. The Company and
Buyer waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or
proceeding in connection with this Agreement, the Note or any
related document or agreement by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law.
b. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the
other party.
c. Headings.
The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of,
this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.
e. Entire
Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the majority in interest of the
Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, or facsimile, addressed as set forth below
or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be as set forth in the heading of this
Agreement with a copy by fax only to (which copy shall not
constitute notice) to Naidich Wurman LLP, 111 Great Neck Road,
Suite 214, Great Neck, NY 11021, Attn: Allison Naidich, facsimile:
516-466-3555, e-mail: allison@nwlaw.com . Each party shall provide notice to the other
party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. Neither
the Company nor the Buyer shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
other. Notwithstanding the foregoing, the Buyer may assign its
rights hereunder to any person that purchases Securities in a
private transaction from the Buyer or to any of its
“affiliates,” as that term is defined under the 1934
Act, without the consent of the Company.
h. Survival.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
i. Further
Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j. No
Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
k. Remedies.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being
required.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above
written.
Guided Therapeutics, Inc.
By:
/s/ Gene S. Cartwright
Gene
S. Cartwright
President
and Chief Executive Officer
Guided
Therapeutics, Inc.
POWER UP LENDING GROUP LTD.
By:
/s/ Cut Kramer
Curt
Kramer
Chief
Executive Officer
111
Great Neck Road, Suite 216
Great
Neck, NY 11021
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of Note: $53,000.00
Aggregate
Purchase Price: $53,000.00
Exhibit
10.16
FIRST AMENDMENT TO LEASE
THIS
FIRST AMENDMENT TO LEASE (the "Amendment") is made this
23 day of February, 2018
(the "Effective Date"), between COLFIN COBALT I-II OWNER, LLC, a
Delaware limited liability company ("Landlord"), and GUIDED
THERAPEUTICS, INC., a Delaware corporation ("Tenant").
W
I T N E S E T H:
WHEREAS, Landlord, as
successor-in-interest to Cobalt Industrial REIT, and Tenant are
parties to that certain Industrial Building Lease dated October 2,
2009 (the "Lease"), pursuant to which Tenant is currently leasing
approximately 23,035 Rentable Square Feet (the "Original Premises")
in the Building owned by Landlord and located at 5835 Peachtree
Comers East, Norcross, Georgia; and
WHEREAS, the Term of the Lease expired
on June 30, 2017, but Tenant has remained in possession of the
Premises; and
WHEREAS, the parties desire to reduce
the size of the Premises, extend the term of the Lease and
otherwise modify the Lease as set forth herein; and
WHEREAS, any capitalized terms not
otherwise defined in this Amendment shall have the meanings
ascribed to them in the Lease.
NOW, THEREFORE, in consideration of the
mutual covenants and agreements hereinafter set forth, and for
other good and valuable consideration, the mutual receipt and legal
sufficiency of which are hereby acknowledged, Landlord and Tenant
hereby agree as follows:
1. Ratification
of Lease. By their respective execution of this Amendment, each of
Landlord and Tenant (i) acknowledge and agree that the Lease
remains in full force and effect, and (ii) ratify and confirm the
Lease in all respects, subject only to the terms and conditions of
this Amendment.
2. Extension
of Term. The Term is hereby extended to expire at 11:59PM local
time on March 31, 2021. For purposes of this Amendment, (i) the
period between January 1, 2018 and March 31, 2018 shall be known as
the "Interim Term," and (ii) the period between April 1, 2018 and
March 31, 2021 shall be known as the "Extension Term."
3. Reduction
of Premises. Effective
immediately on the Effective Date of this Amendment, the "Premises"
shall be reduced to consist of approximately 12,835 Rentable Square
Feet out of the Original Premises, known as Suite 5835-B in the
Building, as shown on Exhibit A
attached hereto. The Effective Date is
the date of Landlord's execution of this Amendment after Tenant has
executed and delivered same to Landlord, as indicated
above.
4. Surrendered
Space. As of the Effective
Date, the Lease shall be deemed terminated with respect to the
remaining 10,200 Rentable Square Feet of the Original Premises (the
"Surrendered Space"); accordingly, prior to such date, Tenant shall
vacate the Surrendered Space and surrender same to Landlord broom
clean and in good order, condition and repair, ordinary wear and
tear excepted, and shall remove all of Tenant’s Property from
the Surrendered Space, all as verified by Landlord's inspection.
Tenant's failure to surrender the Surrendered Space as required
herein shall be deemed a holdover under Article XX
of the Lease. Upon surrender and
delivery of the Surrendered Space in the condition required by this
paragraph, neither Tenant nor any party claiming by, through or
under Tenant shall have or claim any right to occupy the
Surrendered Space or any part thereof, and Tenant shall be released
from all covenants, obligations and liability under the Lease with
respect to the Surrendered Space first arising thereafter, other
than those covenants, obligations (including indemnity obligations)
and liabilities which survive the termination of the Lease pursuant
to the express terms thereof.
(a) Notwithstanding
that the reduction of the Premises shall occur on the Effective
Date, and regardless of whether Landlord leases the Surrendered
Space at any time during the Interim Term, Tenant shall continue to
pay Basic Rent on the Original Premises during the entire Interim
Term, as follows:
|
Period
|
Approximate Annual
Basic Rent PSF
|
Monthly
Basic Rent
|
|
1/1/18-3/31/18
|
$7.22
|
$13,859.39
|
(b)
During
the Extension Term, Tenant shall pay Basic Rent on the Premises, as
follows:
|
Period
|
Approximate Annual
Basic Rent PSF
|
Monthly
Basic Rent
|
|
4/1/18-3/31/19
|
$7.50
|
$8,021.88
|
|
4/1/19-3/31/20
|
$7.73
|
$8,267.88
|
|
4/1/20-3/31/21
|
$7.96
|
$8,513.88
|
6. Additional
Rent. Notwithstanding that the
reduction of the Premises shall occur on the Effective Date, and
regardless of whether Landlord leases the Surrendered Space at any
time during the Interim Term, Tenant shall continue to pay
Additional Rent on the Original Premises, calculated based on
Tenant's Proportionate Share of 9.93% of the Project, during the
entire Interim Term. During the Extension Term, Tenant's
Proportionate Share of the Project shall be reduced to
5.53%.
7. Prepaid
Rent. A prepayment of Rent in
the amount of $27,718.78, minus a credit of $ 7,012.47 for
overpayment of January 2018 rent, shall be due and payable at the
time of Tenant’s execution and delivery of this Amendment,
which shall occur no later than February 15, 2018. The net
prepayment amount due at execution shall be $20,706.31. The
prepayment shall be applied by Landlord to installments of Basic
Rent and Additional Rent first coming due under the Lease,
specifically to cover rent payments for February and March,
2018.
8. Brokers.
Tenant and Landlord each represent that it has not had any dealings
with a real estate broker, finder or other person with respect to
this Amendment in any manner, except Lee & Associates, broker
for Landlord (the "Broker"). Landlord shall pay any commissions or
fees that are payable to the Broker with respect to this Amendment
in accordance with the provisions of a separate commission
agreement. Each party shall indemnify the other party against all
costs or liabilities for commissions or compensation claimed by any
broker or agent claiming the same by, through, or under the
indemnifying party.
9. Acknowledgements of
Tenant. Tenant hereby acknowledges and
agrees as follows: (a) Tenant does not have, and hereby waives any
option to renew or extend the Term beyond the expiration of the
Extension Term, and Article XXVII of the Lease is hereby deleted;
(b) Tenant does not have, and hereby waives any option under the
Lease to expand the Premises, and Article XXVIII of the Lease is
hereby deleted; (c) Tenant does not have, and hereby waives any
option under the Lease to terminate the Lease prior to the
expirationof the Extension Term; (d) Landlord does not have any
obligation to complete or construct any improvements to the
Premises except that Landlord shall, at its sole cost and expense,
demise the Premises from the Surrendered Space; and (e) Tenant is
occupying the Original Premises, and shall continue to occupy the
Premises, in its “AS IS” “WHERE IS”
condition, “WITH ALL FAULTS”.
10. Landlord's Notice
Address. Until Landlord
provides further written notice to Tenant, any written notice
required to be given to Landlord under the Lease shall be delivered
to Landlord at the following address:
ColFin
Cobalt I-II Owner, LLC
13727
Noel Road, Suite 750
Dallas,
TX 75240
Attention:
Asset Manager
11. Rent
Payment Address. Until Landlord
provides further written notice to Tenant, all Rent shall be paid
as follows:
|
Payment
by Check:
PO Box
209263
Austin,
TX 78720-9263
|
Electronic
Payment:
Available via
"Commercial Cafe" Payment Services Tenant Portal
Email
AccountsReceivableatcolfinar@colonyinc.com
User
name and password to be provided
User
training will also be provided
|
12. Counterpart
Execution. This Amendment shall
not be effective or binding until such time as it has been executed
and delivered by all parties hereto. This Amendment may be executed
in counterparts, all of which shall constitute a single
agreement.
13. Continued
Effect. Except as modified by
this Amendment, the Lease and all terms, conditions, covenants and
agreements thereof shall remain in full force and effect and are
hereby in all respects ratified and confirmed. For the avoidance of
doubt, Landlord reserves all of its rights and remedies under the
Lease and no provision of the Lease shall be waived, except by an
instrument in writing (referring specifically to the Lease)
executed by the party against whom waiver is
sought.
SIGNATURES ON FOLLOWING PAGE
IN
WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
as of the date first above written.
LANDLORD:
COLFIN
COBALT I-II OWNER, LLC,
a
Delaware limited liability company
By:
Name:
Title:
TENANT:
GUIDED
THERAPEUTICS, INC.,
a
Delaware corporation
Title:
Chief Operating Officer
5630 PEACHTREE INDUSTRIAL
BLVD
SUITE B
Office
98.019 SF
Warehouse
4,811 SF
Total
12.835 RSF-
SECURITIES PURCHASE
AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the
"Agreement"), dated as of March 12,
2018, by and between Guided
Therapeutics, Inc.,
a Delaware corporation, with
headquarters located
at 5835 Peachtree Comers
East, Suite D, Norcross, GA
30092, (the "Company"), and
EAGLE EQUITIES,
LLC, a Nevada limited
liability company, with its address at
91 Shelton Ave, Suite107,
New Haven, CT 06511 (the
"Buyer").
WHEREAS:
A. The Company and the Buyer are
executing and
delivering this Agreement
in reliance upon
the exemption from securities registration afforded by the rules and regulations as promulgated
by the United States
Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act");
B. Buyer desires to purchase and the Company desires to issue and
sell, upon the
terms and conditions set forth
in this Agreement three 8% convertible
notes of the Company,
in the forms attached hereto as Exhibit
A, B and C in the aggregate principal amount of $200,000.01
(comprised of the
first note being in the amount
of $66,666.67, and the
remaining two notes
in the amounts of $66,666.67 each,
each a "Back End Note") (together with any
note(s) issued in replacement
thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof,
the "Note"), convertible into shares of
common stock,
of the Company (the
"Common Stock"), upon
the terms and subject
to the limitations and
conditions set forth in
such Note. Each
of the three notes shall contain a 10%
OID such that the purchase price of the
notes shall be $60,000.00 each. The first of the
three notes (the
"First Note") shall
be paid for by
the Buyer as set
forth herein.
Each $66,666.67 Back End Note
shall initially be paid
for by the issuance
of an offsetting
$60,000.00 secured note issued to the Company by
the Buyer (a "Buyer
Note"), provided
that prior to conversion
of a particular Back End
Note, the Buyer must have paid
off that particular Buyer Note in
cash such
that the particular
Back End Note may
not be
converted until it has been
paid for in cash by
Buyer.
C. The Buyer wishes
to
purchase, upon the
terms and conditions stated in this Agreement, such principal
amount of Note as
is set forth
immediately below its
name on the signature
pages hereto;and
NOW THEREFORE,
the Company and the Buyer
severally
(and not jointly) hereby
agree as follows:
1.
Purchase and Sale of
Note.
a. Purchase of Note. On each
Closing Date (as defined
below), the Company shall issue
and sell
to the Buyer and the Buyer
agrees to purchase from the Company such
principal amount of Note
as is set
forth immediately
below the Buyer's name on
the signature
pages hereto.
b. Form
of Payment. On the
Closing Date (as defined
below), (i) the
Buyer shall pay the purchase price for the First Note to
be issued and
sold to it at the Closing (as defined below) (the "Purchase Price") by wire
transfer of immediately available funds to the Company, in
accordance with
the Company's written wiring instructions, against delivery of the First Note in the
principal amount equal
to the Purchase Price as is set forth
immediately below the Buyer's name on the signature pages hereto,
and (ii) the Company
shall deliver
such duly executed First
Note on behalf of the Company, to
the Buyer, against delivery of
such Purchase Price.
c. Closing Date. The date and time
of
the first issuance
and sale
of the
First Note pursuant to this Agreement
(the
"Closing Date") shall be on or about March 12, 20 I 8, or such other mutually
agreed
upon time. The
closing of the transactions contemplated by this Agreement (the "Closing") shall
occur on
the Closing
Date at
such
location
as
may be agreed
to
by the parties.
The subsequent closing of each Back
End Note shall
occur on or
before the date specified in the Buyer Note. The Company may
reject
the
closing of the
back end financing by giving the Buyer written
notice at least 30 days prior to the 6 month
anniversary of the
Notes of its intent to reject the funding of each of the
Buyer
Notes.
In
such
base both the
Buyer
Notes and
Back End Notes shall be
terminated.
2. Buyer's Representations and Warranties. The Buyer
represents and warrants
to the Company
that:
a. Investment Purpose. As of the date hereof, the
Buyer is purchasing the Notes and the
shares of Common Stock issuable upon conversion of or otherwise pursuant to the Notes, such shares of Common Stock
being collectively
referred to herein as the
"Conversion Shares" and,
collectively with the Notes,
the "Securities") for its own
account and not
with a present view towards
the public sale
or distribution
thereof, except pursuant to
sales registered
or exempted from registration under the 1933 Act;provided,
however, that by
making the representations herein, the
Buyer does not agree to hold any of the Securities for any
minimum or other specific term and reserves the
right to dispose of the
Securities at any time in
accordance with or pursuant to a registration statement or
an exemption
under the 1933
Act.
b. Accredited Investor Status.
The Buyer is an "accredited
investor" as
that term is
defined in Rule 50l(a)
of Regulation D (an "Accredited Investor"). Any
of Buyer's
transferees, assignees, or
purchasers
must be "accredited investors" in order to
qualify as prospective
transferees, permitted
assignees in the
case of Buyer's or Holder's transfer, assignment or sale of
the Note.
c. Reliance
on Exemptions. The Buyer
understands
that the Securities are
being offered and sold
to it in reliance upon specific exemptions
from the registration
requirements of United
States federal
and state securities
laws and that the Company
is relying
upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgments and
understandings
of the Buyer
set forth herein
in order to determine the
availability of such exemptions
and the eligibility
of the Buyer to acquire the Securities.
d. Information. The Buyer and its advisors, if
any, have been, and for so long as
the Note remain
outstanding will continue to
be, furnished with all materials relating to the
business, finances and operations of the Company and materials
relating to the offer and sale of the Securities which have
been
reasonably requested by the Buyer or
its advisors. The
Buyer and its advisors, if any,
have been, and
for so long as the Note remain outstanding will continue
to be, afforded the opportunity to ask questions
of the Company.
Notwithstanding the foregoing,
the Company has
not disclosed to the Buyer any
material nonpublic
information and will not disclose such
information unless such information is disclosed to the public
prior to or promptly following such disclosure to
the Buyer or Buyer agrees
to be subject to a nondisclosure agreement in form and substance
reasonably satisfactory to
the Company. In no
event shall the
Company be forced to disclose such information publicly solely
by reason of the Buyer's request for
such information. Neither
such inquiries nor any other due
diligence investigation conducted by Buyer or any of
its advisors or representatives
shall modify, amend or
affect Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. The Buyer understands that its investment in the
Securities involves a significant degree of risk. The Buyer is not aware of any
facts that may constitute a breach of any of the
Company's representations and warranties made
herein.
e. Governmental Review. The Buyer understands that
no United States federal or state
agency or any other
government or governmental agency has passed upon or made any
recommendation or endorsement of
the Securities.
f. Transfer or Re-sale.
The Buyer understands that
(i) the sale
or re-sale of the Securities
has not been
and is not being registered under the
1933 Act or any applicable state securities
laws, and the Securities may not be transferred unless
(a) the Securities are sold
pursuant to an effective registration statement under the 1933 Act, (b)
in the case of subparagraphs (c), (d) and (e) below, the
Buyer shall have delivered to
the Company, at
the cost of the
Buyer, an opinion
of counsel that shall
be in form,
substance and scope customary for opinions of counsel
in comparable transactions (an "Opinion of Counsel")
to the effect
that the Securities to be sold or transferred may be sold,
or transferred pursuant to an exemption from such registration, including
the removal of any
restrictive legend
which opinion
shall be
accepted by the Company, (c) the Securities are sold
or transferred to an
"affiliate" (as
defined in Rule 144 promulgated under the 1933 Act (or
a successor rule) ("Rule 144") of the Buyer who
agrees to sell
or otherwise transfer the Securities only in accordance with this Section 2(f) and who
is an Accredited Investor, (d) the
Securities are sold pursuant to Rule 144, or (e) the
Securities are sold
pursuant to Regulation
Sunder the 1933
Act (or a successor rule) ("Regulation S");(ii) any
sale of such Securities made in
reliance on Rule 144 may be made only in accordance
with the terms of said Rule and
further, if said
Rule is not applicable,
any re-sale of such Securities
under circumstances
in which the seller (or the
person through whom
the sale
is made) may be deemed to
be an underwriter (as that term is
defined in the 1933
Act) may require compliance
with some other
exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii)
neither the Company nor
any other person is under any obligation to register such
Securities under the
1933 Act
or any state
securities laws or to comply
with the terms and conditions ofany
exemption thereunder (in each case). Notwithstanding
the foregoing or
anything else contained herein to the contrary, the
Securities may be pledged
as collateral in
connection
with a bona fide
margin account or other lending arrangement.
g. Legends.
The Buyer understands
that the Note and, until such time as the Conversion
Shares have been
registered under the 1933 Act or otherwise may be sold pursuant to
Rule 144 or Regulation S without any restriction
as to the number of
securities as of a particular
date that can
then be immediately
sold,
the Conversion Shares
may bear a restrictive legend in
substantially the
following form (and a stop-transfer
order may be placed
against transfer of the certificates
for such Securities):
“NEITHER
THE ISSUANCE AND SALE OF
THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WIDCH THESE
SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT
OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED
(I)
IN THE
ABSENCE OF
(A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933,
AS AMENDED,
OR
(B) AN OPINION OF
COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN
A GENERALLY
ACCEPTABLE
FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING,
THE SECURITIES MAY
BE PLEDGED IN
CONNECTION
WITH
A
BONA
FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
The legend set forth above shall
be removed and the Company shall
issue a certificate without
such legend to the
holder of any Security upon which it is
stamped, if,
unless otherwise required
by applicable state securities laws,
(a) such Security is
registered for sale under an
effective registration statement filed under the
1933
Act or otherwise may be sold
pursuant to Rule 144 or Regulation S without any restriction
as to the number
of securities as of
a particular date that can then
be immediately sold, and (b)
such holder
provides the Company with an Opinion of Counsel,
to the effect that a public sale
or transfer of such Security
may be made without registration under
the 1933 Act, and that legend
removal is
appropriate, which opinion shall
be accepted by
the Company so that the sale or transfer is effected. The Buyer agrees to sell
all Securities, including those represented by a
ce1tificate(s) from which the legend bas been removed,
in compliance with applicable prospectus
delivery requirements, if
any. In the event that
the Company does not accept such
Opinion of Counsel
provided
by the Buyer with respect
to the transfer
of Securities pursuant to an exemption from registration,
such as Rule 144 or
Regulation S, within
2 business days, it will
be considered an Event
of Default under
the Note.
h. Authorization; Enforcement.
The Buyer is a validly existing corporation, limited
partnership
or
limited
liability company and has all requisite corporate, partnership or
limited
liability company power and authority to invest in the Securities pursuant to this
Agreement. The execution, delivery and performance of
this
Agreement has
been duly and validly authorized
by the Buyer. This Agreement
has been duly executed and delivered on
behalf of the Buyer, and
this Agreement constitutes
a valid and binding agreement of the Buyer
enforceable in accordance with its
terms.
i. Residency. The Buyer is a resident of
the jurisdiction set forth
immediately below the Buyer's name on
the signature
pages hereto.
j. No
Short Sales. Buyer/Holder, its
successors and assigns,
agrees that so long
as the Note remains
outstanding, neither the Buyer/Holder nor
any of its affiliates shall not
enter into or effect
"short sales" of the
Common Stock or hedging transaction which establishes a short
position with respect
to the Common Stock
of the Company. The Company acknowledges and agrees that upon delivery
of a Conversion Notice
by the Buyer/Holder, the
Buyer/Holder immediately owns the shares of
Common Stock described in
the Conversion Notice
and any sale of those
shares issuable under such
Conversion Notice would not be considered short sales.
3. Representations and Warranties of the
Company. The Company represents and warrants to the Buyer
that, except as otherwise disclosed in the Company's filings with
the SEC:
a. Organization and Qualification.
The Company and each of its
subsidiaries,
if any, is a
corporation duly organized, validly existing and
in good standing under the
laws of the jurisdiction in which
it is incorporated, with full
power and authority (
corporate and other) to
own, lease, use and
operate its properties and to carry on its business as and
where now owned, leased,
used, operated and
conducted.
b. Authorization; Enforcement. (i)
The Company has
all reqms1te corporate power and authority to enter into and
perform this Agreement, the Note and to consummate
the transactions contemplated hereby and
thereby and to issue the Securities, in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this
Agreement, the Note by the
Company and the consummation by it of the transactions contemplated
hereby and thereby (including
without
limitation, the
issuance of the Note and the issuance and reservation for issuance of the
Conversion Shares issuable upon conversion or exercise thereof)
have been duly authorized by the Company's Board of Directors
and no further consent
or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii)
this Agreement
has been duly executed and delivered by
the Company by its authorized representative, and such authorized representative is the true
and official representative with authority
to sign this Agreement and the other
documents executed in connection herewith and bind the
Company accordingly,
and (iv) this
Agreement constitutes, and upon execution
and delivery
by the Company
of the Note,
each of such
instruments will constitute, a legal, valid and
binding obligation of the Company
enforceable against the Company in accordance with its
terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general
applicability,
relating to or affecting creditors' rights
generally.
c. Issuance of Shares. The Conversion Shares are duly authorized and reserved for
issuance and, upon conversion of the Note in accordance with its respective terms,
will be validly issued, fully paid
and non-assessable,
and free from all taxes, liens, claims
and encumbrances with respect to
the issue thereof and shall not be
subject to preemptive rights or other similar rights
of shareholders of the Company and will not impose personal
liability upon the holder thereof.
d. Acknowledgment of Dilution. The
Company understands and acknowledges the potentially
dilutive effect
to the Common Stock
upon the issuance of the
Conversion Shares upon
conversion of the Note.
The Company further
acknowledges that
its obligation to issue Conversion
Shares upon conversion of the Note in
accordance with
this Agreement, the
Note is absolute and unconditional regardless of the
dilutive effect that such issuance
may have on the ownership interests of other shareholders of the Company.
e. No
Conflicts. The execution, delivery and performance of this
Agreement, the Note by
the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including,
without limitation, the issuance
and reservation for issuance of the
Conversion Shares) will not (i) conflict with or result
in a violation
of any provision of
the Certificate of Incorporation or By-laws, or (ii) violate or
conflict with, or
result in a breach of any
provision of,
or constitute a default ( or an
event which with notice or lapse of time or
both could become a
default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, any agreement,
indenture, patent, patent license or instrument to which
the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including
federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are
subject) applicable to the Company or
any of its Subsidiaries or by which any
property or asset of
the Company or any of its Subsidiaries
is bound or affected ( except,
with respect to clauses
(ii) and (iii), for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). All
consents, authorizations, orders,
filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior
to the date hereof. The
Company is not in violation of
the listing requirements of the OTC Markets
Exchange (the "OTC
MARKETS") and
does not reasonably anticipate that the
Common Stock will be
delisted by the OTC MARKETS in
the foreseeable
future, nor are the
Company's securities "chilled"
by FINRA. The Company and its Subsidiaries are unaware of any
facts or circumstances which might give rise to
any of the foregoing.
"Material Adverse Effect" means
a material adverse
effect on (i) the
assets, liabilities, results of operations,
condition (financial or otherwise), business,
or prospects of
the Company and
its subsidiaries
taken as a
whole, or (ii)
the ability of the
Company to perform its obligations under this Agreement or the
Notes.
f. Absence of Litigation. There is
no action, suit,
claim, proceeding, inquiry or
investigation before or
by any court,
public board,
government agency, self-regulatory organization or body pending or, to the knowledge of
the Company or any of
its subsidiaries,
threatened against or affecting the Company or any
of its subsidiaries, or
their officers or directors
in their capacity as
such, that could have
a Material Adverse Effect.
The Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to
any of the foregoing.
g. Acknowledgment Regarding Buyer' Purchase of
Securities. The Company acknowledges and agrees
that the Buyer is acting solely in
the capacity of
arm's length
purchasers with respect to this
Agreement and
the transactions contemplated
hereby. The Company further acknowledges that the Buyer is not
acting as a financial advisor or fiduciary of the
Company ( or in any similar
capacity) with respect to this
Agreement and the transactions contemplated hereby
and any statement
made by the Buyer or any of
its respective
representatives or agents in
connection with this Agreement and the transactions
contemplated hereby is not
advice or a recommendation and is
merely incidental to
the Buyer' purchase of the Securities. The
Company further represents to the Buyer that the Company's
decision to enter
into this Agreement has been
based solely on
the independent evaluation of
the Company and its representatives.
h. No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its
or their behalf, has directly or
indirectly made any offers or sales in any
security or solicited any
offers to buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the
Securities to the Buyer.
i. Title to
Property. The Company
and its subsidiaries have
good and marketable title in fee simple to all
real property and good
and marketable title to
all personal property owned by them
which is material to the business of the
Company and
its subsidiaries,
in each case free and clear of all
liens, encumbrances
and defects except such as are described in Schedule 3(i) or such
as would not have a
Material Adverse Effect. Any
real property and
facilities held under lease
by the
Company and its subsidiaries
are held by them under valid,
subsisting
and enforceable leases with
such exceptions as would
not have a Material
Adverse Effect.
j.
Bad Actor. No officer or
director of the Company
would be disqualified under Rule
506(d) of the Securities Act as amended
on the basis of being a
"bad actor" as that term is
established
in the
September 19, 2013 Small Entity Compliance Guide published by the Securities and Exchange
Commission.
k. Breach of Representations and Warranties by
the Company. If
the Company breaches any of the
representations or
warranties set forth
in this Section 3 in
any material respect, and
in addition to any other remedies available to
the Buyer pursuant
to this Agreement, it
will be
considered an Event
of default under the
Note.
4. COVENANTS.
a. Expenses. Excluding
transfer agent
and
other
fees set forth
in
the
First
Note,
and
except
with respect
to
the
$3,000
per Note to be
withheld from the Purchase Price for the Buyer's
legal fees, each party shall be responsible for its own expenses incurred in connection with this Agreement.
b. Listing. The Company shall
promptly secure the listing of
the Conversion
Shares upon each national
securities exchange
or automated quotation
system, ifany,
upon which
shares
of Common Stock
are then listed (subject to
official notice of issuance) and, so long
as the Buyer owns any of the
Note Securities, shall
maintain, so long
as any other shares
of Common Stock shall
be so listed,
such listing of
all Conversion
Shares from time to time issuable upon
conversion of the Note. The Company
will obtain and, so long as the
Buyer owns any of the Securities, maintain the
listing and trading of its
Common Stock
on the OTC MARKETS or any
equivalent replacement market, the Nasdaq stock
market ("Nasdaq") or the New
York Stock Exchange (''NYSE")
and will comply in all respects with the
Company's reporting, filing and
other obligations under the bylaws or rules of the Financial
Industry Regulatory Authority ("FINRA") and such
exchanges, as
applicable. The Company
shall promptly provide to the Buyer copies of any
notices it
receives from the OTC MARKETS
and any other markets on which
the Common Stock
is then listed
regarding the continued eligibility of the Common Stock
for listing on such
markets.
c. Corporate Existence. So long as
the Buyer beneficially owns the
Note, the Company shall
maintain its corporate existence and shall not sell
all or substantially
all of the Company's assets, except in the event of a merger or
consolidation or
sale of all or substantially all
of the Company's assets,
where the surviving or successor entity in such
transaction (i) assumes the
Company's obligations hereunder and under the agreements and
instruments entered into in connection
herewith and (ii) is
a publicly traded corporation
whose Common
Stock is
listed for trading on the OTC MARKETS, Nasdaq or
NYSE.
d. No
Integration. The
Company shall not make any offers or sales
of any security (other than the Securities) under
circumstances that would require
registration of the Securities being offered or sold
hereunder under the
1933 Act or
cause the offering of
the Securities to be integrated with
any other offering of securities by
the Company for the purpose of any stockholder approval
provision applicable to the Company or its
securities.
e. Breach of Covenants. If
the Company breaches any of the covenants set forth in this
Section 4, and in
addition to any other remedies available to the
Buyer pursuant
to this Agreement, it
will be considered
an event of default under
the Note.
5. Governing Law;Miscellaneous.
a. Governing Law. This Agreement shall
be governed by
and construed in accordance with
the laws
of the State of Nevada without
regard to principles of
conflicts of laws.
Any action
brought by either party
against
the other concerning the transactions contemplated by this Agreement shall
be brought only in the
state courts of New
York or in the federal courts located
in the state and
county of New York. The parties to this
Agreement hereby irrevocably
waive any objection
to jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack
of jurisdiction or venue or based upon forum non conveniens.
The Company and Buyer waive trial by
jury. The prevailing party shall be entitled to
recover from the other party its reasonable attorney's fees and costs. Each
party hereby irrevocably waives personal service of
process and consents to process being served in any
suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a
copy thereof via registered or certified mail or
overnight delivery (with
evidence of delivery) to such
party at the address in effect for notices to
it under this Agreement
and agrees that such service
shall constitute good and
sufficient service of process
and notice thereof.
Nothing contained herein
shall be deemed to limit in any way any right
to serve process in any other manner permitted by
law.
b. Counterparts;Signatures by Facsimile. This Agreement may be executed in one or more
counterparts, each of which
shall be deemed an original but
all of which shall
constitute one and the
same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a
party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement, or
electronic mail transmission of a ".pdf' copy of this
Agreement, bearing the signature of the party so delivering
this Agreement.
c. Headings.
The headings
of this Agreement
are for convenience
of reference only and shall not
form part of,
or affect the interpretation of, this
Agreement.
d. Severability. In the event
that any provision
of this Agreement
is invalid or unenforceable
under any applicable statute or
rule of law, then such
provision shall be deemed inoperative to the extent that it
may conflict
therewith and shall be deemed modified to conform with such
statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any
other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein
contain the entire understanding of the parties
with respect to the
matters covered herein
and therein and,
except as specifically set forth herein or
therein, neither the Company nor
the Buyer makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this
Agreement may be waived or amended other than by
an instrument in writing
signed by the waiving party, in the
case of a waiver, or by
the Company and a
majority in interest
of the Buyer, in the
case of an amendment.
f. Notices.
All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be
in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, (iv) via electronic mail or (v)
transmitted by hand delivery,
telegram, or facsimile,
addressed as set forth below or
to such other address as such
party shall have
specified most recently by written notice. Any notice or other communication required or permitted to
be given hereunder shall be
deemed effective (a)
upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the
address or number designated below (if delivered
on a business day during normal business hours where such notice is to
be received) or delivery via
electronic mail, or
the first business
day following such delivery (if
delivered
other than on
a business day during normal
business hours
where such notice is
to be received) or (b)
on the second business day
following the date of mailing by express
courier service, fully
prepaid, addressed to such
address, or upon actual
receipt of such mailing,
whichever shall first
occur. The addresses
for such communications shall
be:
If to the Company, to:
Guided Therapeutics, Inc.
5835 Peachtree Corners
East,
Suite D
Norcross,
GA 30092
Attn: Gene S. Cartwright, CEO
If to the
Buyer:
EAGLE EQUITIES,
LLC
91 Shelton
Ave, Suite 107
New Haven,
CT 06511
Attn: Yakov
Borenstein
Each party shall provide
notice to the
other party of any
change in address.
g. Successors
and Assigns.
This Agreement shall
be binding upon and inure to the
benefit of the
parties and
their successors
and assigns.
Neither the Company
nor the Buyer shall
assign this Agreement
or any rights
or obligations
hereunder without the
prior written consent
of the other. Notwithstanding the foregoing, the
Buyer may
assign its
rights hereunder
to any of
its "affiliates," as
that term is defined
under the
1934 Act, without
the consent of
the Company with Buyer's Opinion of
Counsel.
h. Third Party
Beneficiaries.
This Agreement is
intended for the benefit
of the parties hereto and their
respective
permitted successors and
assigns, and is
not for the benefit
of, nor
may any
provision
hereof be enforced by, any
other person.
i. Survival.
The representations
and warranties of
the Company
and the
agreements
and covenants
set forth
in this Agreement shall
survive the closing
hereunder notwithstanding
any due diligence
investigation
conducted by or on behalf
of the Buyer.
The Company agrees to indemnify and
hold harmless
the Buyer and
all their
officers, directors, employees
and agents for
loss or
damage arising as
a result
of or related to
any breach
by the
Company
of any of its
representations, warranties
and covenants set forth
in this Agreement or
any of its
covenants and obligations
under
this Agreement, including
advancement
of expenses
as they are incurred.
j.
Further Assurances. Each party
shall do and perform, or
cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably
request in order to
carry out the intent and
accomplish the purposes
of this Agreement and the consummation of the transactions contemplated
hereby.
k. No
Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their
mutual intent,
and no rules of strict construction will be applied against any party.
l. Remedies.
The Company acknowledges that
a breach by it
of its obligations hereunder will cause irreparable harm to the Buyer
by vitiating
the intent and purpose of
the transaction
contemplated hereby. Accordingly, the Company
acknowledges that
the remedy at law
for a breach of its
obligations under this
Agreement will be inadequate
and agrees, in the event
of a breach or threatened
breach by the Company of
the provisions
of this Agreement, that the Buyer shall be entitled, in addition to all other
available remedies at
law or in
equity, and in
addition to the
penalties assessable
herein, to
an injunction or injunctions
restraining, preventing or curing any breach of
this Agreement
and to enforce specifically the terms and
provisions hereof, without the necessity
of showing economic loss
and without any bond or other
security being
required.
IN WITNESS WHEREOF, the
undersigned Buyer and
the Company have caused
this Agreement to be
duly executed
as
of the date
first above written.
GUIDED THERAPEUTICS, INC.
By: /s/ Gene
S. Cartwright
Name:
Gene S. Cartwright
Title:
CEO
EAGLE EQUITIES, LLC
By:
/s/ Yakov Borenstein
Name:
Yakov Borenstein
Title:
Manager
AGGREGATE SUBSCRIPTION AMOUNT: $200,000.01
Aggregate Principal Amount
ofNotes: Aggregate Purchase
Price: Note 1:
$66,666.67, less $6,666.67 in OID, less $3,000.00
in legal fees, less
fees of $6,000.00 to Moody Capital
Solutions, Inc.
Back End Note 1: $66,666.67, less
$6,666.67 in OID,
less $3,000.00 in legal fees,
less fees of $6,000.00 to Moody Capital Solutions, Inc. Back End
Note 2: $66,666.67, less $6,666.67 in OID,
less $3,000.00 in
legal fees, less
fees of $6,000.00 to Moody
Capital Solutions,
Inc.
EXHIBIT A 144 NOTE -$66,666.67
EXHIBIT
B
BACK
END NOTE 1-$66,666.67
EXHIBIT
C BACK END NOTE 2-$66,666.67
SECURITIES PURCHASE
AGREEMENT
THIS PURCHASE AGREEMENT
("Agreement") is made as of the 17th
day of May,
2018 by and between
Guided
Therapeutics, Inc., (the "Company"),
and GHS Investments, LLC
(the "Investor").
Recitals
A. The Investor wishes to purchase from the
Company and the Company wishes to sell
and issue to the Investor, upon the
terms and conditions stated in
this Agreement:
1.
$9,250 of
Securities, in the form of a Promissory Note (the "Note"),
attached hereto.
In consideration of the mutual promises made
herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1.
Definitions. In addition to those
terms defined above and elsewhere in this
Agreement, for the purposes of this
Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" means, with respect
to any Person,
any other Person which directly or
indirectly through one or more intermediaries
Controls, is controlled by, or is under
common control with,
such Person.
"Business
Day" means a day, other than a Saturday or Sunday, on
which banks in New York City are open for the general transaction
of business.
"Common
Stock Equivalents" means any
securities of the Company or the Subsidiaries which would entitle
the holder thereof to acquire at any time Common Stock, including
without limitation,
any debt, preferred
stock, rights,
options, warrants or other instrument
that is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to
receive, Common Stock.
"Company's Knowledge"
means the actual knowledge of the executive
officers (as defined in Rule 405 under the 1933 Act) of the
Company, after due inquiry.
"Confidential Information" means trade
secrets, confidential information and know-how (including
but not limited to ideas, formulae,
compositions, processes,
procedures and techniques, research
and development information, computer program
code, performance specifications, support documentation,
drawings, specifications, designs, business and
marketing plans,
and customer and supplier lists and
related information).
"Control" (including the terms "controlling", "controlled
by" or "under common control with") means the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a
Person, whether through the ownership of voting
securities, by contract or otherwise.
"Intellectual Propertv" means all of
the following: (i) patents, patent
applications,
patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice);
(ii) trademarks,
service marks, trade dress, trade
names, corporate names, logos, slogans and Internet domain
names, together with
all goodwill associated with each of the foregoing; (iii)
copyrights and copyrightable works;(iv)
registrations,
applications and renewals for any of
the foregoing; and (v) proprietary computer software (including but
not limited to data, data bases and
documentation).
"Material Adverse Effect" means a material adverse
effect on (i) the assets, liabilities, results of
operations, condition (financial or otherwise),
business, or prospects of the Company and its Subsidiaries
taken as a whole,
or (ii) the ability of the Company to
perform its obligations under the Transaction
Documents.
"Person" means
an individual, corporation,
partnership,
limited liability company,
trust, business trust, association,
joint stock company,
joint venture, sole
proprietorship,
unincorporated
organization,
governmental authority or any other
form of entity not specifically listed herein.
"Purchase
Price" means $7,500, representing a 10% original issuance discount
on the Note and an initial $1,000 being withheld by the Investor to
offset legal and other transaction costs.
"SEC"
means the United States Securities and
Exchange Commission.
"Securities"
means the Note and the common shares issuable at
conversion.
"Subsidiary" of
any Person means another Person, an amount of the
voting securities, other voting
ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors
or other governing body (or, if there are
no such voting interests, 50% or more
of the equity interests of which) is owned directly or
indirectly by such first Person.
"Transaction Documents" means this
Agreement, the Note, the Company Representation Letter, and
supporting documents.
"1933 Act" means the
Securities Act of 1933,
as amended, or any
successor statute, and the rules and regulations
promulgated thereunder.
" 1934
Act" means the Securities Exchange Act
of 1934, as amended, or any
successor statute,
and the rules and
regulations promulgated thereunder.
2. Purchase and Sale of the Securities. Subject to
the terms and conditions of this Agreement, the Company shall sell
and issue to the Investor a Promissory Note in the principal amount
of$9,250.
2.1
Security As Security for the Company's obligations contained herein
and in the Note issued by the Company to the Holder, following any
Event of Default which remains uncured for fifteen (IS) calendar
days, the Holder shall be granted an unconditional security
interest in and to, any and all property of the Company and its
subsidiaries, of any kind or description, tangible or intangible,
whether now existing or hereafter arising or acquired until the
balance of the Note has been reduced to $0. "Any and all property,"
as described herein shall be inclusive of, but not limited to,
assets reported by the Company on its SEC filings, cash, inventory,
accounts receivable, intellectual property rights, equipment and
property. The Investor is authorized to make all filings the
Investor, in its discretion, deems necessary to evidence its
security interests.
3. Closing. Upon confirmation that the other
conditions to closing specified herein have been satisfied or duly
waived by the Investor, the Company shall deliver to the Investor,
a Note registered the name of the Investor and the Investor shall
cause a wire transfer in same day funds to be sent to the account
of the Company as instructed in writing by the
Company, in an amount representing the Purchase Price for
the Note (the "Closing
Date").
4. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Investor that,
except as set forth in the schedules delivered herewith
(collectively,
the "Disclosure
Schedules") and as disclosed in the Company's
SEC Filings:
4. I Organization. Good Standing and
Qualification. Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its
business as now
conducted and to own its
properties. Each of
the Company and its Subsidiaries is duly qualified to
do business as a foreign corporation and is in good standing in
each jurisdiction in which the conduct of its business or its
ownership or leasing of property makes such qualification or
leasing necessary unless the failure to so qualify has not and
could not reasonably be expected to have a Material Adverse Effect.
The Company's Subsidiaries are listed on the
Company's public disclosures filed with the
SEC.
4.2 Authorization. The
Company has full power and authority
and, has taken all requisite action on the part of the
Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and
delivery of the Transaction Documents, (ii)
authorization of the performance of all obligations of the Company
hereunder or thereunder,
and (iii) the
authorization,
issuance (or reservation for issuance)
and delivery of the Securities. The Transaction Documents
constitute the legal,
valid and binding obligations of the
Company, enforceable against the
Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium
and similar laws of general applicability, relating to
or affecting creditors'
rights generally.
4.3 Capitalization. As of the date
hereof, the authorized common stock of the Company on the date
hereof is 1,000,000,000 (b)
the number of shares of capital stock issued and outstanding as
of 5/17/2018
is 195,178,173 (c) the number of shares of capital stock issuable
pursuant to the Company's stock plans' ;and (d) the
number of shares of capital stock issuable and
reserved for issuance pursuant to securities (other than the
Securities) exercisable for, or
convertible into or exchangeable for any shares of capital stock of
the Company as of 5/17/2018 are
872,084,220. All of the
issued and outstanding shares of the Company's
capital stock have been duly authorized and validly issued
and are fully paid, nonassessable and free of
pre-emptive rights. All of the issued
and outstanding shares of capital stock of each Subsidiary have
been duly authorized and validly issued and are fully
paid, nonassessable and free of pre-emptive rights, were
issued in full compliance with applicable state and federal
securities law and any rights of third parties and are owned
by the Company,
beneficially and of record,
subject to no lien, encumbrance or
other adverse claim. No Person is entitled to pre-emptive or
similar statutory or contractual rights with respect to
any securities of the Company. Other than described herein and in
the Company's periodic reports filed with the SEC, there are no
outstanding warrants, options, convertible securities or other
rights, agreements or arrangements of any character under
which the Company or any of its Subsidiaries is or may be obligated
to issue any equity securities of any kind and except as
contemplated by this Agreement, neither the
Company nor any of its Subsidiaries is currently in negotiations
for the issuance of any equity securities of any
kind.
The issuance and sale of the Securities hereunder
will not obligate the Company to issue shares of Common Stock or
other securities to any other Person (other than the Investor) and
will not result in the
adjustment of the exercise, conversion, exchange or
reset price of any outstanding security.
The Company does not have outstanding stockholder
purchase rights or "poison pill"
or any similar arrangement in effect giving any Person the right to
purchase any equity interest in the
Company upon the occurrence of certain events.
4.4 Valid Issuance. The issued Securities have
been duly and validly authorized and, when issued
and paid for pursuant to this Agreement, shall be
free and clear of all encumbrances and restrictions (other than
those created by the Investor), except for
restrictions on transfer set forth in the Transaction Documents or
imposed by applicable
securities laws. Upon the due conversion of the Debenture, the
Converted Shares will be validly issued, fully paid
and non-assessable free and clear of all encumbrances and
restrictions,
except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable
securities laws and except for those created by the Investor. The
Company has reserved a sufficient number of shares of Common Stock
for issuance upon the exercise of the Debenture, free and
clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws and except for those created
by the Investor.
4.5 Consents. The execution, delivery and
performance by the Company of the Transaction
Documents, and the offer, issuance and
sale of the Securities require no consent of, action by or
in respect of, or filing with, any
Person, governmental body, agency, or
official other than filings that have been made pursuant to
applicable state securities laws, and post-sale filings pursuant to
applicable state and federal securities laws which the Company
undertakes to file within the applicable time periods. Subject to
the accuracy of the representations and warranties of the Investor
set forth in Section 5 hereof, the Company has taken all action
necessary to exempt (i) the issuance and sale of the
Securities, (ii) the issuance of the Shares upon due conversion of
the Debenture,
and (iii) the other transactions
contemplated by the Transaction Documents from the provisions of
any shareholder rights plan or other "poison
pill" arrangement, any anti-takeover, business
combination or control share law or statute binding on the Company
or to which the Company or any of its assets and properties may be
subject and any provision of the Company's Articles of
Incorporation or By-laws that is or could reasonably be expected to
become applicable to the Investor as a result of the transactions
contemplated hereby,
including without
limitation, the issuance of the Securities and the
ownership, disposition or voting of the Securities by the
Investor or the exercise of any right granted to the Investor
pursuant to this Agreement or the other Transaction
Documents.
4.6 Delivery of SEC Filings; Business. The Company
has made available or shall make available, within twenty calendar
days from the execution of this Agreement, to the Investor through
the EDGAR system,
true and complete copies of the
Company's most recent Annual Report on Form
IO-K for its last fiscal year (the
" IO-K"), and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the 10-K and prior to
the date hereof (collectively, the "SEC Filings"). The SEC
Filings are the only filings required of the Company pursuant to
the 1934 Act for such period. The Company and its Subsidiaries are
engaged in all material respects only in the business described in
the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company
and its Subsidiaries,
taken as a whole.
4.7 Use of Proceeds. The net proceeds of
the sale of the Note hereunder shall be used by the
Company for working capital and general corporate purposes. The
Company agrees that it shall not use the funds from this
Agreement, at any time, to lend
money, give credit or make advances to any
officers, directors, employees, subsidiaries
and affiliates of the Company.
4.8 No Conflict, Breach, Violation or Default. The
execution, delivery and performance of the Transaction
Documents by the Company and the issuance and sale of the
Securities will not conflict with or result in a breach or
violation of any of the terms and provisions of, or
constitute a default under (i) the Company's Articles of
Incorporation or the Company's Bylaws, both as in
effect on the date hereof (true and complete copies of which have
been made available to the Investor through the EDGAR
system), or (ii)(a) any statute, rule,
regulation or order of any
governmental agency or body or any court, domestic or
foreign, having jurisdiction over the
Company, any Subsidiary or any of their respective assets
or properties,
or (b) any agreement or instrument to which the Company
or any Subsidiary is a party or by which the Company or a
Subsidiary is bound or to which any of their respective assets or
properties is subject.
4.9 Brokers and Finders. No Person will
have, as a result of the transactions contemplated by
the Transaction Documents, any valid
right, interest or claim against or upon the Company, any
Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the
Company.
4.10 No Directed Selling Efforts or General
Solicitation. Neither the Company nor any Person acting on its
behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D) in connection
with the offer or sale of any of the Securities.
4.11 No Integrated Offering. Neither the Company
nor any of its Affiliates, nor any
Person acting on its or their behalf has, directly or indirectly,
made any offers or sales of any Company security or solicited any
offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the
exemption from registration for the transactions contemplated
hereby or would require
registration of the Securities under the 1933
Act.
4.12
Private Placement. The offer and sale of the Securities to the
Investor as contemplated hereby is exempt from the registration
requirements of the 1933 Act.
5.
Representations and Warranties of the
Investor. The Investor hereby represents and
warrants to the Company that:
5.1 Organization and Existence. Such
Investor is a validly existing corporation, limited partnership or
limited liability company and has all requisite corporate,
partnership or limited liability company power and authority to
invest in the Securities pursuant to this
Agreement.
5.2 Authorization. The
execution, delivery and performance by such Investor of the
Transaction Documents to which such Investor is a party have been
duly authorized and will each constitute the valid and legally
binding obligation of such Investor, enforceable
against such Investor in accordance with their respective
terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium
and similar laws of general applicability, relating to
or affecting creditors'
rights generally.
5.3 Purchase Entirely for Own Account. The
Securities to be received by sucb Investor hereunder will be
acquired for such Investor's own
account, not as nominee or agent, and not with a view to the resale
or distribution of
any part thereof in violation of the
1933 Act, and such Investor has no present intention of
selling, granting any participation in, or otherwise
distributing the same in violation of the 1933 Act without
prejudice, however, to such
Investor's right at all times to sell or otherwise dispose of all
or any part of such Securities in compliance with applicable
federal and state securities laws. Nothing contained herein shall
be deemed a representation or warranty by such Investor to hold the
Securities for any period of time. Such Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in
a business that would require it to be so
registered.
5.4 Investment Experience. Such Investor
acknowledges that it can bear the economic risk and complete loss
of its investment in the Securities and has such knowledge and
experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated
hereby.
5.5 Disclosure of Information. Such
Investor has had an opportunity to receive all information related
to the Company
requested by it and to ask questions
of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the
Securities. Such Investor acknowledges receipt of copies of the SEC
Filings. Neither such inquiries nor any other due diligence
investigation conducted by such Investor shall modify, amend or
affect such Investor'
s right to rely on the Company's
representations and warranties contained in this
Agreement.
5.6 Restricted
Securities. Such Investor understands that the Securities are
characterized as "restricted
securities" under the U.S. federal securities laws inasmuch as
they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration
under the 1933 Act only in certain limited
circumstances.
5.7 Legends. It
is understood that, except as provided
below, certificates evidencing the Securities may bear the
following or any similar legend:
(a) "The
securities represented hereby may not be transferred unless (i)
such securities have been registered for sale pursuant to the
Securities Act of 1933,
as amended, (ii) such
securities may be sold pursuant to Rule l44(i), or (iii) the
Company has received an opinion of counsel reasonably satisfactory
to it that such transfer may lawfully be made without registration
under the Securities Act of 1933 or qualification under applicable
state securities laws."
(b) If required by the authorities of
any state in connection with the issuance of sale of the
Securities, the legend required by such state
authority.
5.8
Accredited Investor. Such Investor is an accredited investor as
defined in Rule 501 (a) of Regulation D, as amended, under the 1933
Act.
5.9 No General
Solicitation. Such Investor did not learn of the investment in the
Securities as a result of any public advertising or general
solicitation.
5.10 Brokers and Finders. No Person will have, as
a result of the transactions contemplated by the Transaction
Documents, any valid right, interest or
claim against or upon the Company, any
Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of such
Investor.
6.
Conditions to Closing.
6.1 Conditions to the Investor's Obligations. The
obligation of the Investor to purchase the Note at
Closing is subject to
the fulfillment to such
Investor's satisfaction, on or
prior to the Closing Date, of the following conditions,
any of which may be
waived by the Investor:
(a) The representations and warranties made
by the Company in Section 4
hereof qualified as to materiality shall be true and correct at
all times prior to and on the Closing
Date, except to the extent any
such representation or warranty expressly speaks as of an
earlier date,
in which case such representation or
warranty shall be true and correct as of such earlier
date, and, the
representations and warranties
made by the Company in Section 4 hereof not qualified as
to materiality shall be true and correct in all material respects
at all times prior
to and on the Closing Date,
except to the extent any such representation or warranty
expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and
correct in all material respects as of such earlier date. The Company
shall have performed
in all material respects all
obligations and conditions herein required to be performed
or observed by it on or prior to the Closing
Date.
(b) The Company shall have obtained any and all
consents, permits, approvals, registrations and waivers necessary
or appropriate for consummation of the purchase
and sale of the Securities, and
the consummation of the other transactions
contemplated by
the Transaction Documents, all of
which shall be in full force and effect.
(c) No judgment, writ, order, injunction, award or
decree of or by any court, or
judge, justice or magistrate, including any
bankruptcy court or judge, or any
order of or by
any governmental authority, shall have
been issued, and no action or proceeding shall have been instituted by
any governmental authority, enjoining or preventing the
consummation of the
transactions contemplated hereby or in
the other Transaction Documents.
(d)
The Company shall have executed and delivered the Convertible Note
and supporting documentation.
(e)
The Company shall have executed and delivered the Irrevocable
Transfer Agent Instructions.
(f) No stop order or suspension of
trading shall have been imposed by the public markets on which the Company's common stock is
traded or quoted,
the SEC or any other governmental
or regulatory
body with respect to public
trading in the Common Stock.
6.2 Conditions
to Obligations of the Company. The Company's obligation to sell
and issue the Note at Closing is subject to
the fulfillment to the satisfaction of the Company on or
prior to the Closing Date of the following conditions, any
of which may be
waived by the
Company:
(a) The representations and warranties made by the
Investor in Section 5 hereof, other than the representations and
warranties contained in Sections 5.3, 5.4,
5.5, 5.6,
5.7, 5.8 and 5.9
(the "Investment Representations"), shall be
true and correct in all material respects when
made, and shall be true and correct in all material
respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all
respects when made,
and shall be true and correct in all
respects on the Closing Date with the same force and effect as if
they had been made on and as of said date. The Investor
shall have performed in all material respects all obligations and
conditions herein required to be performed or observed by them on
or prior to the Closing Date.
(b) The Investor shall
have delivered the Purchase Price to the Company in accordance with
the schedule outlined herein.
6.3
Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one
hand, and the Investor, on the other
hand, to effect the Closing shall terminate as
follows:
(i) Upon the mutual written consent of the
Company and the Investor;
(ii) By the Company if
any of the conditions set forth in
Section 6.2 shall have become incapable of
fulfillment,
and shall not have been waived by
the Company;
(iii) By the Investor if any of the
conditions set forth in Section
6.1 shall have become
incapable of fulfillment, and shall
not have been waived by the Investor; or
provided, however, that,
except in the case of clause
(i) above, the party seeking to terminate its obligation to
effect the Closing shall not then be in breach of any of its
representations,
warranties, covenants or
agreements contained in this
Agreement or the other Transaction Documents if such breach
has resulted in the
circumstances giving rise to such party's seeing to
terminate its obligation to effect the Closing.
7.
Survival and Indemnification.
7. I Survival. The representations,
warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions
contemplated by this Agreement.
7.2 Indemnification. The Company agrees to
indemnify and hold harmless each Investor and its Affiliates and
their respective directors, officers, employees
and agents from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable
attorney fees and disbursements and other expenses incurred in
connection with investigating, preparing or
defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof)
(collectively,
"Losses") to which
such Person may become subject
as a result of any breach of representation, warranty, covenant
or agreement made by or to be performed on the part of the
Company under the Transaction Documents,
and will reimburse any such Person for aU such amounts
as they are incurred by such Person.
7.3 Conduct
of Indemnification Proceedings.
Promptly after receipt by any Person (the "Indemnified Person") of
notice of any
demand, claim or circumstances which
would or might give rise to a claim or
the commencement
of any action,
proceeding or investigation in respect
of which indemnity may be sought pursuant to Section
7.2, such Indemnified Person shall
promptly notify the
Company in writing and the Company shall assume the
defense thereof,
including the employment of
counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and
expenses; provided, however,
that the failure of any
Indemnified Person so to notify the Company shall not relieve the Company of its
obligations hereunder except to the extent that the
Company is materially prejudiced by such failure to
notify. In any such proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person
unless: (i) the Company and
the Indemnified Person shall have mutually agreed to the retention
of such counsel;or (ii)
in the reasonable judgment of
counsel to such Indemnified Person representation of both parties by the same counsel would be
inappropriate due to actual
or potential differing
interests between them. The
Company shall not be liable for
any settlement of any proceeding effected without its written consent, which
consent shall not be
unreasonably withheld, but if settled with such consent, or if
there be a final judgment for the
plaintiff, the Company shall
indemnify and hold harmless
such Indemnified Person from and against any loss or
liability (to the extent stated above) by reason
of such settlement or judgment.
Without the prior written consent of the
Indemnified Person,
which consent shall
not be unreasonably withheld, the Company
shall not affect any
settlement of
any pending or threatened proceeding
in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional
release of such Indemnified Person from all liability arising out
of such proceeding.
8.
Miscellaneous.
8.1 Successors and Assigns. This
Agreement may not be assigned by a party hereto
without the prior written consent of the Company
or the Investor, as applicable, provided,
however, that an Investor may assign its
rights and delegate its duties hereunder in whole or in part to
an Affiliate
or to a third party acquiring
some or all of its Securities in a private
transaction without the prior written consent of the
Company, after notice duly given by such Investor to the Company. The
provisions of this Agreement shall inure to
the benefit of
and be binding upon the respective
permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their
respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this
Agreement, except as
expressly provided in
this Agreement.
8.2 Counterparts; This Agreement may be executed in
two or more counterparts, each of
which shall be
deemed an original, but
all of which together shall constitute one
and the same instrument.
This Agreement may also be executed
via facsimile,
which shall be deemed an
original.
8.3
Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this
Agreement.
8.4 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such
notice shall be deemed given upon such delivery, (ii) if given by
fax, then such notice shall be deemed given upon receipt of
consummation of complete transmittal, (iii) if given by
mail, then such notice shall be deemed given upon the
earlier of (A) receipt of such notice by the recipient or
(B)
three days after such notice
is deposited in first class mail, postage
prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one
business day after delivery to such carrier. All
notices shall be addressed to the
party to be notified at the address as follows, or at such other
address as such party may designate by ten days' advance written
notice to the other party:
If
to the Company:
Attn: ______
_
Fax: _______________ Tel: _______
__
If
to the Investor:
GHS Investments, LLC 420
Jericho Turnpike, Suite 207 Jericho, NY 11753
8.5 Expenses. The parties hereto shall pay their
own costs and expenses in connection herewith. In the event
that legal proceedings are commenced by any party to this
Agreement against another party to this Agreement in connection
with this Agreement or the other Transaction
Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata
share of the reasonable attorneys' fees and other reasonable
out-of-pocket costs and expenses incurred by the prevailing party
in such proceedings.
8.6 Amendments and Waivers. Any term of this
Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a
particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the Investor. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of
any Securities purchased under this Agreement at the time
outstanding, each future holder of all such Securities, and the
Company.
8.7 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be
interpreted as if
it were written so as to be enforceable to the
maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any
other jurisdiction.
To the extent permitted by applicable
law, the parties hereby waive any provision of law which renders
any provision hereof prohibited or unenforceable in any
respect.
8.8
Entire Agreement. This Agreement, including the Exhibits and the
Disclosure Schedules, and the other Transaction Documents
constitute the entire agreement among the parties hereof with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, both oral and written, between
the parties with respect to the subject matter hereof and
thereof.
8.9 Further Assurances. The parties shall execute
and deliver all such further instruments and documents and take all such other actions as
may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillments of the
agreements herein contained.
8.10 Governing Law;Consent to
Jurisdiction; Waiver of Jury Trial. This Agreement shall
be governed by, and construed in accordance with, the
internal laws of the State of Nevada, without
regard to principles of conflicts of law. Each of the parties
hereto irrevocably
submit to the exclusive jurisdiction
of the state and federal courts sitting in New York City, New York
over any action or proceeding arising out of or relating
to this Agreement and the parties hereto
hereby irrevocably
agree that all claims in respect of
such action or proceeding may be heard and determined in such
court. The parties hereto agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in
any other manner provided by
law. The parties hereto further waive any objection to
venue in the State of New York and any objection
to an action or proceeding in the State of New York
on the basis of forum non conveniens.
[signature page follows]
IN WITNESS WHEREOF, the parties
have executed this Agreement or caused their duly authorized
officers to execute this Agreement as of the date first above
written.
The Company:
/s/
Gene S. Cartwright
Gene
S. Cartwright
CEO
Guided
Therapeutics, Inc.
Investor:
/s/
Mark Grober
Mark
Grober
Title:
Member
GHS
Investments, LLC.
Disclosure Schedules/
Exhibits
SECURITIES PURCHASE
AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the
“Agreement”), dated as of March 20, 2018, by and
between GUIDED THERAPEUTICS,
INC., a Delaware corporation,
with headquarters located at 5835 Peachtree Corners East, Suite D,
Norcross, GA 30092 (the “Company”), and
AUCTUS FUND,
LLC, a Delaware limited
liability company, with its address at 177 Huntington Avenue, 17th
Floor, Boston, MA 02115 (the
“Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933
Act”);
B.
Buyer desires to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement the
12% convertible note of the Company, in the form attached hereto as
Exhibit A, in the aggregate principal amount of US$150,000.00
(together with any note(s) issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the “Note”), convertible into
shares of common stock, $0.001 par value per share, of the Company
(the “Common Stock”), upon the terms and subject to the
limitations and conditions set forth in such Note.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto;
and
NOW THEREFORE, the Company and the Buyer
severally (and not jointly) hereby agree as follows:
1.
PURCHASE AND SALE OF
NOTE.
a. Purchase of
Note. On the Closing Date (as
defined below), the Company shall issue and sell to the Buyer and
the Buyer agrees to purchase from the Company such principal amount
of Note as is set forth immediately below the Buyer’s name on
the signature pages hereto. In connection with the issuance of the
Note, the Company shall issue warrants to Buyer to purchase
3,409,090 shares of common stock.
b. Form of
Payment. On the Closing Date
(as defined below), (i) the Buyer shall pay the purchase price for
the Note to be issued and sold to it at the Closing (as defined
below) (the “Purchase Price”) by wire transfer of
immediately available funds to the Company, in accordance with the
Company’s written wiring instructions, against delivery of
the Note in the principal amount equal to the Purchase Price as is
set forth immediately below the Buyer’s name on the signature
pages hereto, and (ii) the Company shall deliver such duly executed
Note on behalf of the Company, to the Buyer, against delivery of
such Purchase Price.
c. Closing
Date. Subject to the
satisfaction (or written waiver) of the conditions thereto set
forth in Section 7 and Section 8 below, the date and time of the
issuance and sale of the Note pursuant to this Agreement (the
“Closing Date”) shall be 12:00 noon, Eastern Standard
Time on or about March 20, 2018, or such other mutually agreed upon
time. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur on the Closing
Date at such location as may be agreed to by the
parties.
2.
REPRESENTATIONS AND
WARRANTIES OF THE BUYER. The Buyer represents and warrants
to the Company that:
a.
Investment Purpose.
As of the date hereof, the Buyer is purchasing the Note and the
shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Note (including, without limitation, such
additional shares of Common Stock, if any, as are issuable (i) on
account of interest on the Note (ii) as a result of the events
described in Sections
1.3 and
1.4(g) of the Note or (iii) in payment of the Standard Liquidated
Damages Amount (as defined in Section 2(f) below) pursuant to this
Agreement, such shares of Common Stock being collectively referred
to herein as the “Conversion Shares” and, collectively
with the Note, the “Securities”) for its own account
and not with a present view towards the public sale or distribution
thereof, except pursuant to sales registered or exempted from
registration under the 1933 Act and Buyer is able to bear the
economic risk of holding the Conversion Shares for an indefinite
period (including total loss of its investment), and has sufficient
knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risk of its investment.
provided,
however, that by
making the representations herein, the Buyer does not agree to hold
any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
b. Accredited Investor
Status. The Buyer is an
“accredited investor” as that term is defined in Rule
501(a) of Regulation D (an “Accredited
Investor”).
c. Reliance on
Exemptions. The Buyer
understands that the Securities are being offered and sold to it in
reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the
Buyer’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the
Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as
the Note remains outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the
Securities which have been requested by the Buyer or its advisors.
The Buyer and its advisors, if any, have been, and for so long as
the Note remains outstanding will continue to be, afforded the
opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Buyer any material
nonpublic information and will not disclose such information unless
such information is disclosed to the public prior to or promptly
following such disclosure to the Buyer. Neither such inquiries nor
any other due diligence investigation conducted by Buyer or any of
its advisors or representatives shall modify, amend or affect
Buyer’s right to rely on the Company’s representations
and warranties contained in Section 3 below. The Buyer understands
that its investment in the Securities involves a significant degree
of risk. The Buyer is not aware of any facts that may constitute a
breach of any of the Company's representations and warranties made
herein.
e. Governmental
Review. The Buyer understands
that no United States federal or state agency or any other
government or governmental agency has passed upon or made any
recommendation or endorsement of the
Securities.
f. Transfer or
Re-sale. The Buyer understands
that (i) the sale or re-sale of the Securities has not been and is
not being registered under the 1933 Act or any applicable state
securities laws, and the Securities may not be transferred unless
(a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Buyer shall have delivered to
the Company an opinion of counsel of Buyer reasonably satisfactory
to the Company’s transfer agent that shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the
Company, (c) the Securities are sold or transferred to an
“affiliate” (as defined in Rule 144 promulgated under
the 1933 Act (or a successor rule) (“Rule 144”)) of the
Buyer who agrees in writing to be bound by this Agreement and who
is an Accredited Investor, (d) the Securities are sold pursuant to
Rule 144, or (e) the Securities are sold pursuant to Regulation S
under the 1933 Act (or a successor rule) (“Regulation
S”), and the Buyer shall have delivered to the Company an
opinion of counsel of Buyer reasonably satisfactory to the
Company’s transfer agent that shall be in form, substance and
scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of
such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is
not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the
1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of
any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the
Securities may be pledged as collateral in connection with a
bona
fide margin account or other
lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act may be
sold pursuant to Rule 144 or Regulation S without any restriction
as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):
“NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER DEALER OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT.”
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel
reasonably satisfactory to the Borrower’s transfer agent, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any.
h. Authorization;
Enforcement. Buyer has all
necessary company power and authority to enter into this Agreement,
to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly and
validly authorized. This Agreement has been duly executed and
delivered on behalf of the Buyer, and this Agreement constitutes a
valid and binding agreement of the Buyer enforceable in accordance
with its terms.
i. Residency.
The Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the state of
Delaware.
3.
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY. The Company represents and
warrants to the Buyer that, except as otherwise disclosed in the
SEC Documents (as defined below):
a.
Organization and
Qualification. The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used,
operated and conducted. The Company and each of its Subsidiaries is
duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which its ownership or use
of property or the nature of the business conducted by it makes
such qualification necessary except where the failure to be so
qualified or in good standing would not have a Material Adverse
Effect (except with respect to the re-registration of the
Company’s ISO certification and CE Mark). “Material
Adverse Effect” means any material adverse effect on the
business, operations, assets, financial condition or prospects of
the Company or its Subsidiaries, if any, taken as a whole, or on
the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith provided,
however, that "Material Adverse Effect" shall not include any
event, occurrence, fact, condition or change, directly or
indirectly, arising out of or attributable to: (i) general economic
or political conditions; (ii) conditions generally affecting the
industries in which the Company operates; (iii) any changes in
financial, banking or securities markets in general, including any
disruption thereof and any decline in the price of any security or
any market index or any change in prevailing interest rates; (iv)
acts of war (whether or not declared), armed hostilities or
terrorism, or the escalation or worsening thereof; (v) any action
required or permitted by this Agreement or any action taken (or
omitted to be taken) with the written consent of or at the written
request of Buyer; (vi) any matter of which Buyer is aware on the
date hereof; (vii) any changes in applicable Laws or accounting
rules (including GAAP) or the enforcement, implementation or
interpretation thereof; (viii) the announcement, pendency or
completion of the transactions contemplated by this Agreement,
including losses or threatened losses of employees, customers,
suppliers, distributors or others having relationships with the
Company; (ix) any natural or man-made disaster or acts of God; or
(x) any failure by the Company to meet any internal or published
projections, forecasts or revenue or earnings predictions (provided
that the underlying causes of such failures (subject to the other
provisions of this definition) shall not be excluded).
“Subsidiaries” means any corporation or other
organization, whether incorporated or unincorporated, in which the
Company owns, directly or indirectly, any equity or other ownership
interest.
b. Authorization;
Enforcement. (i) The Company
has all requisite corporate power and authority to enter into and
perform this Agreement, the Note and to consummate the transactions
contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Note by the Company and the
consummation by it of the transactions contemplated hereby and
thereby (including without limitation, the issuance of the Note and
the issuance and reservation for issuance of the Conversion Shares
issuable upon conversion or exercise thereof) have been duly
authorized by the Company’s Board of Directors and no further
consent or authorization of the Company, its Board of Directors, or
its shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.
c. Capitalization.
As of the date hereof, the authorized capital stock of the Company
consists of: (i) 1,000,000,000 shares of Common Stock, of which
approximately 116,140,159 shares are issued and outstanding; and
(ii) 5,000,000 shares of preferred stock, of which approximately
5,944.5 are issued and outstanding. Except No shares are reserved
for issuance pursuant to the Company’s stock option plans, no
shares are reserved for issuance pursuant to securities (other than
the Note and any other convertible promissory note issued to the
Buyer) exercisable for, or convertible into or exchangeable for
shares of Common Stock and 125,000,000 shares (initially) are
reserved for issuance upon conversion of the Note. All of such
outstanding shares of capital stock are, or upon issuance will be,
duly authorized, validly issued, fully paid and non-assessable. No
shares of capital stock of the Company are subject to preemptive
rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. As of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Note or the Conversion Shares. The
Company has filed in its SEC Documents true and correct copies of
the Company’s Certificate of Incorporation as in effect on
the date hereof (“Certificate of Incorporation”), the
Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities convertible
into or exercisable for Common Stock of the Company and the
material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this
representation signed by the Company’s Chief Executive on
behalf of the Company as of the Closing Date.
d. Issuance of
Shares. The issuance of the
Note is duly authorized and, upon issuance in accordance with the
terms of this Agreement, will be validly issued, fully paid and
non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the
issue thereof. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Note in
accordance with its respective terms, will be validly issued, fully
paid and non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability
upon the holder thereof.
e. Acknowledgment of
Dilution. The Company
understands and acknowledges the potentially dilutive effect to the
Common Stock upon the issuance of the Conversion Shares upon
conversion of the Note. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Note
in accordance with this Agreement, the Note is absolute and
unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the
Company.
f. No
Conflicts. The execution,
delivery and performance of this Agreement and the Note by the
Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance of the Conversion Shares)
will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws, or (ii)
violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse
of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party, or
(iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations and regulations of any self-regulatory organizations to
which the Company or its securities are subject) applicable to the
Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or
affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse
Effect).
Neither
the Company nor any of its Subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational
documents and neither the Company nor any of its Subsidiaries is in
default (and no event has occurred which with notice or lapse of
time or both could put the Company or any of its Subsidiaries in
default) under, and neither the Company nor any of its Subsidiaries
has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any
property or assets of the Company or any of its Subsidiaries is
bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect.
The businesses of the Company and its Subsidiaries, if any, are not
being conducted, and shall not be conducted so long as the Buyer
owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, the result of which would
have a Material Adverse Effect. Except as specifically contemplated
by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to
obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Note in accordance with the
terms hereof or thereof or to issue and sell the Note in accordance
with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company is not in violation of
the listing requirements of the OTC Pink (the “OTC
Pink”), the OTCQB or any similar quotation system, and does
not reasonably anticipate that the Common Stock will be delisted by
the OTC Pink, the OTCQB or any similar quotation system, in the
foreseeable future nor are the Company's securities
“chilled” by DTC. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any
of the foregoing.
g.
SEC Documents; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the “1934
Act”) (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC Documents”). The Company
has delivered to the Buyer true and complete copies of the SEC
Documents, except for such exhibits and incorporated documents. As
of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under
applicable law (except for such statements as have been amended or
updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included
in the SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements complied with all respects with United States generally
accepted accounting principles (“GAAP”), consistently
applied, during the periods involved, except as may otherwise be
specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material
respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business
subsequent to September 30, 2017, and (ii) obligations under
contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such
financial statements, which, individually or in the aggregate, are
not material to the financial condition or operating results of the
Company. The Company is subject to the reporting requirements of
the 1934 Act. For the avoidance of doubt, filing of the documents
required in this Section 3(g) via the SEC’s Electronic Data
Gathering, Analysis, and Retrieval system (“EDGAR”)
shall satisfy all delivery requirements of this Section
3(g).
h. Absence of Certain
Changes. Since September 30,
2017, there has been no Material Adverse Effect and the Company has
not incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B)
liabilities not required to be reflected in the Company’s
financial statements pursuant to GAAP or disclosed in filings made
with the SEC. Except for the issuance of the Securities
contemplated by this Agreement, no event, liability, fact,
circumstance, occurrence or development has occurred or exists or
is reasonably expected to occur or exist with respect to the
Company or its Subsidiaries or their respective businesses,
prospects, properties, operations, assets or financial condition
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
that has not been publicly disclosed prior to the date of this
Agreement.
i. Absence of
Litigation. There is no action,
suit, claim, proceeding, inquiry or investigation before or by any
court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse
Effect (except with respect to the lawsuit brought against the
Company by its previous controller). Schedule 3(i) contains a
complete list and summary description of any pending or, to the
knowledge of the Company, threatened proceeding against or
affecting the Company or any of its Subsidiaries involving
estimated damages in excess of $200,000, without regard to whether
it would have a Material Adverse Effect. The Company and its
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
j. Patents, Copyrights,
etc. The Company and each of
its Subsidiaries owns or possesses the requisite licenses or rights
to use all patents, patent applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark applications,
service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to
conduct its business as now operated (and, as presently
contemplated to be operated in the future). There is no claim or
action by any person pertaining to, or proceeding pending, or to
the Company’s knowledge threatened, which challenges the
right of the Company or of a Subsidiary with respect to any
Intellectual Property necessary to enable it to conduct its
business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company’s
knowledge, the Company’s or its Subsidiaries’ current
and intended products, services and processes do not infringe on
any Intellectual Property or other rights held by any person; and
the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing. The Company and each of its
Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of their Intellectual
Property.
k. No Materially Adverse
Contracts, Etc. Neither the
Company nor any of its Subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree,
order, rule or regulation which in the judgment of the
Company’s officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the
judgment of the Company’s officers has or is expected to have
a Material Adverse Effect.
l. Tax
Status. Except as would not
reasonably be expected to have Material Adverse Effect, the Company
and each of its Subsidiaries has made or filed all federal, state
and foreign income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its
Subsidiaries has set aside on its books provisions reasonably
adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in
good faith and has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not
executed a waiver with respect to the statute of limitations
relating to the assessment or collection of any foreign, federal,
state or local tax. None of the Company’s tax returns is
presently being audited by any taxing
authority.
m. Certain
Transactions. Except for
arm’s length transactions pursuant to which the Company or
any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of
its Subsidiaries could obtain from third parties and other than the
grant of stock options described in Schedule 3(c), none of the
officers, directors, or employees of the Company is presently a
party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer,
director, trustee or partner.
n. Disclosure.
All information relating to or concerning the Company or any of its
Subsidiaries set forth in this Agreement and provided to the Buyer
pursuant to Section 2(d) hereof and otherwise in connection with
the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein
or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or
its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or
disclosed.
o. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the
Buyer is acting solely in the capacity of arm’s length
purchasers with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that the
Buyer is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement
and the transactions contemplated hereby and any statement made by
the Buyer or any of its respective representatives or agents in
connection with this Agreement and the transactions contemplated
hereby is not advice or a recommendation and is merely incidental
to the Buyer’ purchase of the Securities. The Company further
represents to the Buyer that the Company’s decision to enter
into this Agreement has been based solely on the independent
evaluation of the Company and its
representatives.
p. No Integrated
Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their
behalf, has directly or indirectly made any offers or sales in any
security or solicited any offers to buy any security under
circumstances that would require registration under the 1933 Act of
the issuance of the Securities to the Buyer. The issuance of the
Securities to the Buyer will not be integrated with any other
issuance of the Company’s securities (past, current or
future) for purposes of any shareholder approval provisions
applicable to the Company or its securities.
q. No
Brokers. Except with respect to
payments to Moody Capital Solutions, Inc., the Company has taken no
action which would give rise to any claim by any person for
brokerage commissions, transaction fees or similar payments
relating to this Agreement or the transactions contemplated
hereby.
r.
Permits;
Compliance. Except as would not reasonably be expected to
have Material Adverse Effect, the Company and each of its
Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the
“Company Permits”), and there is no action pending or,
to the knowledge of the Company, threatened regarding suspension or
cancellation of any of the Company Permits. Neither the Company nor
any of its Subsidiaries is in conflict with, or in default or
violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect. Since September 30, 2017, neither the Company nor
any of its Subsidiaries has received any notification with respect
to possible conflicts, defaults or violations of applicable laws,
except for notices relating to possible conflicts, defaults or
violations, which conflicts, defaults or violations would not have
a Material Adverse Effect.
s.
Environmental
Matters.
(i)
Except as would not reasonably be expected to have Material Adverse
Effect, there are, to the Company’s knowledge, with respect
to the Company or any of its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as
defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither the
Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to
the Company’s knowledge, threatened in connection with any of
the foregoing. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata), including, without limitation, laws relating
to emissions, discharges, releases or threatened releases of
chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as
all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.
(ii)
Other than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company’s or any of its Subsidiaries’
business.
(iii)
To the Company’s knowledge, there are no underground storage
tanks on or under any real property owned, leased or used by the
Company or any of its Subsidiaries that are not in compliance with
applicable law.
t. Title to
Property. The Company and its
Subsidiaries have good and marketable title in fee simple to all
real property and good and marketable title to all personal
property owned by them which is material to the business of the
Company and its Subsidiaries, in each case free and clear of all
liens, encumbrances and defects or such as would not have a
Material Adverse Effect. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
u. Internal Accounting
Controls. The Company and each
of its Subsidiaries maintain a system of internal accounting
controls sufficient, in the judgment of the Company’s board
of directors, to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific
authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
v. Foreign Corrupt
Practices. Except as would not
be reasonably expected to have a Material Adverse Effect, neither
the Company, nor any of its Subsidiaries, nor any director,
officer, agent, employee or other person acting on behalf of the
Company or any Subsidiary has, in the course of his actions for, or
on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful
expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices
Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any
foreign or domestic government official or
employee.
w. Solvency.
The Company (after giving effect to the transactions contemplated
by this Agreement) is solvent (i.e.,
its assets have a fair market value in excess of the amount
required to pay its probable liabilities on its existing debts as
they become absolute and matured) and currently the Company has no
information that would lead it to reasonably conclude that the
Company would not, after giving effect to the transaction
contemplated by this Agreement, have the ability to, nor does it
intend to take any action that would impair its ability to, pay its
debts from time to time incurred in connection therewith as such
debts mature. The Company did not receive a qualified opinion from
its auditors with respect to its most recent fiscal year end and,
after giving effect to the transactions contemplated by this
Agreement, does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current
fiscal year. For the avoidance of doubt any disclosure of the
Borrower’s ability to continue as a “going
concern” shall not, by itself, be a violation of this Section
3(w).
x. No Investment
Company. The Company is not,
and upon the issuance and sale of the Securities as contemplated by
this Agreement will not be an “investment company”
required to be registered under the Investment Company Act of 1940
(an “Investment Company”). The Company is not
controlled by an Investment Company.
y. Insurance.
The Company and each of its Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and
its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have
a Material Adverse Effect. Upon written request the Company will
provide to the Buyer true and correct copies of all policies
relating to directors’ and officers’ liability
coverage, errors and omissions coverage, and commercial general
liability coverage.
z. Bad
Actor. To the Company’s
knowledge, no officer or director of the Company would be
disqualified under Rule 506(d) of the Securities Act as amended on
the basis of being a “bad actor” as that term is
established in the September 19, 2013 Small Entity Compliance Guide
published by the SEC.
aa.
Shell Status. The
Company is not a “shell” issuer and has never been a
“shell” issuer, or that if it previously has been a
“shell” issuer, that at least twelve (12) months have
passed since the Company has reported Form 10 type information
indicating that it is no longer a “shell”
issuer.
bb.
No-Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other
relationship between the Company or any of its Subsidiaries and an
unconsolidated or other off balance sheet entity that is required
to be disclosed by the Company in its 1934 Act filings and is not
so disclosed or that otherwise could be reasonably likely to have a
Material Adverse Effect.
cc.
Manipulation of
Price. The Company has not, and to its knowledge no one
acting on its behalf has: (i) taken, directly or indirectly, any
action designed to cause or to result, or that could reasonably be
expected to cause or result, in the stabilization or manipulation
of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased,
or paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other
securities of the Company.
dd.
[Intentionally
Omitted]
ee.
Employee Relations.
Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or employs any member of a union.
The Company believes that its and its Subsidiaries’ relations
with their respective employees are good. No executive officer (as
defined in Rule 501(f) promulgated under the 1933 Act)
or other key employee of the Company or any of its Subsidiaries has
notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise
terminate such officer’s employment with the Company or any
such Subsidiary. To the knowledge of the Company, no executive
officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject
the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters.
ff.
Breach of Representations
and Warranties by the Company. The Company agrees that if
the Company breaches any of the representations or warranties set
forth in this Section 3, and in addition to any other remedies
available to the Buyer pursuant to this Agreement and it being
considered an Event of Default under Section 3.5 of the Note, the
Company shall pay to the Buyer the Standard Liquidated Damages
Amount in cash or in shares of Common Stock at the option of the
Company, until such breach is cured. If the Company elects to pay
the Standard Liquidated Damages Amounts in shares of Common Stock,
such shares shall be issued at the Conversion Price at the time of
payment.
4.
COVENANTS.
a. Best
Efforts. The parties shall use
their commercially reasonable best efforts to satisfy timely each
of the conditions described in Section 7 and 8 of this
Agreement.
b. Blue Sky
Laws. The Company shall, on or
before the Closing Date, take such action as the Company shall
reasonably determine may be necessary to qualify the Securities for
sale to the Buyer at the applicable closing pursuant to this
Agreement under applicable securities or “blue sky”
laws of the states of the United States (or to qualify for or
obtain an exemption from such qualification for sale), and shall
provide evidence of any such action so taken to the Buyer on or
prior to the Closing Date.
c. Use of
Proceeds. The Company shall use
the proceeds from the sale of the Note for working capital and
other general corporate purposes and shall not, directly or
indirectly, use such proceeds for any loan to or investment in any
other corporation, partnership, enterprise or other person (except
in connection with its currently existing direct or indirect
Subsidiaries).
d. Expenses.
Except as otherwise expressly provided in Section 5, all costs and
expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection
with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or
not the Closing shall have occurred.
e. Financial
Information. The Company agrees
to send or make available the following reports to the Buyer until
the Buyer transfers, assigns, or sells all of the
Securities:
(i)
within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or any
of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of
any notices or other information the Company makes available or
gives to such shareholders. For the avoidance of doubt, filing the
documents required in (i) above via EDGAR or releasing any
documents set forth in (ii) above via a recognized wire service
shall satisfy the delivery requirements of this Section
4(f).
f. Listing.
The Company shall use commercially reasonable efforts to secure the
listing of the Conversion Shares upon each national securities
exchange or automated quotation system, if any, upon which shares
of Common Stock are then listed (subject to official notice of
issuance) and, so long as the Buyer owns any of the Securities,
shall use commercially reasonable efforts to maintain, so long as
any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion
of the Note. So long as the Buyer owns any of the Securities, The
Company will use commercially reasonable efforts to maintain the
listing and trading of its Common Stock on the OTC Pink, OTCQB or
any equivalent replacement exchange, the Nasdaq National Market
(“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq
SmallCap”), the New York Stock Exchange (“NYSE”),
or the NYSE MKT and will use commercially reasonable efforts to
comply in all respects with the Company’s reporting, filing
and other obligations under the bylaws or rules of the Financial
Industry Regulatory Authority (“FINRA”) and such
exchanges, as applicable. The Company shall promptly provide to the
Buyer copies of any material notices it receives from the OTC Pink,
OTCQB and any other exchanges or quotation systems on which the
Common Stock is then listed regarding the continued eligibility of
the Common Stock for listing on such exchanges and quotation
systems. The Company shall pay any and all fees and expenses in
connection with satisfying its obligation under this Section
4(g).
g. Corporate
Existence. So long as the Buyer
beneficially owns any Note, the Company shall maintain its
corporate existence and shall not sell all or substantially all of
the Company’s assets, except in the event of a merger or
consolidation or sale of all or substantially all of the
Company’s assets, where the surviving or successor entity in
such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose
Common Stock is listed for trading on the OTC Pink, OTCQB, OTCQX,
Nasdaq, NasdaqSmallCap, NYSE or AMEX.
h. No
Integration. The Company shall
not make any offers or sales of any security (other than the
Securities) under circumstances that would require registration of
the Securities being offered or sold hereunder under the 1933 Act
or cause the offering of the Securities to be integrated with any
other offering of securities by the Company for the purpose of any
stockholder approval provision applicable to the Company or its
securities.
i. Failure to Comply with
the 1934 Act. So long as the
Buyer beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall
continue to be subject to the reporting requirements of the 1934
Act.
j. Trading
Activities. Neither the Buyer
nor its affiliates has an open short position (or other hedging or
similar transactions) in the common stock of the Company and the
Buyer agree that it shall not, and that it will cause its
affiliates not to, engage in any short sales of or hedging
transactions with respect to the common stock of the
Company.
k. Restriction on
Activities. Commencing as of
the date first above written, and until the sooner of the six month
anniversary of the date first written above or payment of the Note
in full, or full conversion of the Note, the Company shall not,
directly or indirectly, without the Buyer’s prior written
consent, which consent shall not be unreasonably withheld: (a)
change the nature of its business; (b) sell, divest, acquire,
change the structure of any material assets other than in the
ordinary course of business; or (c) solicit any offers for, respond
to any unsolicited offers for, or conduct any negotiations with any
other person or entity in respect of any variable rate debt
transactions (i.e., transactions were the conversion or exercise
price of the security issued by the Company varies based on the
market price of the Common Stock) above $500,000, whether a
transaction similar to the one contemplated hereby or any other
investment.
l. Legal
Counsel Opinions. Upon the request of the Buyer
from to time to time, the Company shall be responsible (at its
cost) for promptly supplying to the Company’s transfer agent
and the Buyer a customary legal opinion letter of its counsel (the
“Legal Counsel Opinion”) to the effect that the sale of
Conversion Shares by the Buyer or its affiliates, successors and
assigns is exempt from the registration requirements of the 1933
Act pursuant to Rule 144 (provided the requirements of Rule 144 are
satisfied and provided the Conversion Shares are not then
registered under the 1933 Act for resale pursuant to an effective
registration statement). Should the Company’s legal counsel
fail for any reason to issue the Legal Counsel Opinion, the Buyer
may (at the Company’s cost) secure another legal counsel to
issue the Legal Counsel Opinion, and the Company will instruct its
transfer agent to accept such opinion.
m. Par
Value. If the closing bid price
at any time the Note is outstanding falls below $0.001, the Company
shall use all commercially reasonable efforts to obtain shareholder
consent, to reduce the par value of its Common Stock to $0.0001 or
less and shall effect such action promptly upon obtaining such
approval.
n. Breach of
Covenants. The Company agrees
that if the Company breaches any of the covenants set forth in this
Section 4, and in addition to any other remedies available to the
Buyer pursuant to this Agreement, it will be considered an Event of
Default under Section 3.4 of the Note, the Company shall pay to the
Buyer the Standard Liquidated Damages Amount in cash or in shares
of Common Stock at the option of the Buyer, until such breach is
cured, or with respect to Section 4(d) above, the Company shall pay
to the Buyer the Standard Liquidated Damages Amount in cash or
shares of Common Stock, at the option of the Buyer, upon each
violation of such provision. If the Company elects to pay the
Standard Liquidated Damages Amounts in shares of Common Stock, such
shares shall be issued at the Conversion Price at the time of
payment.
5. Transaction Expense
Amount. Upon Closing, the
Company shall pay an amount equal to Fifteen Thousand and 00/100
United States Dollars (US$15,000.00), to Auctus Fund Management,
LLC (“Auctus Management”) to cover the Holder's due
diligence, monitoring, and other transaction costs incurred for
services rendered in connection herewith.
6. Transfer Agent
Instructions. The Company shall
issue irrevocable instructions to its transfer agent to issue
certificates, registered in the name of the Buyer or its nominee,
for the Conversion Shares in such amounts as specified from time to
time by the Buyer to the Company upon conversion of the Note in
accordance with the terms thereof (the “Irrevocable Transfer
Agent Instructions”). In the event that the Borrower proposes
to replace its transfer agent, the Borrower shall provide, prior to
the effective date of such replacement, a fully executed
Irrevocable Transfer Agent Instructions in a form as initially
delivered pursuant to the Purchase Agreement (including but not
limited to the provision to irrevocably reserve shares of Common
Stock in the Reserved Amount) signed by the successor transfer
agent to Borrower and the Borrower. Prior to registration of the
Conversion Shares under the 1933 Act or the date on which the
Conversion Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date
that can then be immediately sold, all such certificates shall bear
the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that: (i) no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this
Section, and stop transfer instructions to give effect to Section
2(f) hereof (in the case of the Conversion Shares, prior to
registration of the Conversion Shares under the 1933 Act or the
date on which the Conversion Shares may be sold pursuant to Rule
144 without any restriction as to the number of Securities as of a
particular date that can then be immediately sold), will be given
by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the
Note; (ii) it will not direct its transfer agent not to transfer or
delay, impair, and/or hinder its transfer agent in transferring (or
issuing)(electronically or in certificated form) any certificate
for Conversion Shares to be issued to the Buyer upon conversion of
or otherwise pursuant to the Note as and when required by the Note
and this Agreement; and (iii) it will not fail to remove (or
directs its transfer agent not to remove or impairs, delays, and/or
hinders its transfer agent from removing) any restrictive legend
(or to withdraw any stop transfer instructions in respect thereof)
on any certificate for any Conversion Shares issued to the Buyer
upon conversion of or otherwise pursuant to the Note as and when
required by the Note and this Agreement. Nothing in this Section
shall affect in any way the Buyer’s obligations and agreement
set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Buyer provides the Company with (i) an opinion
of counsel of Buyer reasonably satisfactory to the Company’s
transfer agent in form, substance and scope customary for opinions
in comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under
the 1933 Act and such sale or transfer is effected or (ii) the
Buyer provides reasonable assurances that the Securities can be
sold pursuant to Rule 144, the Company shall permit the transfer,
and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates, free from
restrictive legend, in such name and in such denominations as
specified by the Buyer. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the
Buyer, by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section
may be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section,
that the Buyer shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
7. CONDITIONS PRECEDENT
TO THE COMPANY’S OBLIGATIONS TO SELL. The obligation of the Company hereunder to issue
and sell the Note to the Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date of each of the
following conditions thereto, provided that these conditions are
for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion:
a.
The Buyer shall have executed this Agreement and delivered the same
to the Company.
b.
The Buyer shall have delivered the Purchase Price in accordance
with Section 1(b) above.
c.
The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
d.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
8. CONDITIONS PRECEDENT
TO THE BUYER’S OBLIGATION TO PURCHASE. The obligation of the Buyer hereunder to
purchase the Note at the Closing is subject to the satisfaction, at
or before the Closing Date of each of the following conditions,
provided that these conditions are for the Buyer’s sole
benefit and may be waived by the Buyer at any time in its sole
discretion:
a.
The Company shall have executed this Agreement and delivered the
same to the Buyer.
b.
The Company shall have delivered to the Buyer the duly executed
Note (in such denominations as the Buyer shall request) and in
accordance with Section 1(b) above.
c.
The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the
Company’s Transfer Agent.
d.
The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, but not limited to
certificates with respect to the Company’s Certificate of
Incorporation, By-laws and Board of Directors’ resolutions
relating to the transactions contemplated hereby.
e.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f.
No event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g.
The Conversion Shares shall have been authorized for quotation on
the OTC Pink, OTCQB or any similar quotation system and trading in
the Common Stock on the OTC Pink, OTCQB or any similar quotation
system shall not have been suspended by the SEC or the OTC Pink,
OTCQB or any similar quotation system.
h.
The Buyer shall have received an officer’s certificate
described in Section 3(c) above, dated as of the Closing
Date.
9. GOVERNING LAW;
MISCELLANEOUS.
a. Governing
Law. This Agreement shall be
governed by and construed in accordance with the laws of the State
of Nevada without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the
transactions contemplated by this Agreement, the Note or any other
agreement, certificate, instrument or document contemplated hereby
shall be brought only in the state courts of Massachusetts or in
the federal courts located in the state of Massachusetts. The
parties to this Agreement hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or
based upon forum non
conveniens. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY
OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY.
The prevailing party shall be entitled to recover from the other
party its reasonable attorney's fees and costs. In the event that
any provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law.
b. Counterparts;
Signatures by Facsimile. This
Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the
other party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the signature of the party so
delivering this Agreement.
c. Construction;
Headings. This Agreement shall
be deemed to be jointly drafted by the Company and the Buyer and
shall not be construed against any person as the drafter hereof.
The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of,
this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.
e. Entire Agreement;
Amendments. This Agreement, the
Note and the instruments referenced herein contain the entire
understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyer makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or
amended other than by an instrument in writing signed by the
majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, email, or facsimile, addressed as set
forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be
deemed effective (a) upon hand delivery or delivery by email or
facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such
notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be:
If to
the Company, to:
Guided
Therapeutics, Inc.
5835
Peachtree Corners East, Suite D
Norcross, GA
30092
Attn:
Gene Cartwright
E-mail:
info@guidedinc.com
With a
copy to (which copy shall not constitute notice):
Jones
Day
1420
Peachtreet St.
Norcross,
GA 30092
E-mail:
hdrodman@jonesday.com
If to
the Buyer:
Auctus
Fund, LLC
177
Huntington Avenue, 17th Floor
Boston,
MA 02115
Attn:
Lou Posner
Facsimile: (617)
532-6420
With a
copy to (which copy shall not constitute notice):
Chad
Friend, Esq., LL.M.
Legal
& Compliance, LLC
330
Clematis Street, Suite 217
West
Palm Beach, FL 33401
e-mail:
CFriend@LegalandCompliance.com
Each
party shall provide notice to the other party of any change in
address.
g.
Successors and
Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or
any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, subject to
Section 2(f), the Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from the
Buyer or to any of its “affiliates,” as that term is
defined under the 1934 Act, without the consent of the
Company.
h. Third Party
Beneficiaries. This Agreement
is intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other
person.
i. Survival.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder not withstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
j. Further
Assurances. Each party shall do
and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
k. No Strict
Construction. The language used
in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
l. Remedies.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being
required.
m. Publicity.
The Company, and the Buyer shall have the right to review a
reasonable period of time before issuance of any press releases,
SEC, OTCQB or FINRA filings, or any other public statements with
respect to the transactions contemplated hereby;provided,
however,
that the Company shall be entitled, without the prior approval of
the Buyer, to make any press release or SEC, OTCQB (or other
applicable trading market) or FINRA filings with
respect
to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company
in connection with any such press release prior to its release and
shall be provided with a copy thereof and be given an opportunity
to comment thereon). Notwithstanding the foregoing, the Company
shall not be required to submit for review any such disclosure
contained in filings with the SEC if it shall have previously
provided substantially the same disclosure for review in connection
with a previous filing.
n.
Indemnification.
Subject to the provisions of this Section 9(n), the Company will
indemnify and hold Buyer and its directors, officers, shareholders,
members, partners, employees and agents (each, a “Buyer
Party”) harmless from any and all losses, liabilities,
obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs
and reasonable attorneys’ fees and costs of investigation
that any such Buyer Party may suffer or incur as a result of or
relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this
Agreement or the Note, or any other agreement, certificate,
instrument, or document contemplated hereby or thereby, (b) any
action instituted against the Buyer Parties in any capacity, or any
of them or their respective affiliates, by any stockholder of the
Company who is not an affiliate of such Buyer Party, with respect
to any of the transactions contemplated by this Agreement (unless
such action is based upon a breach of such Buyer Party’s
representations, warranties or covenants under this Agreement or
any agreements or understandings such Buyer Party may have with any
such stockholder or any violations by such Buyer Party of state or
federal securities laws or any conduct by such Buyer Party that
constitutes fraud, gross negligence, willful misconduct or
malfeasance) or (c) any untrue or alleged untrue statement of a
material fact contained in any registration statement, any
prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out
of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the
statements therein (in the case of any prospectus or supplement
thereto, in light of the circumstances under which they were made)
not misleading. If any action shall be brought against any Buyer
Party in respect of which indemnity may be sought pursuant to this
Agreement, such Buyer Party shall promptly notify the Company in
writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing reasonably acceptable to
the Buyer Party. Any Buyer Party shall have the right to employ
separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such Buyer Party except to the extent that (i) the
employment thereof has been specifically authorized by the Company
in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in
such action there is, in the reasonable opinion of counsel, a
material conflict on any material issue between the position of the
Company and the position of such Buyer Party, in which case the
Company shall be responsible for the reasonable fees and expenses
of no more than one such separate counsel. The Company will not be
liable to any Buyer Party under this Agreement (y) for any
settlement by a Buyer Party effected without the Company’s
prior written consent, which shall not be unreasonably withheld,
conditioned, or delayed; or (z) to the extent, but only to the
extent that a loss, claim, damage or liability is attributable to
any Buyer Party’s breach of any of the representations,
warranties, covenants or agreements made by such Buyer Party in
this Agreement. The indemnification required by this Section 9.n.
shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are
received or are incurred. The indemnity agreements contained herein
shall be in addition to any cause of action or similar right of any
Buyer Party against the Company or others and any liabilities the
Company may be subject to pursuant to law.
[signature page
follows]
/s/
Gene S. Cartwright
Gene
S. Cartwright
CEO
Guided
Therapeutics, Inc.
/s/
Lou Posner
Lou
Posner
Managing
Director
Auctus
Fund, LLC
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the
“Agreement”), dated as of April 30, 2018, by and
between Guided Therapeutics,
Inc., a Delaware corporation,
with its address at 5835 Peachtree Corners East, Suite D, Norcross,
Georgia 30092 (the “Company”), and POWER UP LENDING GROUP
LTD., a Virginia corporation,
with its address at 111 Great Neck Road, Suite 216, Great Neck, NY
11021 (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the “SEC”)
under the Securities Act of 1933, as amended (the “1933
Act”); and
B. Buyer
desires to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement a convertible
note of the Company, in the form attached hereto as Exhibit A, in
the aggregate principal amount of $103,000.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or
otherwise with respect thereto in accordance with the terms
thereof, the “Note”), convertible into shares of common
stock, $0.001 par value per share, of the Company (the
“Common Stock”), upon the terms and subject to the
limitations and conditions set forth in such
Note.
NOW
THEREFORE, the Company and the
Buyer severally (and not jointly) hereby agree as
follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On the Closing Date (as defined below), the Company shall
issue and sell to the Buyer and the Buyer agrees to purchase from
the Company such principal amount of Note as is set forth
immediately below the Buyer’s name on the signature pages
hereto.
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer
shall pay the purchase price for the Note to be issued and sold to
it at the Closing (as defined below) (the “Purchase
Price”) by wire transfer of immediately available funds to
the Company, in accordance with the Company’s written wiring
instructions, against delivery of the Note in the principal amount
equal to the Purchase Price as is set forth immediately below the
Buyer’s name on the signature pages hereto, and (ii) the
Company shall deliver such duly executed Note on behalf of the
Company, to the Buyer, against delivery of such Purchase
Price.
c. Closing
Date. Subject to the satisfaction (or written waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the
date and time of the issuance and sale of the Note pursuant to this
Agreement (the “Closing Date”) shall be 12:00 noon,
Eastern Standard Time on or about May 1, 2018, or such other
mutually agreed upon time. The closing of the transactions
contemplated by this Agreement (the “Closing”) shall
occur on the Closing Date at such location as may be agreed to by
the parties.
2. Buyer’s
Representations and Warranties. The Buyer represents and warrants
to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note
and the shares of Common Stock issuable upon conversion of or
otherwise pursuant to the Note (such shares of Common Stock being
collectively referred to herein as the “Conversion
Shares” and, collectively with the Note, the
“Securities”) for its own account and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales registered or exempted from registration
under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation D (an
“Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being
offered and sold to it in reliance upon specific exemptions from
the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. Information.
The Company has not disclosed to the Buyer any material nonpublic
information and will not disclose such information unless such
information is disclosed to the public prior to or promptly
following such disclosure to the Buyer.
e. Legends.
The Buyer understands that the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act; or may
be sold pursuant to an applicable exemption from registration, the
Conversion Shares may bear a restrictive legend in substantially
the following form:
"THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE
ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE
HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY
ACCEPTABLE TO THE ISSUER’S TRANSFER AGENT, THAT SUCH
SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS."
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to an exemption from
registration without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144, at the Deadline, it
will be considered an Event of Default pursuant to Section 3.2 of
the Note.
f. Authorization;
Enforcement. This Agreement has been duly and validly authorized.
This Agreement has been duly executed and delivered on behalf of
the Buyer, and this Agreement constitutes a valid and binding
agreement of the Buyer enforceable in accordance with its
terms.
3. Representations
and Warranties of the Company. The Company represents and warrants
to the Buyer that:
a. Organization
and Qualification. The Company and each of its Subsidiaries (as
defined below), if any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate
and other) to own, lease, use and operate its properties and to
carry on its business as and where now owned, leased, used,
operated and conducted. “Subsidiaries” means any
corporation or other organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly,
any equity or other ownership interest.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and
authority to enter into and perform this Agreement, the Note and to
consummate the transactions contemplated hereby and thereby and to
issue the Securities, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement, the
Note by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the
issuance of the Note and the issuance and reservation for issuance
of the Conversion Shares issuable upon conversion or exercise
thereof) have been duly authorized by the Company’s Board of
Directors and no further consent or authorization of the Company,
its Board of Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered by the Company by
its authorized representative, and such authorized representative
is the true and official representative with authority to sign this
Agreement and the other documents executed in connection herewith
and bind the Company accordingly, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of the
Note, each of such instruments will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms.
c. Capitalization.
As of the date hereof, the authorized common stock of the Company
consists of 1,000,000,000 authorized shares of Common Stock, $0.001
par value per share, of which 143,912,938 shares are issued and
outstanding; and 191,985,089 shares are reserved for issuance upon
conversion of the Note. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly
issued, fully paid and non-assessable.
d. Issuance
of Shares. The Conversion Shares are duly authorized and reserved
for issuance and, upon conversion of the Note in accordance with
its respective terms, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive rights or other similar rights of
shareholders of the Company and will not impose personal liability
upon the holder thereof.
e. No
Conflicts. The execution, delivery and performance of this
Agreement, the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. “Material Adverse Effect” means
any material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be
entered into in connection herewith.
f. SEC
Documents; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the “1934
Act”) (all of the foregoing filed prior to the date hereof
and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter
referred to herein as the “SEC Documents”). Upon
written request the Company will deliver to the Buyer true and
complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates or if amended,
as of the dates of the amendments schedules thereto and documents
(other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the “SEC
Documents”). Upon written request the Company will deliver to
the Buyer true and complete copies of the SEC Documents, except for
such exhibits and incorporated documents. As of their respective
dates or if amended, as of the dates of the amendments schedules
thereto and documents (other than exhibits to such documents)
incorporated by reference therein, being hereinafter referred to
herein as the “SEC Documents”). Upon written request
the Company will deliver to the Buyer true and complete copies of
the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates or if amended, as of the
dates of the amendments schedules thereto and documents (other than
exhibits to such documents) incorporated by reference therein,
being hereinafter referred to herein as the “SEC
Documents”). Upon written request the Company will deliver to
the Buyer true and complete copies of the SEC Documents, except for
such exhibits and incorporated documents. As of their respective
dates or if amended, as of the dates of the
amendments
g. Absence
of Certain Changes. Since December 31, 2017, except as set forth in
the SEC Documents, there has been no material adverse change and no
material adverse development in the assets, liabilities, business,
properties, operations, financial condition, results of operations,
prospects or 1934 Act reporting status of the Company or any of its
Subsidiaries.
h. Absence
of Litigation. Except as set forth in the SEC Documents, there is
no action, suit, claim, proceeding, inquiry or investigation before
or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or
any of its Subsidiaries, threatened against or affecting the
Company or any of its Subsidiaries, or their officers or directors
in their capacity as such, that could have a Material Adverse
Effect. The Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the
foregoing.
i. No
Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or
its securities.
j. No
Brokers. Except with respect to Moody Capital Solutions, Inc., the
Company has taken no action which would give rise to any claim by
any person for brokerage commissions, transaction fees or similar
payments relating to this Agreement or the transactions
contemplated hereby.
k. No
Investment Company. The Company is not, and upon the issuance and
sale of the Securities as contemplated by this Agreement will not
be an “investment company” required to be registered
under the Investment Company Act of 1940 (an “Investment
Company”). The Company is not controlled by an Investment
Company.
l. Breach
of Representations and Warranties by the Company. If the Company
breaches any of the representations or warranties set forth in this
Section 3, and in addition to any other remedies available to the
Buyer pursuant to this Agreement, it will be considered an Event of
default under Section 3.4 of the Note.
4. COVENANTS.
a. Best
Efforts. The Company shall use its best efforts to satisfy timely
each of the conditions described in Section 7 of this
Agreement.
b. Form
D; Blue Sky Laws. The Company agrees to timely make any filings
required by federal and state laws as a result of the closing of
the transactions contemplated by this
Agreement.
c. Use
of Proceeds. The Company shall use the proceeds for general working
capital purposes.
d. Expenses.
At the Closing, the Company’s obligation with respect to the
transactions contemplated by this Agreement is to reimburse
Buyer’ expenses shall be $3,000.00 for Buyer’s legal
fees and due diligence fee.
e. Corporate
Existence. So long as the Buyer beneficially owns any Note, the
Company shall maintain its corporate existence and shall not sell
all or substantially all of the Company’s assets, except with
the prior written consent of the Buyer.
f. Breach
of Covenants. If the Company breaches any of the covenants set
forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be
considered an event of default under Section 3.4 of the
Note.
g. Failure
to Comply with the 1934 Act. So long as the Buyer beneficially owns
the Note, the Company shall comply with the reporting requirements
of the 1934 Act; and the Company shall continue to be subject to
the reporting requirements of the 1934 Act.
h. Trading
Activities. Neither the Buyer nor its affiliates has an open short
position in the common stock of the Company and the Buyer agrees
that it shall not, and that it will cause its affiliates not to,
engage in any short sales of or hedging transactions with respect
to the common stock of the Company its affiliates not to, engage in
any short sales of or hedging transactions with respect to the
common stock of the Company
i. Right
of First Refusal. Unless it shall have first delivered to the
Buyer, at least forty eight (48) hours prior to the closing of such
Future Offering (as defined herein), written notice describing the
proposed Future Offering (“ROFR Notice”), including the
terms and conditions thereof, identity of the proposed purchaser
and proposed definitive documentation to be entered into in
connection therewith, and providing the Buyer an option during the
forty eight (48) hour period following delivery of such notice to
purchase the securities being offered in the Future Offering on the
same terms as contemplated by such Future Offering (the limitations
referred to in this sentence and the preceding sentence are
collectively referred to as the “Right of First
Refusal”), the Company will not conduct any equity (or debt
with an equity component) financing in an amount less than $150,000
(“Future Offering(s)”) during the period beginning on
the Closing Date and ending nine (9) months following the Closing
Date. In the event the terms and conditions of a proposed Future
Offering are amended in any respect after delivery of the notice to
the Buyer concerning the proposed Future Offering, the Company
shall deliver a new notice to the Buyer describing the amended
terms and conditions of the proposed Future Offering and the Buyer
thereafter shall have an option during the forty eight (48) hour
period following delivery of such new notice to purchase its pro
rata share of the securities being offered on the same terms as
contemplated by such proposed Future Offering, as amended.
Notwithstanding anything contained herein to the contrary, any
subsequent offer by an investor, or an affiliate of such investor,
identified on an ROFR Notice is subject to this Right of First
Refusal.
5. Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the
Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance
with the terms thereof (the “Irrevocable Transfer Agent
Instructions”). In the event that the Company proposes to
replace its transfer agent, the Company shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to this Agreement (including but not limited to the
provision to irrevocably reserve shares of Common Stock in the
Reserved Amount as such term is defined in the Note) signed by the
successor transfer agent to Company and the Company. Prior to
registration of the Conversion Shares under the 1933 Act or the
date on which the Conversion Shares may be sold pursuant to an
exemption from registration, all such certificates shall bear the
restrictive legend specified in Section 2(e) of this Agreement. The
Company warrants that: (i) no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section
5, will be given by the Company to its transfer agent and that the
Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this
Agreement and the Note; (ii) it will not direct its transfer agent
not to transfer or delay, impair, and/or hinder its transfer agent
in transferring (or issuing)(electronically or in certificated
form) any certificate for Conversion Shares to be issued to the
Buyer upon conversion of or otherwise pursuant to the Note as and
when required by the Note and this Agreement; and (iii) it will not
fail to remove (or directs its transfer agent not to remove or
impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any
Conversion Shares issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note
and/or this Agreement. If the Buyer provides the Company and the
Company’s transfer, at the cost of the Buyer, with an opinion
of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under
the 1933 Act, the Company shall permit the transfer, and, in the
case of the Conversion Shares, promptly instruct its transfer agent
to issue one or more certificates, free from restrictive legend, in
such name and in such denominations as specified by the Buyer. The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 may be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyer shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond
or other security being required.
6. Conditions
to the Company’s Obligation to Sell. The obligation of the
Company hereunder to issue and sell the Note to the Buyer at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions thereto, provided that
these conditions are for the Company’s sole benefit and may
be waived by the Company at any time in its sole
discretion:
a. The
Buyer shall have executed this Agreement and delivered the same to
the Company.
b. The
Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.
c. The
representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing
Date.
d. No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
7. Conditions
to The Buyer’s Obligation to Purchase. The obligation of the
Buyer hereunder to purchase the Note at the Closing is subject to
the satisfaction, at or before the Closing Date of each of the
following conditions, provided that these conditions are for the
Buyer’s sole benefit and may be waived by the Buyer at any
time in its sole discretion:
a. The
Company shall have executed this Agreement and delivered the same
to the Buyer.
b. The
Company shall have delivered to the Buyer the duly executed Note
(in such denominations as the Buyer shall request) in accordance
with Section 1(b) above.
c. The
Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company’s Transfer
Agent.
d. The
representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, but not limited to
certificates with respect to the Board of Directors’
resolutions relating to the transactions contemplated
hereby.
e. No
litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f. No
event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g. The
Conversion Shares shall have been authorized for quotation on an
exchange or electronic quotation system and trading in the Common
Stock on such exchange or electronic quotation system shall not
have been suspended by the SEC or an exchange or electronic
quotation system.
h. The
Buyer shall have received the fully executed (with notary
Confession of Judgment) dated as of the Closing
Date.
8. Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Virginia without regard to
principles of conflicts of laws. Any action brought by either party
against the other concerning the transactions contemplated by this
Agreement shall be brought only in the state courts of New York or
in the federal courts located in the Eastern District of New York.
The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens. The Company and
Buyer waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the event that any provision of this Agreement or any
other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or
proceeding in connection with this Agreement, the Note or any
related document or agreement by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to
it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law.
b. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original but all of which shall constitute
one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the
other party.
c. Headings.
The headings of this Agreement are for convenience of reference
only and shall not form part of, or affect the interpretation of,
this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision
hereof.
e. Entire
Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except
as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in
writing signed by the majority in interest of the
Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other
communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally
served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable
air courier service with charges prepaid, or (iv) transmitted by
hand delivery, telegram, or facsimile, addressed as set forth below
or to such other address as such party shall have specified most
recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business
day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such
communications shall be as set forth in the heading of this
Agreement with a copy by fax only to (which copy shall not
constitute notice) to Naidich Wurman LLP, 111 Great Neck Road,
Suite 214, Great Neck, NY 11021, Attn: Allison Naidich, facsimile:
516-466-3555, e-mail: allison@nwlaw.com . Each party shall provide notice to the other
party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. Neither
the Company nor the Buyer shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the
other. Notwithstanding the foregoing, the Buyer may assign its
rights hereunder to any person that purchases Securities in a
private transaction from the Buyer or to any of its
“affiliates,” as that term is defined under the 1934
Act, without the consent of the Company.
h. Survival.
The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
i. Further
Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
j. No
Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
k. Remedies.
The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer by vitiating the
intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Agreement, that the Buyer shall
be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to
an injunction or injunctions restraining, preventing or curing any
breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss
and without any bond or other security being
required.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above
written.
Guided Therapeutics, Inc.
By:/s/
Gene S. cartwright
Gene
S. Cartwright
President
and Chief Executive Officer
POWER UP LENDING GROUP LTD.
By:
/s/ Curt Kramer
Name:
Curt Kramer
Title:
Chief Executive Officer
111
Great Neck Road, Suite 216
Great
Neck, NY 11021
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate
Principal Amount of Note: $103,000.00
Aggregate
Purchase Price: $103,000.00
SECURITIES PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT
(the "Agreement"),
dated as of June 7,
2018, by and between Guided Therapeutics, Inc., a Delaware
corporation, with its address
at 5835 Peachtree Corners East, Suite
D, Norcross, Georgia
30092 (the
"Company"), and POWER UP LENDING GROUP LTD., a
Virginia corporation, with its address at 111 Great
Neck Road, Suite 216, Great Neck, NY 11021 (the "Buyer").
WHEREAS:
A. The
Company and the Buyer are executing
and delivering this Agreement in reliance upon the exemption from
securities registration
afforded by the rules and regulations
as promulgated by the United States
Securities and Exchange Commission (the "SEC) under the
Securities Act of 1933,
as amended (the "1933 Act");
and
B. Buyer desires to purchase and the Company
desires to issue and sell, upon the
terms and conditions set forth in this Agreement
a convertible note of the Company,
in the form attached hereto as Exhibit A, in the
aggregate principal
amount of $53,000.00 (together with
any note(s) issued in replacement thereof or as a dividend
thereon or otherwise with respect thereto in accordance with the terms thereof, the "Note"),
convertible into shares of common stock, $0.001 par value
per share, of the Company (the "Common Stock"), upon the terms and subject
to the limitations and
conditions set forth in
such Note.
NOW THEREFORE, the Company and the Buyer
severally (and
not jointly) hereby agree as follows:
1. Purchase
and Sale of Note.
a. Purchase of Note. On the
Closing Date (as defined below), the
Company shall
issue and sell to the
Buyer and the Buyer agrees to purchase from the
Company such principal
amount of Note as is set
forth immediately
below the Buyer's name
on the signature pages hereto.
b.
Form of Payment. On the
Closing Date (as defined below), (i) the Buyer shall pay the
purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the "Purchase Price")
by wire transfer of immediately
available funds to the
Company, in accordance with the Company's written wiring instructions, against
delivery of the Note in the principal amount equal
to the Purchase Price as is
set forth immediately below the Buyer's name on
the signature pages
hereto, and
(ii) the Company shall deliver
such duly executed Note on behalf of the Company, to the
Buyer, against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or
written waiver) of the conditions thereto set forth in Section 6
and Section 7 below, the date and
time of the
issuance and sale
of the Note pursuant to this Agreement
(the "Closing Date") shall be 12:00
noon, Eastern Standard Time on or about June 11, 2018,
or such other mutually agreed upon time. The
closing of the transactions
contemplated by this Agreement (the
"Closing") shall occur on the Closing Date at such location as
may
be
agreed to by the parties.
2.
Buyer's Representations and Warranties. The Buyer represents and
warrants to the Company that:
a. Investment Purpose. As of the
date hereof, the Buyer is purchasing the Note and the shares of
Common Stock issuable upon conversion of or otherwise pursuant to
the Note (such shares of Common Stock being collectively referred
to herein as the "Conversion Shares" and, collectively
with the Note, the "Securities") for its own account and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales registered or exempted from registration
under the 1933 Act.
b. Accredited Investor Status. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of
Regulation D (an "Accredited
Investor").
c. Reliance on Exemptions. The Buyer understands
that the Securities are being offered and sold to it in reliance
upon specific exemptions from the registration requirements of
United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings
of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to
acquire the Securities.
d.
Information. The Company has not disclosed to the Buyer any
material non public information and will not disclose such
information unless such information is disclosed to the public
prior to or promptly following such disclosure to the
Buyer.
e. Legends. The Buyer understands that the Note
and, until such time as the Conversion Shares have been
registered under the 1933 Act; or may be
sold pursuant to an applicable exemption from registration,
the Conversion Shares may bear a restrictive legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). OR UNDER ANY STATE SECURITIES
LAWS, AND MAY NOT BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
(2) THE ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO
THE HOLDER OF SUCH SECURITIES, WHICH
COUNSEL AND OPINION ARE REASONABLY ACCEPTABLE TO THE ISSUER'S
TRANSFER AGENT,
THAT SUCH SECURITIES MAY BE
PLEDGED, SOLD, ASSIGNED, HYPOTHECATED
OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS."
The legend set
forth above shall
be removed and the
Company shall
issue
a certificate without such legend
to the holder of any Security upon
which it is stamped, if, unless
otherwise required
by applicable state securities laws, (a) such Security
is registered for sale under an effective registration statement filed under the 1933
Act or otherwise may
be sold pursuant
to an exemption from registration without any restriction as to the
number of securities as of
a particular date that
can then be immediately
sold, or (b)
such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for
opinions of counsel
in comparable
transactions, to the
effect that a
public sale or transfer of
such Security may be made
without registration under the 1933 Act, which
opinion shall
be accepted by the
Company so that the
sale or transfer is
effected. The Buyer agrees to sell all
Securities, including
those represented by a certificate(s)
from which the legend has been removed, in compliance with
applicable prospectus delivery requirements, if any. In the event
that the Company does
not accept the opinion
of counsel provided
by the Buyer
with respect
to the transfer of Securities
pursuant to an exemption
from registration, such as Rule
144, at the
Deadline, it
will be considered an Event of
Default pursuant to Section 3.2
of the Note.
f. Authorization: Enforcement. This
Agreement has been duly and
validly authorized. This
Agreement has been duly executed and delivered on behalf of
the Buyer, and this Agreement
constitutes a
valid and binding agreement
of the Buyer enforceable in accordance with its terms.
3. Representations and Warranties of
the Company.
The Company represents and warrants to
the Buyer
that:
a.
Organization and
Qualification.
The Company and each of its Subsidiaries (as defined below), if
any, is a
corporation duly organized, validly
existing and
in good standing under
the laws of the jurisdiction in which
it is incorporated, with
full power and authority (corporate and other) to own,
lease, use and operate its properties and to carry on
its business as and where now owned, leased, used, operated and conducted. "Subsidiaries" means any
corporation or other
organization, whether incorporated
or unincorporated, in which
the Company owns, directly
or indirectly, any
equity or other ownership
interest.
b. Authorization: Enforcement. (i) The Company has
all requisite corporate power and
authority to
enter into and perform
this Agreement, the Note and to
consummate the transactions
contemplated hereby and thereby and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the
execution and delivery
of this Agreement, the Note by
the Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation, the issuance of the
Note and the issuance and reservation
for issuance of the Conversion Shares
issuable upon conversion or exercise thereof) have been
duly authorized by the
Company's Board of Directors
and no further consent or authorization of the Company, its Board of Directors,
or its shareholders
is required,
(iii) this Agreement has been duly executed and
delivered by the Company
by its authorized representative, and
such authorized representative is the true and official
representative with authority to sign this Agreement and the other
documents executed
in connection herewith and bind the
Company accordingly, and (iv) this Agreement
constitutes,
and upon execution and delivery by the
Company of the Note, each
of such instruments will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms.
c. Capitalization. As of the
date hereof, the authorized common stock of the Company consists of
1,000,000,000 authorized shares of
Common Stock, $0.001 par value per share, of which
89,421,392 shares
are issued and
outstanding; and 119,841,718 shares are reserved for
issuance upon
conversion of the Note. All
of such outstanding shares of capital stock are, or
upon issuance will be, duly authorized, validly issued, fully
paid and
non-assessable.
d. Issuance of Shares. The
Conversion Shares are
duly authorized and reserved for
issuance and, upon conversion of
the Note in accordance with its respective terms, will be validly
issued, fully paid and non-assessable, and free from
all taxes, liens, claims and encumbrances with respect
to the issue
thereof and shall not be subject to
preemptive rights
or other similar
rights of shareholders of the Company and will not impose personal liability upon
the holder thereof.
e. No Conflicts. The
execution, delivery and performance of this Agreement, the Note by
the Company and the consummation by the Company of the transactions
contemplated hereby
and thereby (including, without
limitation, the issuance and reservation for issuance of the
Conversion Shares) will not (i) conflict
with or result in a
violation of any provision of the
Certificate of Incorporation or By-laws, or (ii) violate or
conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of
time or both could become a default) under, or give to
others any rights of termination, amendment,
acceleration or
cancellation of, any agreement, indenture, patent,
patent license or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) result
in a violation of any law, rule,
regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are
subject) applicable to
the Company or any of
its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries
is bound or
affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would
not, individually or
in the aggregate, have
a Material Adverse Effect).
The businesses
of the Company and its Subsidiaries, if any, are not being
conducted, and shall
not be conducted so long as the
Buyer owns any of the Securities, in violation
of any law, ordinance or regulation of
any governmental entity. "Material Adverse Effect" means any
material adverse effect on the business, operations, assets, financial condition or
prospects of the Company or its
Subsidiaries, if any, taken as
a whole, or on the transactions contemplated
hereby or by the agreements or instruments to be entered
into in connection herewith.
f. SEC Documents: Financial Statements.
The Company has filed all reports, schedules,
forms, statements
and other documents required to be
filed by it with the
SEC pursuant to the reporting
requirements of the Securities Exchange Act of
1934, as amended (the "1934 Act")
(all of the foregoing filed prior to the date hereof
and all exhibits
included therein and financial statements and schedules
thereto and documents (other than exhibits to such documents) incorporated by reference therein,
being hereinafter referred to
herein as the "SEC Documents"). Upon written request the
Company will deliver to the Buyer true and complete copies of
the SEC Documents, except for such exhibits and incorporated documents. As of their
respective dates or if
amended, as of the dates of the amendments, the
SEC Documents complied in all material respects
with the requirements of the 1934 Act and the rules
and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and
none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required
to be stated therein
or necessary in
order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. None
of the statements
made in any
such SEC Documents is, or has been,
required to be amended or updated under applicable law
(except for such statements
as have been amended
or updated in subsequent
filings prior the date hereof). As of
their respective dates or if amended, as
of the dates of the amendments, the financial statements of
the Company included in the SEC
Documents complied as
to form in all material respects
with applicable
accounting requirements
and the published rules and regulations of the SEC
with respect
thereto. Such
financial statements
have been prepared in accordance with
United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the
consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods then ended (subject, in
the case of unaudited
statements, to normal
year-end audit adjustments). The Company is subject to
the reporting
requirements of the 1934
Act.
g. Absence of Certain
Changes. Since
March 31, 2018, except as set forth
in the SEC Documents, there has
been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations,
financial condition, results of operations, prospects
or 1934 Act reporting status of the
Company or any of
its Subsidiaries.
h. Absence of Litigation. Except as set
forth in the SEC Documents, there is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency,
self-regulatory organization or body
pending or, to the knowledge of
the Company or any of
its Subsidiaries, threatened
against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity
as such, that
could have a
Material Adverse Effect. The Company
and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the
foregoing.
i. No Integrated Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their
behalf, has directly or
indirectly made any offers
or sa les in
any security or solicited
any offers to buy any security under
circumstances that would require registration under the 1933 Act of the
issuance of the
Securities to the Buyer. The
issuance of the Securities to the Buyer will not be
integrated with any other
issuance of the Company's securities (past, current or future) for
purposes of any
shareholder approval
provisions applicable
to the Company or its
securities.
j. No Brokers. Except with respect to
Moody Capital Solutions,
Inc., the Company has taken no action
which would give rise to any claim by
any person for brokerage commissions, transaction fees or similar payments
relating to this Agreement or the transactions contemplated
hereby.
k.
No Investment Company. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will
not be an "investment company" required to be registered under the
Investment Company Act of 1940 (an "Investment Company"). The
Company is not controlled by an Investment Company.
I. Breach of Representations and Warranties
_b
the Company. If the Company breaches any of the representations or
warranties set forth in this Section 3, and in addition to any
other remedies available to the Buyer pursuant to this Agreement,
it will be considered an Event of default under Section 3.4 of the
Note.
4.
COVENANTS.
a.
Best Efforts. The Company shall use its best efforts to satisfy
timely each of the conditions described in Section 7 of this
Agreement.
b.
Form 0; Blue Sky Laws. The Company agrees to timely make any
filings required by federal and state laws as a result of the
closing of the transactions contemplated by this
Agreement.
c.
Use of Proceeds. The Company shall use the proceeds for general
working capital purposes.
d. Expenses. At the Closing, the Company's
obligation with respect to the transactions contemplated by this Agreement is to
reimburse Buyer' expenses shall be $3,000.00 for Buyer's legal fees
and due diligence fee.
e.
Corporate Existence. So long as the Buyer beneficially owns any
Note, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except
with the prior written consent of the Buyer.
f. Breach of Covenants. If the Company breaches
any of the covenants set forth in this Section 4, and in addition
to any other remedies available to the Buyer pursuant to this
Agreement, it will be considered an event of default under Section
3.4 of the Note.
g.
Failure to Comply with the 1934 Act. So long as the Buyer
beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall
continue to be subject to the reporting requirements of the 1934
Act.
h. Trading Activities. Neither the Buyer nor its
affiliates has an open short position in the common stock of the
Company and the Buyer agrees that it shall not, and that it will
cause its affiliates not to,
engage in any short sales of or
hedging transactions with respect to the common stock of the
Company.
i.
Right of
First
Refusal. Unless it shall have first
delivered to the Buyer, at least forty eight (48) hours prior to the closing of
such Future Offering
(as defined herein), written notice describing the proposed
Future Offering ("ROFR
Notice"), including the terms and
conditions thereof,
identity of the proposed
purchaser and proposed definitive documentation to be entered
into in connection therewith, and providing the
Buyer an option during the forty eight (48) hour period following
delivery of such
notice to purchase the securities
being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are
collectively referred
to as the "Right
of First Refusal"), the Company
will not conduct any equity (or debt with
an equity component) financing in an amount less than
$150,000 {"Future Offering(s)") during the
period beginning
on the Closing Date
and ending nine (9) months following the Closing Date. In the event
the terms and conditions of a proposed Future Offering are amended
in any respect after delivery of the notice to
the Buyer concerning the
proposed Future
Offering, the Company shall deliver a
new notice to
the Buyer describing the amended terms and conditions of
the proposed Future Offering and
the Buyer thereafter shall have an option
during the forty eight (48) hour period following delivery of such new notice
to purchase its pro rata share of the
securities being offered on the same terms as contemplated
by such proposed Future Offering, as amended. Notwithstanding anything contained
herein to the contrary, any subsequent offer by an
investor, or an affiliate of such investor,
identified on an ROFR Notice is
subject to this Right of
First Refusal.
5. Transfer
Agent Instructions. The
Company shall issue irrevocable
instructions to its transfer agent
to issue certificates, registered in the
name of the Buyer
or its nominee, for the Conversion Shares in such amounts
as specified from time to time by the Buyer to the
Company upon conversion of the Note in accordance with the
terms thereof (the
"Irrevocable Transfer
Agent Instructions" ).
In the event that the Company proposes to
replace its transfer agent, the Company shall provide, prior
to the effective date of such replacement, a fully executed
Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this
Agreement (including but not
limited to the provision to
irrevocably reserve shares
of Common Stock in the Reserved Amount
as such term is
defined in the Note) signed by the
successor transfer
agent to Company
and the Company. Prior to registration of the Conversion
Shares under
the 1933 Act or the date on
which the Conversion Shares may be sold pursuant
to an exemption from registration, all
such certificates shall bear the
restrictive legend
specified in Section 2(e) of this
Agreement. The Company warrants that: (i) no instruction other than
the Irrevocable Transfer
Agent Instructions referred to in this
Section 5, will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent
provided in this Agreement and the Note; (ii) it will
not direct its transfer
agent not to transfer or delay, impair, and/or hinder its transfer
agent in transferring (or issuing)(electronically or
in certificated form) any certificate for Conversion
Shares to be issued to the Buyer upon conversion of or otherwise
pursuant to the Note as and when
required by the Note and this Agreement; and (iii) it will not fail
to remove (or
directs its transfer
agent not to remove or impairs, delays, and/or hinders its transfer
agent from removing) any restrictive legend (or to withdraw any
stop transfer instructions in
respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or
otherwise pursuant to
the Note as and when
required by the Note and/or this Agreement. If the Buyer provides
the Company and the Company's transfer, at the cost of the Buyer,
with an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions,
to the effect
that a public sale or transfer
of such Securities may
be made without registration under the 1933 Act, the Company
shall permit the transfer, and, in the
case of the Conversion Shares, promptly instruct its transfer
agent to issue one or more certificates, free from restrictive
legend, in such
name and in such
denominations as specified
by the Buyer. The Company acknowledges
that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer,
by vitiating
the intent and purpose of
the transactions
contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a
breach of its obligations under t his
Section 5 may be
inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions
of this Section, that the Buyer shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without the necessity
of showing economic loss
and without any bond or
other security being required.
6.
Conditions to the Company's Obligation
to Sell. The obligation
of the Company hereunder to issue and
sell the Note to the Buyer at the Closing is
subject to the satisfaction, at or before the Closing
Date of each of the following conditions thereto, provided that
these conditions are
for the Company's
sole benefit and may be waived by the Company at any time in
its sole discretion:
a. The Buyer shall have executed
this Agreement and
delivered the same
to the Company.
b. The Buyer shall have
delivered the Purchase Price in
accordance with Section
l(b) above.
c. The representations and warranties of the
Buyer shall be true and
correct in all material
respects as of the date when made and as of the Closing Date as
though made at
that time (except for representations
and warranties that speak as of a specific date), and the Buyer shall have
performedi
satisfied
and complied
in all material respects with the covenants,
agreements
and
conditions
required by this Agreement to be
performed, satisfied
or complied with by the Buyer
at or prior to the Closing Date.
d. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by
or in any court or
governmental authority of competent
jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.
7. Conditions to The Buyer's Obligation to
Purchase. The obligation of the Buyer hereunder to purchase
the Note at the Closing is subject to
the satisfaction,
at or before the Closing Date
of each of the following conditions,
provided that these conditions are
for the Buyer's sole benefit and may be waived by the
Buyer at any
time in its
sole discretion:
a. The
Company shall have
executed this Agreement
and delivered the same to the Buyer.
b. The Company shall have delivered to the Buyer the duly executed Note (in
such denominations
as the Buyer shall request) in accordance
with Section
l(b) above.
c. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been
delivered to and
acknowledged in writing by the
Company's Transfer Agent.
d. The representations and warranties of the
Company shall
be true and correct in all
material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and warranties that speak as of a specific
date) and the Company shall have
performed, satisfied and
complied in all material respects with
the covenants, agreements and
conditions required by this
Agreement to be performed, satisfied or complied with by the
Company at or
prior to the Closing Date. The
Buyer shall have received
a certificate or certificates, executed by the chief executive officer
of the Company, dated as of the Closing Date, to the
foregoing effect and
as to such other
matters as may be reasonably requested by the Buyer
including, but not limited to certificates with respect to the
Board of Directors' resolutions relating to
the transactions contemplated hereby.
e. No
litigation, statute,
rule, regulation,
executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental
authority of competent jurisdiction or any
self-regulatory organization
having authority over the matters contemplated hereby which
prohibits the
consummation of any of the
transactions contemplated by this Agreement.
f. No event shall
have occurred which could reasonably be expected to
have a Material Adverse
Effect on the Company including but not limited to a
change in the
1934 Act reporting status of the
Company or the failure of the Company to
be timely in its 1934 Act reporting obligations.
g. The Conversion Shares shall
have been authorized for
quotation on an exchange
or electronic quotation system and
trading in the Common Stock
on such exchange or electronic quotation system shall not have
been suspended by the SEC or an
exchange or electronic quotation system.
h. The Buyer
shall have received the
fully executed
(with notary Confession of Judgment) dated as of the
Closing Date.
8. Governing law; Miscellaneous.
a. Governing law. This Agreement
shall be governed by
and construed
in accordance with the
laws of the
State of Virginia without
regard to principles of conflicts of laws. Any action brought
by either party against the
other concerning the transactions contemplated by this
Agreement shall
be brought only in the state
courts of New York or
in the federal courts
located in the Eastern District of New York. The parties to this
Agreement hereby irrevocably waive any objection
to jurisdiction and
venue of any action
instituted hereunder and
shall not assert any defense
based on lack
of jurisdiction or venue
or based upon/arum non conveniens.
The Company and Buyer waive trial by
jury. The prevailing party shall be
entitled to recover from
the other party its reasonable attorney's fees and costs. In the event that any
provision of this Agreement or any other agreement delivered
in connection herewith is invalid or unenforceable
under any applicable
statute or rule of law, then such
provision shall
be deemed inoperative to the extent
that it may conflict therewith and shall be
deemed modified to conform with such statute or rule
of law. Any such provision which may
prove invalid
or unenforceable under any
law shall not affect the
validity or enforceability of any
other provision of any agreement.
Each party hereby irrevocably waives personal service of
process and consents to process being served in any
suit, action or proceeding in connection
with this Agreement, the Note or any related
document or agreement by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for
notices to it under this Agreement and agrees
that such service
shall constitute good
and sufficient service
of process and notice
thereof. Nothing contained herein shall be
deemed to limit in
any way any right to
serve process in any other manner permitted by law.
b. Counterparts. This Agreement may be
executed in one
or more counterparts,
each of which shall be
deemed an
original but all of which shall
constitute one and the same agreement and
shall become effective when
counterparts have been signed by
each party and
delivered to the other
party.
c. Headings. The headings of this Agreement are
for convenience of reference only and shall not
form part of, or affect
the interpretation of,
this Agreement.
d. Severability. In the event that
any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule
of law, then
such provision shall be
deemed inoperative to the
extent that it may
conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may
prove invalid or unenforceable under any law
shall not affect the validity or
enforceability of any
other provision
hereof.
e. Entire Agreement; Amendments. This Agreement
and the instruments referenced herein
contain the entire
understanding of the parties
with respect to
the matters covered herein
and therein and, except as specifically set forth herein or therein,
neither the Company
nor the Buyer makes any
representation, warranty, covenant or undertaking with respect
to such matters.
No provision
of this Agreement may be waived or amended
other than by an instrument in writing signed
by the majority
in interest of the Buyer.
f. Notices. All notices, demands, requests,
consents, approvals, and other communications required or permitted hereunder
shall be in writing and, unless otherwise specified herein, shall be (i)
personally served,
(ii) deposited in the
mail, registered or
certified, return receipt
requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or
facsimile, addressed
as set forth
below or to such other address
as such party
shall have specified most
recently by written notice. Any
notice or other
communication required
or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery
or delivery by facsimile,
with accurate confirmation
generated by the transmitting
facsimile machine, at the
address or number designated below (if delivered on a
business day
during normal business
hours where such notice is to be
received), or the first business day following such delivery
(if delivered other
than on a business day during
normal business hours where such notice is
to be received) or
(b) on the second business day following
the date of mailing by express
courier service, fully
prepaid,
addressed to
such address, or upon actual receipt of
such mailing, whichever
shall first occur. The addresses for such communications shall
be as set forth in the
heading of this
Agreement with a copy
by fax only to (which copy shall not
constitute notice) to Naidich Wurman LLP, 111 Great Neck Road,
Suite 214, Great
Neck, NY 11021, Attn: Allison
Naidich, facsimile:
516-466-3555, e-mail:
allison@nwlaw.com. Each
party shall provide notice to the other
party of any change
in address.
g. Successors and Assigns.
This Agreement shall
be binding upon and inure to the benefit
of the parties and their successors and assigns. Neither
the Company nor the Buyer
shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the
other. Notwithstanding the
foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a
private transaction
from the Buyer or to any of
its "affiliates," as
that term is defined under the 1934 Act,
without the consent of the
Company.
h. Survival. The representations and warranties of
the Company and
the agreements and covenants
set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on
behalf of the Buyer.
The Company agrees to indemnify and hold
harmless the Buyer and all
their officers, directors, employees and agents for loss or
damage arising as result of or
related to any
breach or alleged
breach by the Company of
any of its representations,
warranties and covenants set
forth in this Agreement or
any of its covenants and obligations under this Agreement, including
advancement of expenses as
they are incurred.
i. Further Assurances. Each party
shall do and
perform, or cause to be
done and performed, all
such further acts
and things, and
shall execute and
deliver all such
other agreements, certificates, instruments and documents, as the other
party may reasonably request in
order to carry out
the intent and
accomplish the purposes
of this Agreement and the consummation of the transactions contemplated
hereby.
j.
No Strict Construction. The language
used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules
of strict construction
will be applied against any party.
k. Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly,
the Company acknowledges that the remedy at law
for a breach of
its obligations under this
Agreement will be
inadequate and agrees, in the
event of a breach or threatened
breach by the Company of the provisions of this Agreement,
that the Buyer shall be
entitled, in addition
to all other
available remedies at
law or in equity, and in
addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this
Agreement and
to enforce specifically the terms and provisions hereof,
without the necessity of showing economic loss and without
any bond or
other security being
required.
[THE
REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK)
IN WITNESS WHEREOF, the undersigned Buyer
and the Company have caused this Agreement to
be duly executed as of the date
first above written.
GUIDED THERAPEUTICS, INC.
/s/ Gene S. Cartwright
Gene S.
Cartwright
President
and Chief Executive Officer
POWER UP LENDING GROUP LTD.
By:
/s/ Curt Kramer
Name:
Curt Kramer
Title:
Chief Executive Officer
111 Great Neck Road, Suite
216
Great
Neck, NY 11021
AGGREGATE SUBSCRIPTION
AMOUNT:
Aggregate Principal Amount of Note:
$53,000.00
Aggregate
Purchase Price:
$53,000.00
SECURITIES PURCHASE
AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement")
is made as of the 22nd day of June, 2018 by and
between Guided Therapeutics,
Inc.,
(the "Company"),
and GHS Investments, LLC
(the "Investor").
Recitals
A. The Investor wishes to purchase from the
Company and the Company wishes
to sell and issue to the Investor, upon the
terms and conditions stated in this Agreement:
1. $68,000 of Securities, in the form
of a Promissory Note (the "Note"), attached
hereto.
In consideration of the mutual promises made
herein and for other good and valuable
consideration,
the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. In addition
to those terms defined above and elsewhere in this
Agreement, for the purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" means,
with respect to any Person, any other
Person which directly or indirectly through one or more
intermediaries Controls, is controlled by, or is under
common control with,
such Person.
"Business Day" means a day, other than a
Saturday or Sunday,
on which banks in New York City are
open for the general transaction of business.
"Common Stock Equivalents"
means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time
Common Stock, including
without limitation,
any debt, preferred
stock, rights, options, warrants or other instrument that
is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to
receive,
Common Stock.
"Company's Knowledge" means the
actual knowledge of the executive officers (as defined in Rule 405
under the 1933 Act) of the Company,
after due inquiry.
"Confidential Information" means trade
secrets, confidential information and know-how (including but not
limited to ideas,
formulae, compositions, processes, procedures
and techniques,
research and development
information,
computer program
code, performance specifications, support
documentation,
drawings,
specifications,
designs, business and
marketing plans,
and customer and supplier lists and
related information).
"Control" (including the terms "controlling", "controlled by" or "under common
control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of
voting securities, by contract or
otherwise.
"Intellectual Property" means all of the
following: (i) patents,
patent applications, patent
disclosures and inventions (whether or not patentable and whether
or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos,
slogans and Internet domain names, together with all goodwill
associated with each of the foregoing; (iii) copyrights and
copyrightable works; (iv) registrations, applications and renewals for any
of the foregoing; and (v) proprietary computer software (including
but not limited to data, data bases and
documentation).
"Material Adverse Effect" means a material adverse effect on
(i) the assets, liabilities, results of
operations, condition (financial or otherwise), business, or
prospects of the Company and its Subsidiaries taken as a whole,
or (ii) the ability of the Company to
perform its obligations under the Transaction
Documents.
"Person" means
an individual,
corporation, partnership, limited
liability company,
trust, business trust, association,
joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other
form of entity not specifically listed herein.
"Purchase Price" means $60,500, representing a 10% original
issuance discount on the Note and an initial $2,000 being withheld
by the Investor to offset legal and other transaction
costs.
"SEC" means
the United States Securities and Exchange Commission.
"Securities"
means the Note and the common shares issuable at
conversion.
"Subsidiary" of any Person means another Person, an amount of
the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of
its Board of Directors or other governing body (or, if there are no
such voting interests, 50% or more of the equity interests of
which) is owned directly or indirectly by such first
Person.
"Transaction Documents" means this Agreement, the
Note, the Company Representation Letter, and
supporting documents.
"1933 Act"
means the Securities Act
of 1933, as
amended, or any successor statute, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities
Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated
thereunder.
2.
Purchase and Sale of the Securities. Subject to the terms and
conditions of this Agreement, the Company shall sell and issue to
the Investor a Promissory Note in the principal amount of
$62,500
2.1
Security As Security for the Company's obligations contained herein
and in the Note issued by the Company to the Holder, following any
Event of Default which remains uncured for fifteen (15) calendar
days, the Holder shall be granted an unconditional security
interest in and to, any and all property of the Company and its
subsidiaries, of any kind or description, tangible or intangible,
whether now existing or hereafter arising or acquired until the
balance of the Note has been reduced to $0. "Any and all property,"
as described herein shall be inclusive of, but not limited to,
assets reported by the Company on its SEC filings, cash, inventory,
accounts receivable, intellectual property rights, equipment and
property. The Investor is authorized to make all filings the
Investor, in its discretion, deems necessary to evidence its
security interests.
3. Closing. Upon confirmation that the other
conditions to closing specified herein have been satisfied or duly
waived by the Investor, the Company shall deliver to the Investor,
a Note registered the name of the Investor and the Investor shall
cause a wire transfer in same day funds to be sent to the account
of the Company as instructed in writing by the Company, in an
amount representing the Purchase Price for the Note (the
"Closing Date").
4.
Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investor that, except as set forth
in the schedules delivered herewith (collectively, the "Disclosure
Schedules") and as disclosed in the Company's SEC
Filings:
4. 1 Organization, Good Standing and
Qualification. Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carryon its business as
now conducted and to own its properties. Each of the Company and
its Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property
makes such qualification or leasing necessary unless the failure to
so qualify has not and could not reasonably be expected to have a
Material Adverse Effect. The Company's Subsidiaries are listed on the Company's public
disclosures filed with the SEC.
4.2 Authorization. The Company has
full power and authority and, has taken all requisite action
on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and
delivery of the Transaction Documents, (ii) authorization of the
performance of all obligations of the Company hereunder or
thereunder, and (iii) the authorization, issuance (or reservation
for issuance) and delivery of the Securities. The Transaction
Documents constitute the legal, valid and binding obligations of
the Company,
enforceable against the Company in
accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer,
reorganization,
moratorium and similar laws of general
applicability,
relating to or affecting
creditors' rights generally.
4.3 Capitalization. As of the date
hereof, the authorized common stock of the Company on the
date hereof is _
1 ,000,000,000 __; (b)
the number of shares of
capital stock issued and outstanding
as of_6/21/18
is _252,577,663 ; (c) the
number of shares of capital stock issuable pursuant to the
Company's stock plans _38,51 1,718 ; and (d) the number of shares of capital stock
issuable and reserved for issuance pursuant to securities (other
than the Securities) exercisable for, or convertible into or
exchangeable for any shares of capital stock of the Company as
of
_
6/21/18_
_ are _708,910,619 . All of the
issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of pre-emptive rights. All
of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are
fully paid, nonassessable and free of pre-emptive rights, were
issued in full compliance with applicable state and federal
securities law and any rights of third parties and are owned by the
Company, beneficially and of record, subject to
no lien, encumbrance or other adverse claim. No Person is entitled
to pre-emptive or similar statutory or contractual rights
with respect to any securities of the Company. Other than described
herein and in the Company's periodic reports filed with the
SEC, there are no outstanding warrants,
options, convertible securities or other rights, agreements
or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity
securities of any kind and except as contemplated by this
Agreement, neither the Company nor any of its Subsidiaries is
currently in negotiations for the issuance of any equity securities
of any kind.
The issuance and sale of the Securities hereunder
will not obligate the Company to issue shares of Common Stock or
other securities to any other Person (other than the Investor) and
will not result in the adjustment of the
exercise, conversion, exchange or
reset price of any outstanding security. The Company does not have
outstanding stockholder purchase rights or "poison pill"
or any similar arrangement in effect giving any Person the right to
purchase any equity interest in the Company upon the occurrence
ofcertain events.
4.4 Valid Issuance. The issued
Securities have been duly and validly authorized and, when issued
and paid for pursuant to this Agreement, shall be free and clear of
all encumbrances and restrictions (other than those created by the
Investor), except for restrictions on transfer set forth in
the Transaction Documents or imposed by applicable securities laws.
Upon the due conversion of the Debenture, the Converted Shares will
be validly issued, fully paid and non-assessable free and clear of
all encumbrances and restrictions, except for restrictions on
transfer set forth in the Transaction Documents or imposed by
applicable securities laws and except for those created by the
Investor. The Company has reserved a sufficient number of shares of
Common Stock for issuance upon the exercise of the Debenture, free
and clear of all encumbrances and restrictions, except for
restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws and except for those created
by the Investor.
4.5 Consents. The execution, delivery and
performance by the Company of the Transaction Documents, and the
offer, issuance and sale of the Securities require no consent of,
action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have
been made pursuant to applicable state securities laws, and
post-sale filings pursuant to applicable state and federal
securities laws which the Company undertakes to file within the
applicable time periods. Subject to the accuracy of the
representations and warranties of the Investor set forth in Section
5 hereof, the Company has taken all action necessary to exempt (i)
the issuance and sale of the Securities, (ii) the issuance of the
Shares upon due conversion of the Debenture, and (iii) the other
transactions contemplated by the Transaction Documents from the provisions of any shareholder
rights plan or other "poison pill"
arrangement, any anti-takeover, business combination or control
share law or statute binding on the Company or to which the Company
or any of its assets and properties may be subject and any
provision of the Company's Articles of Incorporation or By-laws
that is or could reasonably be expected to become applicable to the
Investor as a result of the transactions contemplated hereby,
including without limitation, the issuance of the Securities and
the ownership, disposition or voting of the Securities by the
Investor or the exercise of any right granted to the Investor
pursuant to this Agreement or the other Transaction
Documents.
4.6 Delivery of SEC Filings; Business. The Company
has made available or shall make available, within twenty calendar
days from the execution of this Agreement, to the Investor through
the EDGAR system, true and complete copies of the Company's most
recent Annual Report on Form l0-K for its last fiscal year (the
"10-K"), and all other reports filed by the Company pursuant to the
1934 Act since the filing of the l0-K and prior to the date hereof
(collectively, the "SEC Filings"). The SEC Filings are
the only filings required of the Company pursuant to the 1934 Act
for such period. The Company and its Subsidiaries are engaged in
all material respects only in the business described in the SEC
Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company
and its Subsidiaries, taken as a whole.
4.7 Use of Proceeds. The net proceeds of the sale
of the Note hereunder shall be used by the Company for working
capital and general corporate purposes. The Company agrees that it
shall not use the funds from this Agreement, at any time, to lend
money, give credit or make advances to any officers, directors,
employees, subsidiaries and affiliates of
the Company.
4.8 No Conflict, Breach, Violation or Default. The
execution, delivery and performance of the Transaction Documents by
the Company and the issuance and
sale of the Securities will not conflict with or result in a breach
or violation of any of the terms and provisions of, or constitute a
default under (i) the Company's Articles of Incorporation or the
Company's Bylaws, both as in effect on the date hereof (true and
complete copies of which have been made available to the Investor
through the EDGAR system), or (ii)(a) any statute, rule, regulation
or order of any governmental agency or body or any court, domestic
or foreign, having jurisdiction over the Company, any Subsidiary or
any of their respective assets or properties, or (b) any agreement
or instrument to which the Company or any Subsidiary is a party or
by which the Company or a Subsidiary is bound or to which any of
their respective assets or properties is
subject.
4.9 Brokers and Finders. No Person will
have, as a result of the transactions contemplated by
the Transaction Documents, any valid right, interest or claim
against or upon the Company, any
Subsidiary or an Investor for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into
by or on behalf
of the Company.
4.10 No Directed Selling Efforts or
General Solicitation. Neither the Company nor any Person
acting on its
behalf has conducted any general
solicitation or general advertising (as those terms are used in
Regulation D) in connection with the offer or sale of any of the
Securities.
4.11 No
Integrated Offering. Neither the Company nor
any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales
of any Company security or solicited any offers to buy any
security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from
registration for the
transactions contemplated
hereby or would require registration of the Securities
under the 1933
Act.
4.12
Private Placement. The offer and sale of the Securities to the
Investor as contemplated hereby is exempt from the registration
requirements of the 1933 Act.
5.
Representations and Warranties of the
Investor. The Investor hereby represents and warrants
to the Company that:
5.1
Organization and Existence. Such
Investor is a validly existinmg corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or
limited liability company power and authority to invest in the
Securities pursuant to this Agreement.
5.2 Authorization. The execution, delivery and
performance by such Investor of the Transaction Documents to which
such Investor is a party have been duly
authorized and will each constitute
the valid and legally
binding obligation of such Investor,
enforceable against such Investor in accordance with their
respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability, relating to or affecting
creditors' rights generally.
5.3 Purchase Entirely for Own Account. The
Securities to be received by such Investor hereunder will be
acquired for such Investor's own account, not as
nominee or agent, and not with
a view to the resale or distribution of any part thereof in
violation of the 1933 Act, and such Investor has no
present intention of selling,
granting any participation in, or otherwise distributing the same
in violation of the 1933 Act without prejudice, however, to such
Investor's right at all times to
sell or otherwise dispose of all or any
part of such Securities in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Securities
for any period of time. Such
Investor is not a broker-dealer
registered with the SEC under the 1934 Act or an entity engaged in
a business that would require it to be so
registered.
5.4
Investment Experience. Such Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby.
5.5
Disclosure of Information. Such Investor has had an opportunity to
receive all information related to the Company requested by it and
to ask questions of and receive answers from the Company regarding
the Company, its business and the terms and conditions of the
offering of the Securities. Such Investor acknowledges receipt of
copies of the SEC Filings. Neither such inquiries nor any other due
diligence investigation conducted by such Investor shall modify,
amend or affect such Investor's right to rely on the Company's
representations and warranties contained in this
Agreement.
5.6 Restricted Securities. Such Investor
understands that the Securities are characterized as
"restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be
resold without registration under the 1933 Act only in certain
limited circumstances.
5.7 Legends. It
is understood that, except as
provided below,
certificates evidencing the Securities
may bear the following or any similar legend:
(a) "The
securities represented hereby may not be transferred
unless
(i) such securities have been registered for sale
pursuant to the Securities Act of 1933, as amended, (ii) such
securities may be sold pursuant to Rule 144(i), or
(iii)
the Company has received an opinion of
counsel reasonably satisfactory to it that such transfer may
lawfully be made without registration under the Securities Act of
1933 or qualification under applicable state securities
laws."
(b) If required by the authorities of any state in
connection with the issuance of sale of the
Securities, the legend required by such state
authority.
5.8 Accredited Investor. Such Investor is an
accredited investor as defined in Rule 501(a) of Regulation
D, as amended, under the
1933 Act.
5.9
No General Solicitation. Such Investor did not learn of the
investment in the Securities as a result of any public advertising
or general solicitation.
5.10 Brokers and Finders. No Person will have, as
a result of the transactions contemplated by the Transaction
Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any
commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on
behalf of such Investor.
6.
Conditions to Closing.
6.1 Conditions to the Investor's
Obligations.
The obligation of the Investor to
purchase the Note at Closing is subject to the fulfillment to such
Investor's satisfaction, on or prior to the Closing Date,
of the following conditions, any
of which may be waived by the Investor:
(a) The representations and warranties made by
the Company in Section 4 hereof qualified as to materiality
shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation
or warranty expressly
speaks as of an earlier date,
in which case such representation or warranty
shall be true and correct as of
such earlier date, and, the representations and
warranties made by the Company in Section 4 hereof not qualified as
to materiality shall be true and correct in all material respects
at all times prior to and on the Closing Date,
except to the extent any such representation or warranty
expressly speaks
as of an earlier date, in which case
such representation or warranty shall be true and correct in
all
material respects as of such earlier
date. The Company shall have performed in all material respects all
obligations and conditions herein required to be performed
or observed by it on or prior to the Closing
Date.
(b) The Company shall have obtained any
and all consents,
permits, approvals, registrations and
waivers necessary or appropriate for consummation of the purchase
and sale of the Securities, and the consummation of the other
transactions contemplated by the Transaction
Documents, all of which shall be in full force and
effect.
(c) No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy
court or judge,
or any order of or by any governmental
authority, shall have been issued, and no action or proceeding
shall have been instituted by any governmental authority,
enjoining or
preventing the consummation of the
transactions contemplated hereby or in the other Transaction
Documents.
(d) The Company shall have executed and delivered
the Convertible Note and supporting
documentation.
(e) The Company shall have executed and delivered
the Irrevocable Transfer Agent Instructions.
(t)
No stop order or
suspension of
trading shall have
been imposed by the public markets on which the Company's common stock is traded or quoted, the
SEC or any other governmental or regulatory body with
respect to public trading in the Common Stock.
6.2 Conditions
to Obligations
of the Company. The Company's obligation to sell and issue the Note
at Closing is subject to the fulfillment to the
satisfaction of the Company on or
prior to the Closing Date of the following
conditions, any of which may be waived by the
Company:
(a) The representations and warranties made by the
Investor in Section 5 hereof, other than the representations and
warranties contained in Sections 5.3, 5.4, 5.5,
5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material
respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if
they had been made on and as of said date. The Investment
Representations shall be true and correct in all respects when
made, and shall be true and correct in all respects on
the Closing Date with the same force and effect as if they had been
made on and as of said date. The Investor shall have performed in
all material respects all obligations and conditions herein
required to be performed or observed by them on or prior to the
Closing Date.
(b)
The Investor shall have delivered the Purchase Price to the Company
in accordance with the schedule outlined herein.
6.3
Termination of Obligations to Effect Closing; Effects.
(a) The obligations of the Company, on the one
hand, and the Investor, on the other
hand, to effect the Closing shall terminate as
follows:
(i)
Upon the mutual written consent of the Company and the
Investor;
(ii)
By the Company if any of the conditions set forth in Section 6.2
shall have become incapable of fulfillment, and shall not have been
waived by the Company;
(iii)
By the Investor if any of the conditions set forth in
Section
6.1 shall have
become incapable of fulfillment, and shall
not have been waived by the Investor; or
provided, however, that, except
in the case of clause (i) above, the party seeking to terminate its
obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or the other Transaction
Documents if such breach has resulted in the circumstances
giving rise to such party's seeking to terminate its obligation to
effect the Closing.
7.
Survival and Indemnification.
7.1 Survival. The
representations, warranties, covenants and agreements contained in
this Agreement shall survive the Closing of the transactions
contemplated by this Agreement.
7.2 Indemnification. The Company agrees to
indemnify and hold harmless each Investor and its Affiliates and
their respective directors, officers, employees and agents from and
against any and all losses, claims, damages, liabilities
and expenses (including without limitation reasonable attorney fees
and disbursements and other expenses incurred in
connection with investigating, preparing or defending any
action, claim or proceeding, pending or threatened and the costs of
enforcement thereof) (collectively, "Losses") to
which such Person may become subject as a result of any breach of
representation, warranty, covenant or agreement made by or to be
performed on the part of the Company under the Transaction
Documents, and will reimburse any such Person for all such amounts
as they are incurred by such Person.
7.3 Conduct of Indemnification Proceedings.
Promptly after receipt by any Person (the "Indemnified Person") of
notice of any demand, claim or circumstances which would or might
give rise to a claim or the commencement of any
action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 7.2, such Indemnified
Person shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Person, and
shall assume the payment of all fees and expenses;
provided, however, that the failure of any Indemnified
Person so to notify the Company shall not relieve the Company of
its obligations hereunder except to the extent that the Company is
materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain
its own counsel, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless: (i) the Company
and the Indemnified Person shall have mutually agreed to the
retention of such counsel; or (ii) in the reasonable judgment of
counsel to such Indemnified Person representation of both parties
by the same counsel would be inappropriate due to actual or
potential differing interests between them. The Company
shall not be liable for any settlement of any proceeding effected
without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if
there be a [mal judgment for the plaintiff, the Company shall
indemnify and hold harmless such Indemnified Person from and
against any loss or liability (to the extent stated above) by
reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be
unreasonably withheld, the Company shall not affect any settlement
of any pending or threatened proceeding in respect of which
any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such
Indemnified Person from all liability arising out of such
proceeding.
8. Miscellaneous.
8.1
Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or
the Investor, as applicable, provided, however, that an Investor
may assign its rights and delegate its duties hereunder in whole or
in part to an Affiliate or to a third party acquiring some or all
of its Securities in a private transaction without the prior
written consent of the Company, after notice duly given by such
Investor to the Company. The provisions of this Agreement shall
inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this
Agreement.
8.2 Counterparts; This Agreement may be executed
in two or more counterparts, each of which shall
be
deemed an original, but all of which
together shall constitute one
and the same instrument. This Agreement may also be executed
via facsimile, which shall be deemed an
original.
8.3 Titles and Subtitles. The
titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this
Agreement.
8.4 Notices. Unless
otherwise provided, any notice
required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then
such notice shall
be deemed given upon such delivery,
(ii) if given by fax, then such notice
shall be deemed given upon receipt of confirmation of complete
transmittal,
(iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of
such notice by the recipient or (8)
three days after such notice is
deposited in first class mail, postage prepaid, and (iv) if given
by an internationally recognized overnight air
courier, then such notice shall be
deemed given one business day after delivery to such carrier. All
notices shall be addressed to
the party to be notified at the address
as follows, or at such other address as such party may
designate by ten days' advance written notice to the other
party:
If to the Company:
Gene
S. Cartwright
CEO
Guided
Therapeutics, Inc
If to the Investor:
GHS Investments, LLC
420 Jericho Turnpike, Suite
207
Jericho,
NY 11753
8.5 Expenses. The parties hereto shall pay
their own costs and expenses in connection herewith. In the event that legal proceedings are
commenced by any party to this Agreement against another party to this Agreement in connection with this Agreement or
the other Transaction Documents, the party
or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their
pro rata share of the reasonable attorneys' fees and
other reasonable out-of-pocket costs and expenses incurred by the prevailing party in
such proceedings.
8.6 Amendments and Waivers. Any
term of this
Agreement may be amended and the
observance of any term of this Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of
the Company and the Investor. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of
any Securities purchased under this Agreement at the time
outstanding, each future holder of all such Securities, and the
Company.
8.7 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent
permitted by applicable law,
and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any
provision hereof prohibited or unenforceable in any
respect.
8.8 Entire Agreement. This Agreement, including
the Exhibits and the Disclosure Schedules, and the other
Transaction Documents constitute the entire agreement among the
parties hereof with
respect to the subject matter hereof
and thereof and supersede all prior agreements and
understandings,
both oral and written, between the
parties with respect to the subject matter hereof and
thereof.
8.9 Further Assurances. The parties
shall execute and deliver all such further instruments and documents and take
all such other actions as may reasonably be required to carry out
the transactions contemplated hereby and to evidence the
fulfillment of the agreements herein contained.
8.10 Governing Law; Consent to Jurisdiction;
Waiver of Jury Trial. This Agreement shall be governed by, and
construed in accordance with, the internal
laws of the State of Nevada, without regard to principles of
conflicts of Law. Each of the parties hereto irrevocably submit to
the exclusive jurisdiction of the state and federal courts sitting
in New York City, New York over any action or proceeding arising
out of or relating to this
Agreement and the parties hereto hereby irrevocably agree that all
claims in respect of such action or proceeding may be heard and
determined in such court. The parties
hereto agree that a [mal judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. The
parties hereto further waive any objection to venue in the State of
New York and any objection to an action or proceeding in the State
of New York on the basis of forum non
conveniens.
[signature
page follows]
IN WITNESS WHEREOF, the parties
have executed this Agreement or caused their
duly authorized
officers to execute this
Agreement as of the date first above written. The
Company:
By:
/s/ Gene S. Cartwright
Name:
Gene S. Cartwright
Guided Therapeutics, Inc.
By:
/s/ Mark Grober
Name:
Mark Grober
Title:
Member
The Investor: GHS Investments, LLC.
SECURITIES PURCHASE
AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the "Agreement'),
dated as of July 3,
2018, by
and between GUIDED THERAPEUTICS,
INC., a Delaware corporation, with headquarters located at 5835 Peachtree Comers East, Suite D, Norcross, GA 30092
(the "Company"), and AUCTUS FUND, LLC,
a Delaware limited liability company, with its address at 545 Boylston Street,
2nd Floor, Boston, MA 02116 (the "Buyer").
WHEREAS:
A. The
Company and the Buyer
are executing and delivering this Agreement in reliance upon
the exemption from securities
registration afforded by the
rules and regulations as promulgated
by the United States Securities
and Exchange Commission (the "SEC")
Holder the Securities Act of 1933, as amended (the "1933
Act');
B. Buyer desires to purchase and the
Company desires to
issue and sell, upon the terms and conditions set
forth in this Agreement the
12% convertible note of
the Company, in
the form attached hereto as
Exhibit A., in
the aggregate principal amount of US$89,250.00
(together with
any note(s) issued in replacement thereof or as
a dividend thereon
or otherwise with respect thereto in accordance with the
term thereof; the
''Note''), convertible into shares of
common stock,
$0.00 I par
value per share, of the Company
(the ''Common Stock'), upon
the terms and subject to
the limitations and conditions
set forth in such
Note.
C. The Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, such principal amount of Note as is set forth immediately
below its name on the signature pages hereto;and
NOW THEREFORE,
the Company and the Buyer severally (and not jointly) hereby agree as follows :
1. PURCHASE AND SALE OF NOTE.
a. Purchase of Note. On the Closing
Date (as defined below),
the Company shall issue and sell to the Buyer
and the Buyer
agrees to purchase from the
Company such principal amount of Note as is set forth
immediately below the
Buyer's name on the signature
pages hereto.
b. Form of
Payment. On the
Closing Date (as defined below), (0 the Buyer shall
pay the purchase price
for the Note to be issued and
sold to it at the
Closing (as defined
below) (the ''Purchase
Price') by wire transfer of immediately available
funds to the Company, in
accordance with the Company's written wiring instructions,
against delivery
of the Note
in the principal amount equal to the Purchase Price
as is set forth immediately below the Buyer's
name on the signature pages hereto, and (n) the Company shall deliver such
duly executed Note
on behalf of the
Company, to the Buyer,
against delivery
of such Purchase Price.
c. Closing Date.
Subject to the satisfaction (or written waiver) of the
conditions thereto set
forth in Section 7 and Section 8
below, the date and time
of the issuance and sale of the Note pursuant
to this Agreement (the
"Closing Date') shall be 12:00
noon, Eastern Standard Time on or about July 3,
2018, or such
other mutually agreed upon time.
The closing of
the transactions contemplated by
this Agreement (the "Closing')
shall occur on the Closing Date
at such location
as may be agreed to by
the parties.
2.
REPRESENTATIONS AND
WARRANTlES OF THE BUYER
The Buyer represents
and warrants to the
Company that:
a. Investment
Purpose. As of
the date hereof, the Buyer is
purchasing the Note and
the shares of Common Stock issuable
upon conversion of or
otherwise pursuant to the
Note (including, without limitation, such additional
shares of
Common Stock, if
any, as are issuable
(i) on account of
interest on the Note (ii)
as a result of the events
described in Sections
1.3 and 1.4(g)
of the Note or
(iii) in payment of the Standard Liquidated Damages Amount
(as defined in Section 2(t)
below) pursuant
to this Agreement, such shares of Common Stock
being collectively referred to herein as the ''Conversion Shares" and,
collectively with
the Note, the
"Securities') fur its own account and
not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or
exempted from registration
under the 1933 Act
and Buyer is able to
bear the economic risk
of holding the
Conversion Shares for an
indefinite period (including total loss of
its investment),
and has sufficient
knowledge and
experience in financial and business matters so
as to be capable
of evaluating the merits and risk of
its investment.
provided, however, that
by making the representations
herein, the Buyer
does not
agree to hold any of the
Securities fur any minimum or other specific term and
reserves the right to dispose
of the Securities
at any time in
accordance with or pursuant to a registration statement or
an exemption under the
1933 Act.
b. Accredited Investor Status The
Buyer is an "accredited investor" as
that term is
defined in Rule 501 (a)
of Regulation D
(an "Accredited Investor')'
c. Reliance on
Exemptions. The Buyer understands that the Securities are being offered and sold
to it in reliance upon specific
exemptions from the
registration requirements of
United States federal and state securities laws and
that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations,
warranties, agreements, acknowledgments and understandings of the
Buyer set forth
herein in order to determine the availability of such exemptions
and the eligibility of the Buyer to acquire the Securities.
d. Information. The Buyer and its
advisors, if any,
have been, and for so long s
the Note remains outstanding will continue
to be, furnished with
all materials relating
to the business, finances and operations of the Company and
materials relating to the offer
and sale of the
Securities which
have been requested by the Buyer or
its advisors.
The Buyer and its advisors, if any, have been, and fur
so long as
the Note remains outstanding will continue to be, afforded the
opportunity to ask
questions of the Company. Notwithstanding the foregoing, the Company has
not disclosed
to the Buyer any material nonpublic information and will not
disclose such
information unless such information is disclosed
to the public
prior to or promptly following such
disclosure to the Buyer. Neither such inquiries nor any other due
diligence investigation conducted by
Buyer or any of its advisors
or representatives
shall modify,
amend or affect Buyer's right to rely on the Company's representations and warranties contained in Section
3 below. The
Buyer understands that its investment in the
Securities involves a
significant degree
of risk. The Buyer is not
aware of any facts that may constitute
a breach of any of
the Company's representations and warranties made herein.
e. Governmental Review.
The Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed
upon or made any recommendation or
endorsement of the
Securities.
f Transfer or Re-sale. The Buyer
understands that CO
the sale or re-sale
of the Securities has not been andis
not being registered under the 1933 Act or any applicable state securities
laws, and the Securities may not be
transferred unless (a)
the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the
Buyer shall have delivered to the Company an opinion of counsel of Buyer reasonably satisfactory to the Company's transfer agent that shall be in
form, substance and scope
customary fur
opinions of counsel
in comparable transactions to the
effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted
by the Company, (c) the Securities
are sold or transferred to
an "affiliate" (as
defined in Rule 144 promulgated under the 1933 Act (or a successor rule) ("Rule 144"» of
the Buyer who
agrees in writing to be bound
by this Agreement and who is
an Accredited Investor, (d) the
Securities are sold pursuant to
Rule 144, or (e) the
Securities are sold
pursuant to Regulation S under
the 1933 Act (or a
successor rule) ("Regulation S"), and the Buyer shall
have delivered to the Company an opinion of
counsel of Buyer
reasonably satisfactory
to the Company's
transfer agent that shall be
in form, substance and scope
customary fur
opinions of counsel in corporate
transactions, which opinion shall be accepted
by the Company;(n)
any sale of such Securities made
in reliance on
Rule 144 may be made only in
accordance with the terms
of said Rule and further, if
said Rule is not
applicable, any re-sale of
such Securities under circumstances in
which the seller (or the person
through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance
with some other exemption under
the 1933 Act or
the rules and regulations of the SEC
thereunder;and (iii)
neither the Company nor any
other person is under any
obligation to register
such Securities under the 1933 Act
or any state securities laws or
to comply with
the terms and conditions of any
exemption thereunder
(in each case). Notwithstanding the foregoing or anything else contained herein to the
contrary, the Securities
may be pledged
as collateral in connection with a bona fide
margin account or other
lending arrangement.
g. Legends. The Buyer understands that
the Note and, until such time as the
Conversion Shares have been registered under the 1933 Act may
be sold pursuant to
Rule 144 or Regulation S without any restriction as to the number
of securities
as of a particular date that can
then be immediately sold, the Conversion Shares may
bear a restrictive legend
in substantially the following form
(and a stop-transfer order may be placed against transfer
of the certi1icates for such
Securities):
"NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRA
NON STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY
THE HOLDER), IN A GENERALLY ACCEPT ABLE FORM, THAT REGISTRATION IS
NOT SUREDUNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR
RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER DEALER OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT."
The legend set forth
above shall be
removed and the
Company shall issue certi1icate without
such legend to the holder of any
Security upon which it is stamped,
if; unless otherwise
required by applicable state securities laws, (a)
such Security
is registered for sale
under an effective registration statement
filed under the
1933 Act or
otherwise may be
sold pursuant to
Rule 144 or Regulation S without any restriction as to the
number of securities as of a
particular date
that can then be
immediately sold, or (b) such holder provides the Company with
an opinion of
counsel reasonably satisfactory to the Borrower's transfer
agent, in form, substance and scope
customary for opinions
of counsel in comparable transactions, to the effect that
public sale or
transfer of such
Security may be made without
registration under
the 1933
Act, which opinion shall
be accepted by
the Company
so that the sale or
transfer is effected the
Buyer agrees to sell all Securities, including those
represented by
a certi1icate(s) from which
the legend has been
removed, in compliance with applicable prospectus delivery
requirements,
if any.
h. Authorization;Enforcement. Buyer bas
all necessary company power and
authority to enter
into this Agreement, to carry out its obligations
hereunder and
to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
authorized. This Agreement has been duly executed and
delivered on behalf of the Buyer, and this
Agreement constitutes a valid and binding agreement
of the Buyer enforceable in accordance with its
terms.
i. Residency. The Buyer is a limited liability company duly organized, validly existing
and in good standing
under the Laws of the
state of
Delaware.
3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY. The
Company represents and warrants
to the Buyer that, except as otherwise disclosed in the SEC Documents (as
defined below):
a. Organization and Qualification The
Company and each of its Subsidiaries (as defined
below), if any, is
a corporation duly organized,
validly existing
and in good standing under
the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and
other) to own, lease,
use and operate its properties and to
carry on its business as
and where now owned, leased, used, operated
and conducted. The Company and
each of its Subsidiaries is duly qualified as a foreign
corporation to do
business and is in
good standing
in every jurisdiction in which its ownership or use
of property or the nature of the business conducted
by it makes such
qualification necessary except where
the fui1ure to be so qualified or in good standing would
not have a Material Adverse
Effect (except with respect to
the re-registration of the Company's ISO certification and CE
Mark). "Material Adverse Effect" means
any material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its
Subsidiaries, if any,
taken as a whole, or on the
transactions contemplated hereby
or by the agreements or instruments to
be entered into in connection herewith provided, however, that 'Material
Adverse Effect"
shall not
include any event, occurrence, fact,
condition or change, directly or indirectly, arising out of or
attributable to: (i)
general economic or
political conditions; (iI) conditions generally affecting
the industries in
which the Company operates; (iii) any changes in financial
banking or securities markets in genera~ including any disruption
thereof and any decline in the price of any security or any market
index or any change in prevailing interest rates; (iv) acts of war (whether or not declared),
banned hostilities
or terrorism,
or the escalation or worsening
thereof, (v)
any action required or permitted by
this Agreement or
any action taken (or omitted to
be taken) with the written consent of or at the
written request of Buyer; (vi) any matter of which Buyer is aware
on the date hereof, (vii) any
changes in applicable Laws or accounting rules
(including GAAP) or the
enforcement, implementation or
interpretation thereof, (viii) the
announcement, pendency or completion of the transactions
contemplated by this Agreement, including losses or
threatened losses of employees, customers, suppliers,
distributors or others
having relationships with the Company;(ix)
any natural or man-made disaster
or acts of God; or (x) any failure by the Company to meet any
internal or published projections, forecasts or revenue or
earnings predictions (provided that the underlying
causes of such
failures (subject to the other
provisions of
this definition) shall not be
excluded). "Subsidiaries" means any corporation or
other organization, whether
incorporated or
unincorporated,
in which the Company owns, directly or indirectly, any equity or
other ownership interest.
b. Authorization;Enforcement. (i) The Company has all
requisite corporate power
and authority to enter
into and perform this Agreement, the Note
and to consummate the transactions contemplated hereby and thereby and to issue
the Securities,
in accordance with the terms hereof and thereof;
(n) the execution and
delivery of this
Agreement, the Note by
the Company and
the consummation by it
of the transactions contemplated hereby and thereby (including without limitation, the issuance
of the Note and
the issuance and
reservation fur issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by
the Company's
Board of Directors and no further
consent or authorization
of the Company, its
Board of Directors, or its
shareholders is required, (iii)
this Agreement has
been duly executed and delivered by the Company by
its authorized
representative, and
such authorized representative i<;the true
and official
representative with authority to sign
this Agreement and the other
documents executed in
connection herewith
and bind the Company accordingly, and
(iv) this Agreement constitutes, and upon
execution and delivery by the Company of
the Note, each of such
instruments will constitute, a
legal, valid and binding obligation of
the Company enforceable
against the Company in
accordance with its terms.
c. Capitalization. As of the date hereof; the authorized capital stock of the Company
consist of (D 1,000,000,000 shares of Common Stock,
of which approximately 252,511,663 shares
are issued and outstanding;and (n)
5,000,000 shares of preferred
stock, of which approximately 5,944.5 are issued and outstanding.
Except No shares are reserved for issuance pursuant to the Company's stock
option plans,
no shares are
reserved for issuance
pursuant to securities (other than
the Note and
any other convertible promissory note issued to the Buyer) exercisable for,
or convertible into
or exchangeable fur
shares of Common Stock and 1
share (initially) is
reserved for issuance upon conversion of the Note. All of such
outstanding shares of capital stock
are, or upon
issuance will be, duly
authorized, validly issued, fully paid and non-assessable.
No shares of capital stock of
the Company are subject
to preemptive rights
or any other similar rights of the
shareholders of the
Company or any liens or
encumbrances imposed through
the actions or failure to act of the
Company. As of the effective
date of this Agreement, (i) there are no
outstanding options,
warrants, scrip, rights to subscribe for,
puts, calls, rights of first
refusal, agreements, understandings, claim;or other
commitments or rights of
any character whatsoever relating to, or
securities or rights
convertible into or exchangeable for any shares of capital stock
of the Company or any
of its Subsidiaries, or arrangements by
which the Company
or any of its Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any
of its Subsidiaries, (n) there are no agreements or arrangements under which
the Company or
any of its
Subsidiaries i<;obligated to register
the sale of any of its
or their securities under the 1933 Act and
(iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company
(or in any agreement providing rights to security holders) that
will be triggered by the issuance of the Note or
the Conversion
Shares. The
Company has
filed in its SEC Documents true and correct copies of the Company's
Certificate of Incorporation as in effect on the date hereof
(''Certificate of Incorporation'), the Company's
By-laws, as in effect on the date
hereof (the "By-laws''),
and the terms of all securities
convertible into
or exercisable fur Common Stock of
the Company and the material rights of the holders
thereof in
respect thereto. The
Company shall provide the Buyer with a written update of this
representation signed
by the Company's Chief Executive on behalf of the
Company as of the Closing Date.
d. Issuance of
Shares. The issuance of the Note is duly authorized
and, upon issuance
in accordance with the
terms of this Agreement, will be
validly issued,
fully paid and non-assessable and free
from all preemptive or similar rights, taxes, liens,
charges and other encumbrances
with respect
to the issue thereto:
The Conversion Shares are duly
authorized and reserved for issuance and, upon conversion of the
Note in accordance with its respective terms,
will be validly
issued, fully paid and non-assessable, and free
from all taxes, liens,
clam and encumbrances with respect
to the issue thereof and
shall not be subject
to preemptive rights or other
similar rights of
shareholders of the Company and will not impose
personal liability upon the holder thereto:
e.
Acknowledgment of Dilution.
The Company
understands and
acknowledges the potentially dilutive effect to the Common Stock upon the issuance of
the Conversion Shares upon conversion of the Note. The
Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Note in
accordance with this Agreement,
the Note is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of
other shareholders of the Company.
f No Conflicts. The execution, delivery
and performance of this Agreement and the Note
by the Company and
the consummation by
the Company of
the transactions contemplated hereby and thereby
(including, without
limitation, the issuance and reservation for issuance of
the Conversion Shares)
will not (i) conflict with or result in a violation
of any provision of the Certificate of Incorporation or
By-laws, or (ii)
violate or conflict with, or result in
a breach of any provision of;
or constitutes a default (or an event which with
notice or lapse of time or both could become
a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of; any
agreement,
indenture, patent, patent
license or instrument to which the Company or
any of its Subsidiaries is a party, or (iii)
result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws
and regulations and regulations of any self-regulatory
organizations to which the Company or
its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any
property or asset of the
Company or any
of its Subsidiaries is bound or affected
(except for such
conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its
Subsidiaries is in violation of its Certificate of Incorporation,
By-laws or other organizational documents and neither the
Company nor any of its Subsidiaries is in default (and no
event has occurred which with
notice or lapse of
time or both
could put the Company or any of its Subsidiaries
in default) under, and
neither the Company
nor any of its Subsidiaries
bas taken any
action or failed to take any
action that would give to others any rights of termination, amendment, acceleration
or cancellation of
any agreement, indenture or instrument
to which the Company
or any of its Subsidiaries is a party or
by which any
property or assets of
the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as
would not, individually
or in the aggregate, have
a Material Adverse Effect.
The businesses of the
Company and its Subsidiaries, if
any, are not being conducted,
and shall not
be conducted so long as
the Buyer owns any of
the Securities, in
violation of any
law, ordinance or regulation of any governmental entity, the result of
which would have a Material Adverse Effect. Except
as specifically
contemplated by this Agreement and as required under the 1933 Act and any applicable state
securities laws, the
Company is not required to obtain any consent, authorization or order o( or make any filing or registration with, any court, governmental agency,
regulatory agency, sell'-regulatory
organization or stock market or any third party
in order for it to execute, deliver or perform
any of its obligations under this Agreement, the Note in
accordance with the terms hereof or thereof or
to issue and sell the Note in
accordance with the terms hereof and to issue the Conversion Shares upon conversion of
the Note. All consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have
been obtained or elected on or
prior to the date hereof.
The Company is
not in violation of the listing
requirements of the OTC Pink (the "OTC Pink"), the OTCQB or any
similar quotation system, and does
not reasonably anticipate that the Common Stock
will be delisted by the OTC Pink,
the OTCQB or any similar
quotation system, in the
foreseeable future nor are the Company's securities "chilled" by DTC.
The Company and its
Subsidiaries are unaware
of any facts or circumstances which might give rise to any
of the foregoing.
g. SEC
Documents;Financial Statements. The
Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the
"1934 Act) (all
of the foregoing
filed prior to
the date hereof
and all exhibits included
therein and financial
statements and schedules
thereto and documents (other than exhibits to
such documents) incorporated by reference therein,
being hereinafter referred to herein as the ''SEC Documents"). The Company has
delivered to the Buyer
true and complete copies
of the SEC
Documents, except for such exhibits and incorporated documents. As of their
respective dates, the
SEC Documents complied in all material respects with the
requirements of
the 1934 Act and the
rules and regulations of the
SEC promulgated thereunder applicable to the
SEC DocW11ents, and
none of the SEC
Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact or omitted
to state
a material fact required to be
stated therein or necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not
misleading. None of
the statements made in any such
SEC Documents
is, or
has been,
required to be amended
or updated under
applicable law (except
for such statements as have
been amended or
updated in subsequent filings prior the date hereof).
As of their respective dates, the financial statements of the Company
included in the
SEC Documents complied as to form in all material respects with applicable accounting requirements
and the published rules
and regulations of the SEC
with respect
thereto. Such financial statements complied with all respects with United
States generally
accepted accounting principles
("GAAP'), consistently
applied, during
the periods involved, except as may otherwise be specified
in such financial statements
or the notes thereto
and except that unaudited financial statements may not contain
all footnotes required by
GAAP, and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of
the dates thereof and
the consolidated results
of their operations and cash flows for the periods then ended (subject, in the case
of unaudited
statements, to normal year-end audit adjustments). Except as set
forth in the financial
statements of the Company
included in the
SEC Documents, the Company has no
liabilities,
contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to March 31,
2018, and (ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under
GAAP to be reflected in such financial statements, which, individually or in
the aggregate, are not
material to the
financial condition or
operating results
of the Company.
The Company is subject to the
reporting requirements of the 1934 Act. For the avoidance
of doubt, filing
of the documents required in this Section 3(g)
via the SEC's
Electronic Data Gathering, Analysis, and Retrieval system ("EDGAR') shall
satisfy all delivery requirements of this Section 3(g).
h Absence of
Certain Changes. Since
March 31, 2018,
there has been
no Material Adverse Effect
and the Company has not incurred
any liabilities
(contingent or
otherwise) other than
(A) trade payables and
accrued expenses incurred in
the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to
GAAP or disclosed in
filings made with the SEC.
Except fur the
issuance of the Securities
contemplated by
this Agreement, no event, liability, fact, circumstance, occurrence
or development has occurred or
exists or is reasonably
expected to occur or
exist with respect to
the Company or its Subsidiaries
or their respective
businesses, prospects, properties, operations,
assets or financial condition that would be required to
be disclosed by the
Company under applicable securities laws
at the time this representation is made that has
not been publicly disclosed
prior to the date of
this Agreement.
i. Absence of
Litigation. There
is no action, suit, claim, proceeding, inquiry or
investigation before or
by any court,
public board, government agency, self-regulatory
organization or body
pending or, to the
knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or
any of its Subsidiaries,
or their officers
or directors in their
capacity as such, that could have a
Material Adverse Effect (except with respect to the lawsuit brought against the
Company by its
previous controller). Schedule 3(i)
contains a complete list
and summary description of
any pending or, to
the knowledge of the Company,
threatened proceeding
against or affecting
the Company or any of its Subsidiaries
involving estimated damages in excess of $200,000, without regard to whether it would have a
Material Adverse Effect. The Company and its
Subsidiaries are unaware of any
facts or circumstances which might give rise to any
of the foregoing.
J. Patents,
Copyrights, etc. The Company and each of
its Subsidiaries owns or possesses the
requisite licenses
or rights to use
all patents, patent
applications, patent rights, inventions,
know-how, trade secrets, trademarks, trademark
applications, service marks, service names,
trade secrets and copyrights
("Intellectual Property'') necessary to enable it
to conduct its
business as
now operated (and, as presently contemplated to be operated
in the future). There
is no claim or action by any
person pertaining to,
or proceeding pending, or to the
Company's knowledge threatened, which
challenges the right
of the Company or of a Subsidiary with
respect to any
Intellectual Property
necessary to enable it
to conduct its business as now
operated (and, as presently
contemplated to be operated in
the future); to the best of the
Company's knowledge, the Company's or its Subsidiaries' current and
intended products, services and
processes do not infringe on
any Intellectual Property or other rights
held by any person;and the
Company is unaware of any
facts or circumstances which
might give rise to any
of the
foregoing. The Company
and each of its Subsidiaries have taken
reasonable security measures to
protect the secrecy,
confidentiality and value of their Intellectual Property.
k. No
Materially Adverse Contracts, Etc. Neither the Company
nor any of its Subsidiaries is subject to any
charter, corporate or other legal
restriction, or any
judgment, decree, order, rule or
regulation which in the
judgment of the
Company's officers has or is
expected in the future to
have a Material Adverse Effect
Neither the Company
nor any of its Subsidiaries is
a party to any contract or agreement which in the
judgment of the Company's
officers has
or is expected to have a
Material Adverse Effect
1 Tax
Status. Except as
would not reasonably be
expected to have Material Adverse Effect, the Company
and each of its Subsidiaries
has made or filed all
federal state and
foreign income and all
other tax returns, reports and declarations required
by any jurisdiction to which it is
subject (unless
and only to the
extent that the Company
and each of its Subsidiaries has set aside on its
books provisions reasonably adequate fur the payment of all
unpaid and unreported taxes) and has paid all taxes
and other governmental assessments and charges that are material
in amount, shown or
determined to be
due on such
returns, reports and
declarations,
except those being contested in good faith
and bas set aside on
its books
provisions reasonably adequate fur the
payment of all
taxes fur periods
subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid
taxes in any
material amount claimed to be
due by the taxing authority of
any jurisdiction,
and the officers
of the Company know
of no basis for
any such claim The
Company has not executed a waiver with respect to the statute of limitations relating to
the assessment or collection
of any foreign, federal state or local tax.
None of the Company's tax returns
is presently
being audited by any
taxing authority.
m. Certain
Transactions. Except for arm's length transactions
pursuant to which
the Company or any of its
Subsidiaries makes payments in
the ordinary course of
business upon terms no less favorable than the Company
or any of its Subsidiaries could
obtain from third parties
and other than the grant of stock options described in
Schedule 3(c),
none of the
officers, directors,
or employees of
the Company is presently
a party to any
transaction with the
Company or any of
its Subsidiaries (other than for services as employees, officers
and directors), including any
contract, agreement or other
arrangement providing for
the furnishing of
services to or by, providing fur
rental of real
or personal property to or from, or otherwise requiring
payments to or from any officer, director or
such employee or,
to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer,
director, or any such
employee has a
substantial interest or
is an officer, director, trustee or partner.
n. Disclosure. All
information relating to or
concerning the
Company or any of its Subsidiaries set
forth in this Agreement and provided to the Buyer pursuant
to Section 2(d)
hereof and
otherwise in connection
with the transactions contemplated hereby is true and
correct in all material respects and the Company
has not omitted to state
any material fact necessary in
order to make the
statements made herein or therein,
in light of the circumstances under which
they were made,
not misleading. No event or circumstance has occurred
or exists with respect to
the Company or any of
its Subsidiaries or its or
their business, properties, prospects, operations or financial
conditions, which, under
applicable law,
rule or regulation, requires public
disclosure or announcement by
the Company but
which has not been so
publicly announced or disclosed.
o. Acknowledgment Regarding Buyer'
Purchase of
Securities. The Company acknowledges and agrees
that the Buyer
is acting solely in the
capacity of arm's
length purchasers with respect to this Agreement and
the transactions
contemplated hereby.
The Company further acknowledges that the Buyer is
not acting as a financial advisor or fiduciary of
the Company (or in
any similar capacity)
with respect to this
Agreement and the transactions contemplated hereby and any
statement made by
the Buyer or any of its respective
representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Buyer' purchase of the
Securities. The Company further represents to
the Buyer that
the Company's
decision to enter into
this Agreement
has been based solely on the
independent evaluation of the
Company and its representatives.
p. No Integrated Offering. Neither
the Company, nor any of
its affiliates, nor any person acting
on its or their behalf;has
directly or indirectly made any offers or sales
in any security or solicited any offers
to buy any
security under circumstances that would require registration
under the 1933
Act of the issuance
of the Securities to
the Buyer. The issuance
of the Securities
to the Buyer will not be
integrated with any
other issuance of the Company's
securities (past, current or future) for
purposes of any shareholder approval provisions applicable to the Company or
its securities.
q. No
Brokers. Except with respect to
payments to Moody Capital
Solutions, Inc., the Company
has taken no action which would give rise to any claim by any
person for brokerage commissions, transaction fees or similar payments relating to
this Agreement or the
transactions contemplated hereby.
r. Permits; Compliance. Except as would
not reasonably
be expected to have Material
Adverse Effect, the Company and each of its Subsidiaries is
in possession of all
franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders necessary to
own, lease and
operate its properties and to carry on
its business as it is now being conducted
(collectively,
!be ''Company
Permits'), and there
is no action pending or, to
the knowledge of the
Company, threatened
regarding suspension or
cancellation of any of the
Company Permits.
Neither the Company
nor any of its Subsidiaries
is in conflict with, or in default or
violation o~ any of the Company Permits, except for any such conflicts, defaults or
violations which, individually or in the aggregate, would not
reasonably be expected to have a
Material Adverse Effect. Since March 31, 2018, neither the
Company nor any of its Subsidiaries has received any notification with respect to possible
conflicts, defaults or violations of applicable laws, except
fur notices relating to
possible conflicts, defaults or
violations, which conflicts, defaults or
violations would not have a Material Adverse Effect.
s.
Environmental Matters.
(i) Except as
would not reasonably
be expected to have
Material Adverse Effect, there
are, to be Company's
knowledge, with respect to the Company or any
of its Subsidiaries or any
predecessor of the Company, no past
or present violations of Environmental Laws (as
defined below), releases of any material into
the environment, actions,
activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any
common law environmental liability or any liability under
the Comprehensive Environmental Response, Compensation and
Liability Act of
1980 or similar federal, state,
local or
foreign laws and neither the
Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing,
nor is any action pending or, to the Company's knowledge,
threatened in connection with any of the foregoing. The
term "Environmental Laws" means
all federal, state,
local or foreign
laws relating to
pollution or protection of
human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or
subsurface
strata), including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants contaminants, or
toxic or hazardous
substances or wastes (collectively, "Hazardous Materials') into the environment, or otherwise relating to the
manufacture,
processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as
well as all authorizations,
codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices
or notice letters, orders,
permits, plans or regulations issued,
entered, prorogated or
approved thereunder.
(ii) Other than those that are or were
stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about
any real property currently owned, leased or used by the Company or any of its
Subsidiaries, and no Hazardous Materials were released on or
about any real property previously owned, leased or used by the Company or
any of its Subsidiaries during the period the property was
owned, leased
or used by the Company
or any of its Subsidiaries, except in the normal course of
the Company's or any of its
Subsidiaries'
business.
(iii) To the Company's knowledge, there
are no underground storage tanks
on or under any real property owned, leased or used by the
Company or any of
its Subsidiaries that are not in compliance with applicable
law.
t. Title to
Property. The Company
and its Subsidiaries have good
and marketable
title in fee simple to all
real property and good and marketable
title to all personal property owned by them which
is material to the business of the
Company and its Subsidiaries, in each case free
and clear of all liens, encumbrances and directs
or such as would not have a Material Adverse Effect. Any real property
and facilities held under lease by the Company and
its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such
exceptions as would not have a
Material Adverse Effect.
u. Internal Accounting Controls. The
Company and each of its
Subsidiaries maintain a system of
internal accounting controls sufficient, in
the judgment of
the Company's board of directors, to provide
reasonable assurance that (i)transactions are executed
in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of
financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability,
(iii) access to
assets is permitted only in accordance with management's
general or specific
authorization and
(iv) the recorded accountability for assets is compared
with the existing assets
at reasonable intervals
and appropriate action is taken with respect to any
differences.
v. Foreign Corrupt Practices. Except as would not be reasonably expected to
have a Material Adverse Effect, neither the Company, nor
any of its Subsidiaries, nor any director, officer, agent,
employee or other person
acting on behalf of the Company or any
Subsidiary has,
in the course of his actions
fur, or on behalf of; the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political
activity; made any
direct or indirect unlawful payment
to any foreign or domestic government official or emp1oyee
from corporate
funds;violated or
is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate,
payoff; influence payment, kickback
or other unlawful payment to any foreign or domestic
government official or employee.
w. Solvency. The Company (after gIVII1g effect to the transactions contemplated by this
Agreement) is solvent
G&, its assets have a
fair market value in excess of
the amount required to pay its probable liabilities
on its existing debts as they become
absolute and
matured) and currently the
Company has no information that would lead it
to reasonably conclude that
the Company would not, after
giving effect
to the transaction contemplated by this Agreement, have the
ability to, nor does it intend to take any action that
would impair its ability
to, pay its debts from time to time
included in connection therewith as such debts
mature. The Company
did not receive a qualified opinion from
its auditors
with respect to its most
recent fiscal year end
and, after giving effect to the
transactions contemplated by this Agreement, does
not anticipate or know of any basis
upon which its auditors might issue a qualified opinion in respect
of its current
fiscal year. For the
avoidance of
doubt any disclosure
of the Borrower's
ability to continue as a "going concern"
shall not, by itself; be a violation of this
Section 3 (w).
x. No
Investment Company. The Company is
not, and upon the issuance
and sale of the
Securities as
contemplated by
this Agreement will not be an "investment company" required to be
registered under the Investment Company Act of 1940
(an ''Investment Company"). The Company is not
controlled by an
Investment Company.
y.
Insurance. The Company and each
of its Subsidiaries are insured by l11Surers of
recognized financial responsibility against such losses
and risks and in such
amounts as management of the Company believes to be prudent
and customary in the businesses in which the Company and
its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material
Adverse Effect. Upon
written request the
Company will provide to the Buyer true and correct
copies of all policies relating to directors' and officers'
liability coverage, errors and omissions coverage, and commercial
general liability coverage.
z. Bad Actor.
To the Company's knowledge, no officer
or director of the Company would
be disqualified under Rule 506(d) of the Securities Act as amended
on the basis of being a ''bad actor'
as that term is
established in the September 19, 2013 Small Entity Compliance Guide published by the SEC.
aa. Shell Status. The Company is not a
"shell"
issuer and has never been
a "shelf'
issuer, or that if it previously has
been a "shelf'
issuer, that at least
twelve (12) months have passed
since the Company has
reported Form 10 type information indicating that it is no
longer
a "shell" issuer.
bb.
No-Off Balance
Sheet Arrangements. There is no
transaction, arrangement, or other relationship between
the Company or any
of its Subsidiaries and an unconsolidated or other
off balance sheet
entity that is required to
be disclosed by the Company in its
1934 Act filings and is not so disclosed
or that otherwise
could be reasonably likely to
have a Material Adverse Effect.
cc. Manipulation of Price. The Company has not, and to its knowledge no one acting
on its behalf
has: (i) taken, directly or
indirectly, any action designed to cause or to
result, or that could reasonably be expected to cause or result, in the stabili2ation or
manipulation of the price of any security of
the Company to facilitate the sale
or resale of any of the
Securities, (ii) sold,
bid fur, purchased, or paid any compensation fur
soliciting purchases o~ any of the
Securities, or (iii) paid or agreed to
pay to any person any compensation for soliciting
another to purchase any other
securities of the Company.
dd.
I1ntentionally
Omitted]
ee. Employee Relations. Neither the Company nor
any of its Subsidiaries is a party to any collective bargaining
agreement or employs any
member of a union. The
Company believes
that its and its Subsidiaries'
relations with their respective employees are good.
No executive officer (as defined in
Rule 501(f) promulgated
lll1der the 1933 Act)
or other key employee of the Company or any of its Subsidiaries has
notified the Company or any such Subsidiary that such officer
intends to leave the Company or any such Subsidiary or otherwise terminate such officer's
employment with the Company or any such Subsidiary. To the knowledge of the
Company, no executive officer or other key employee
of the Company
or any of its Subsidiaries is, or is now expected to be, in
violation of any material term of any employment contract,
confidentiality, disclosure
or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and
the continued employment of each such executive
officer or other key employee (as
the case may be) does not subject the Company or
any of its Subsidiaries to any liability with respect to any
of the foregoing matters.
ff. Breach of Representations and Warranties by
the Company.
The Company agrees
that if the Company
breaches any of the representations or
warranties set forth in
this Section 3, and
in addition to any other remedies available to the
Buyer pursuant to this Agreement and it being considered an
Event of Delimit under Section
3.5 of
the Note, the Company shall pay to the Buyer the Standard Liquidated Damages
Amolll1t in cash
or in shares of Common Stock
at the option of the
Company, until such breach is
cured. If the Company elects to pay
the Standard Liquidated Damages
Arnolll1ts in shares of Common Stock, such shares shall be issued at
the Conversion
Price at the time of
payment.
4.
COVENANTS.
a. Best Efforts. The
parties shall use their commercially reasonable best efforts to satisfy timely each
of the conditions described in Section 7
and 8 of this Agreement.
b. Blue Sky Laws. The Company shall, on or
before the Closing
Date, take such action as
the Company shall reasonably determine may be necessary to
qualify the Securities fur sale
to the Buyer at
the applicable closing pursuant to
this Agreement lll1der
applicable securities or "blue
sky" laws of the states of the United
States (or to qualify
fur or obtain an
exemption from
such qualification for sale), and shall provide
evidence of any such
action so taken to
the Buyer on or prior to the Closing Date.
c.
Use of Proceeds. The Company shall use
the proceeds from the
sale of the Note fur
working capital and other general corporate purposes and shall
not, directly or indirectly, use
such proceeds fur any loan
to or inves1lrent in any other corporation, partnership, enterprise
or other person (except in connection with its currently
existing direct or indirect
Subsidiaries).
d. Expenses.
Except as otherwise expressly provided in
Section 5, all
costs and expenses,
including, without limitation, fees and disbursements
of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not
the Closing shall have occurred.
e. Financial Information. The Company agrees to send or
make available the
following reports to the Buyer until the Buyer transfers, assigns, or
sells all of the
Securities:
(i) within
ten (10) days after the filing with the SEC, a copy of
its Annual Report on
Form IO-K its Quarterly Reports on Form IO-Q and
any Current Reports on
Form 8-K; (ii) within
one (I) day after release, copies of all
press releases issued by the Company
or any of its Subsidiaries; and (ill) contemporaneously with the making available
or giving to the shareholders
of the Company, copies of any notices or other information the
Company makes available or gives to such
shareholders.
For the avoidance of
doubt, filing the documents required in
(0 above via
EDGAR or releasing
any documents set
forth in (ii)
above via a
recognized wire service shall satisfy the
delivery requirements of
this Section 4(1).
f. Listing. The
Company shall use
commercially reasonable efforts to secure the
listing of the Conversion Shares
upon each national securities
exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed (subject to
official notice of issuance)
and, so long as the Buyer
owns any of the Securities, shall use commercially reasonable efforts to
maintain, so
long as any other shares of Common Stock shall be so
listed, such
listing of all Conversion Shares from time to time
issuable upon conversion
of the Note.
So long as
the Buyer owns any of
the Securities,
The Company will use commercially reasonable efforts to maintain the listing and trading of its
Common Stock on the
OTC Pink,
OTCQB or any equivalent
replacement exchange, the Nasdaq
National Market
("Nasdaq''), the Nasdaq SmallCap Market ("Nasdaq SrnallCap"), the New
York Stock Exchange ("NYSE"), or the NYSE
MKT and will use commercially reasonable
efforts to comply in all
respects with the Company's reporting, filing and other obligations under the bylaws or rules of the
Financial Industry Regulatory Authority (''FINRA'') and such exchanges,
as applicable. The Company shall promptly provide to
the Buyer copies of
any material notices it
receives from
the OTC Pink,
OTCQB and any other exchanges or quotation systems on
which the Common
Stock is then
listed regarding the continued eligibility of the
Common Stock for
listing on such exchanges
and quotation systems.
The Company shall pay any and
all fees and
expenses in connection
with satisfying its obligation
under this Section
4(g).
g. Corporate Existence. So long as
the Buyer beneficially owns any
Note, the Company shall maintain its corporate
existence and
shall not sell all or
substantially all
of the
Company's assets, except
in the event of a
merger or consolidation or sale of
all or substantially all of
the Company's assets, where the surviving or successor entity in such
transaction (0 assumes the Company's
obligations hereunder and under the agreements and instruments entered into
in connection herewith and (n)
is a publicly traded
corporation whose Common
Stock is listed fur
trading on the
OTC Pink, OTCQB, OTCQX, Nasdaq,
NasdaqSmallCap, NYSE or AMEX.
h. No
Integration. The Company shall not
make any offers or sales
of any security (other than the Securities) under circumstances that would require
registration of
the Securities being offered or sold hereunder under the 1933
Act or cause
the offering of the Securities to be
integrated with any other offering of securities by the Company
for the purpose of
any stockholder approval provision applicable to the Company or
its securities.
i Failure to
Comply with the 1934
Act. So long as
the Buyer beneficially
owns the Note, the Company
shall comply with the reporting
requirements of
the 1934 Act;and the
Company shall continue to
be subject to the reporting requirements of the 1934 Act.J. Trading Activities. Neither the Buyer nor its affiliates has an
open short position
(or other hedging or
similar transactions) in the
common stock of
the Company and
the Buyer agree that it shall
not, and that
it will cause
its affiliates not to, engage in any short
sales of or hedging
transactions with respect to the common stock of the Company.
k. Restriction on Activities. Commencing as of the date
first above written, and
until the sooner of the six month anniversary of the date first
written above or payment of the
Note in full, or full conversion of the Note,
the Company shall not,
directly or indirectly, without the
Buyer's prior written consent, which consent shall not be
unreasonably withheld: (a) change the nature
of its business;(b) sell, divest, acquire, change the structure
of any material
assets other than in the ordinary course of business;or
(c) solicit any offers for, respond
to any unsolicited offers for, or conduct
any negotiations with
any other person or
entity in respect
of any variable
rate debt transactions
(ie., transactions were the conversion or exercise price
of the security
issued by the Company varies based on the market
price of the Common
Stock) above $500,000, whether
a transaction
similar to the one contemplated hereby
or any other
investment.
l. Legal Counsel
Opinions. Upon the request of the
Buyer from to time to time, the
Company shall be responsible (at its
cost) fur promptly supplying to the Company's transfer agent and the Buyer a customary legal
opinion letter
of its counsel (the "Legal
Counsel Opinion") to
the effect that the sale
of Conversion Shares by
the Buyer or its affiliates, successors and assigns is
exempt from the registration
requirements of
the 1933 Act pursuant
to Rule 144 (provided
the requirements of Rule 144
are satisfied and
provided the Conversion Shares are not then registered under the
1933 Act for resale pursuant to an effective
registration statement).
Should the Company's legal counsel tail
fur any reason to issue
the Legal Counsel
Opinion, the Buyer may
(at the Company's
cost) secure another
legal counsel to issue the
Legal Counsel
Opinion, and the Company will
instruct its transfer agent to accept such opinion.
m. Par Value. If
the closing bid price at
any time the
Note is outstanding falls
below $0.00 I,
the Company
shall use all commercially
reasonable
efforts to obtain shareholder consent, to reduce the par value of its Common
Stock to $0.000 I
or less and shall e:trect such
action promptly
upon obtaining such approval
n. Breach of Covenants. The Company
agrees that if the
Company breaches any
of the covenants set forth in
this Section 4, and
in addition to
any other remedies available to the Buyer pursuant to this
Agreement, it will be considered an Event of Default under Section
3.4 of the Note, the Company
shall pay to the
Buyer the Standard Liquidated Damages Amount in
cash or in shares of
Common Stock at the
option of the Buyer, until such
breach is cured,
or with respect to Section 4(d)
above, the Company
shall pay to
the Buyer the Standard
Liquidated Damages Amount in cash
or shares of
Common Stock, at
the option of the
Buyer,
upon each violation of such
provision. If the
Company elects to pay the Standard Liquidated
Damages Amounts in shares of Common Stock, such shares shall
be issued at the Conversion Price at the
time of payment.
1.
Transaction Expense Amount. Upon Closing, the Company shall
pay an amount equal to Seven
Thousand Two
Hundred Fifty and 0011
00 United States Dollars (US$7,250.00),
to Auctus Fund Management, LLC ("Auctus
Management'') to
cover the
Holder's due
diligence, monitoring, and other transaction
costs incurred for services rendered
in connection
herewith.
2.
Transfer Agent
Instructions. The Company shall issue irrevocable
instructions to its
transfer agent to issue certificates, registered in
the name of
the Buyer or its
nominee, fur the Conversion Shares in such
amounts as specified from time
to time by the Buyer to the Company upon conversion of
the Note in
accordance with the terms thereof (the "Irrevocable
Transfer Agent Instructions'').
In the event that the
Borrower proposes to
replace its transfer
agent, the Borrower
shall provide, prior to the
effective date of such
replacement, a fully
executed Irrevocable
Transfer Agent
Instructions in a form
as initially delivered
pursuant to !he Purchase Agreement (including but not
limited to the
provision to
irrevocably reserve shares of Common Stock
in the Reserved Amount)
signed by the
successor transfer agent
to Borrower and the
Borrower. Prior to registration of the
Conversion Shares under the 1933 Act
or the date
on which the Conversion
Shares may be
sold pursuant to Rule
144 without any
restriction as to
the number of
Securities as of a particular date that can then
be immediately sold, all
such certificates
shall bear !he restrictive
legend specified
in Section 2(g) of this Agreement. The Company warrants
that: (i) no
instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section, and stop transfer instructions to give effect
to Section 2(t) hereof (in the case of
!he Conversion Shares,
prior to registration
of !he Conversion Shares
under the 1933 Act or the
date on which
the Conversion Shares may
be sold pursuant to Rule 144
without any restriction as to
the number of Securities as of a particular date that can then
be immediately sold),
will be given by
the Company to its
transfer agent and that
the Securities
shall otherwise be
freely transferable on the books and records of
the Company as and
to the extent provided in this Agreement and !he Note;
(ii) it will not direct
its transfer agent not
to transfer or delay,
impair, and/or hinder its transfer
agent in transferring (or issuing)( electronically or in
certificated firm) any certificate fur Conversion Shares to be issued to the
Buyer upon conversion
of or otherwise pursuant to the
Note as and when required by the Note and this
Agreement; and (ill) it will not fail to remove
(or directs its transfer agent not to
remove or impairs,
delays, and/or hinders
its transfer agent from removing) any restrictive legend
(or to withdraw any stop transfer
instructions in respect there (i) on any certificate for any
Conversion Shares issued to the Buyer upon
conversion of or otherwise pursuant to the
Note as and when required by the Note
and this Agreement Nothing in
this Section shall
affect in any way the
Buyer's obligations
and agreement set forth in
Section 2(g) hereof
to comply with all applicable
prospectus delivery requirements, if any,
upon re-sale of
the Securities. If the Buyer provides
the Company with (i) an
opinion of counsel of Buyer reasonably satisfactory to the Company's transfer agent in form,
substance and
scope customary fur opinions
in comparable transactions, to
the effect that a
public sale or transfer of
such Securities may be
made without registration under
the 1933 Act
and such sale
or transfer is effected or
(n) the Buyer provides reasonable assurances
that the Securities can be sold pursuant
to Rule 144, the
Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates, free from restrictive legend,
in such name and
in such denominations as
specified by the Buyer. The
Company acknowledges
that a breach by it
of its obligations hereunder will cause
irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby.
Accordingly, the
Company acknowledges that the remedy at law for a breach
of its obligations under this Section may be inadequate
and agrees, in the event of a
breach or
threatened breach
by the Company of the
provisions of this Section, that the Buyer shall be entitled, in
addition to all
other available remedies, to an
injunction restraining any breach and requiring immediate transfer,
without the necessity of
showing economic loss and
without any bond or other security being
required.
7. CONDITIONS PRECEDENT TO THE COMPANY'S OBUGATIONS TO SELL. The obligation of the
Company hereunder
to issue and sell
the Note to the
Buyer at the Closing is
subject to the satisfaction, at or before the Closing Date of
each of the
following conditions
thereto, provided
that these conditions are for
the Company's
sole benefit and
may be waived by the Company
at any time
in its sole
discretion:
a. The Buyer
shall have executed this Agreement and delivered
the same to the
Company.
b. The Buyer shall have delivered the Purchase
Price in accordance
with Section 1 (b)
above.
c. The representations and warranties of the Buyer
shall be true and correct in all material
respects as of the date when made and as of the
Closing Date as
though made at that time
(except for representations and warranties that
speak as of a specific date), and the Buyer shall
have performed, satisfied and complied
in all material
respects with the
covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with
by the Buyer at or prior to the Closing Date.
d.
No litigation, statute, rule,
regulation, executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or
in any court or governmental authority of competent
jurisdiction or any
self regulatory organization having authority over
the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
8. CONDITIONS
PRECEDENT TO THE
BUYER'S
OBLIGATION TO PURCHASE.
The obligation of
the Buyer hereunder to purchase the Note at
the Closing is subject
to the satisfaction, at or before the Closing Date of each
of the following
conditions, provided
that these conditions are fur the Buyer's sole benefit and may be
waived by the Buyer at
any time in its
sole discretion n:
a. The
Company shall have executed
this Agreement and delivered the same
to the Buyer.
b.
The Company shall have delivered to
the Buyer the
duly executed Note (in such denominations as the Buyer shall request) and in accordance with Section 1
(b) above.
c. The Irrevocable Transfer Agent
Instructions,
in form and substance
satisfactory to a
majority-in-interest of the Buyer,
shall have been delivered to and acknowledged in writing by the Company's Transfur Agent.
d. The representations and warranties
of the Company shall
be true and correct in
all material respects as
of the date when made and
as of the Closing Date as
though made at such
time (except
for representations and
warranties that speak
as of a specific date) and the Company shall have performed, satisfied
and complied in
all material respects
with the covenants, agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the
Company at or prior to the Closing Date.
The Buyer shall
have received a certificate or certificates, executed
by the chief executive officer of the Company, dated
as of the Closing
Date, to the foregoing effect and as to such other matters as
may be reasonably requested by the
Buyer including, but not limited to certificates with respect to the Company's Certificate
of Incorporation,
By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
e. No
litigation, statute, rule,
regulation, executive order, decree,
ru1ing or 1l!JlIDction shall have
been enacted, entered, promulgated
or endorsed by or
in any court or governmental authority of
competent jurisdiction
or any self regulatory organization having authority over the matters
contemplated hereby
which prohibits the consummation of any of the transactions contemplated
by this Agreement.
f. No event
shall have occurred which could reasonably
be expected to have a
Material Adverse Effect on
the Company including but not 1irnited to a change in the
1934 Act reporting status of the Company or
the failure of
the Company to be
timely in its 1934 Act
reporting
obligations.
g. The
Conversion Shares
shall have been authorized for
quotation on the OTC
Pink, OTCQB
or any similar quotation system and
trading in the Common
Stock on the
OTC Pink, OTCQB or any
similar quotation system shall not have been suspended by
the SEC or the OTC
Pink, OTCQB or any similar quotation system
h. The Buyer shall have received
an officer's certificate
described in Section
3(c) above, dated as of
the Closing Date.
9. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement
shall be governed by
and construed
in accordance with the
laws of the State of Nevada without regard
to principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Agreement, the Note
or any other agreement, certificate,
instrument or document
contemplated hereby
shall be brought only in
the state courts
of Massachusetts or in the federal
courts located in the state
of Massachusetts. The parties
to this Agreement hereby irrevocably waive any objection to
jurisdiction and
venue of any
action instituted hereunder and shall
not assert any defense based on lack
of jurisdiction or venue or based
upon forum
non conveniens. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR
UNDER ANY OTHER TRANSACTION DOCUMENT OR
IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT,
ANY
OTHER TRANSACTION
DOCUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.
The prevai1ing party shall be
entitled to recover from the other party
its reasonable attorneys fees and costs. In the event that any provision
of this Agreement
or any other agreement delivered in connection herewith
is invalid or unenforceable under any applicable statute or
rule of law, then such
provision shall be deemed inoperative to the
extent that it
may conflict therewith and
shall be deemed modified to conform with such
statute or rule of law.
Any such provision which may
prove invalid or unenforceable under any law
shall not affrect the validity or enforceability of any other
provision of
any agreement. Each party hereby irrevocably waives personal service of
process and consents to
process being served in
any suit, action or
proceeding in connection with this Agreement or any
other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence
of delivery) to such
party at the address in effect
for notices to it under this Agreement and
agrees that such service shall
constitute good and
sufficient service of
process and notice thereof
Nothing contained herein shall be deemed to limit
in any way any right to
serve process in any other
manner permitted by
law.
b. Counterparts;Signatures by Facsimile. This
Agreement may be executed
in one or more
counterparts,
each of which shall be deemed an original but all of which
shall constitute one and
the same agreement
and shall become effective when counterparts have been signed
by each party and delivered to the
other party. This Agreement, once executed by a
party, may be delivered
to the other party
hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
c. Construction;
Headings. This Agreement
shall be deemed to be jointly
drafted by the Company
and the Buyer and shall not be construed against any person as the
drafter hereof The headings of this Agreement are
fur convenience of
reference only and shall
not form part of; or
attract the
interpretation of; this
Agreement.
d. Severability. In the event that any provision of
this Agreement is invalid or
enforceable under any applicable statute or rule of law, then such provision shall be
deemed inoperative to the
extent that it may
conflict therewith and
shall be deemed modified to conform
with such statute or rule of
law. Any provision hereof
which may prove invalid or enforceable under any law shall
not affect the validity or
enforceability of any other
provision hereof
e. Entire
Agreement;Amendments.
This Agreement, the Note
and the instruments referenced herein contain the entire understanding of the
parties with
respect to
the matters covered herein and therein
and, except as specifically set forth
herein or therein,
neither the Company nor
the Buyer makes any representation, warranty, covenant or
undertaking with respect
to such matters.
No provision of this
Agreement may be waived
or amended other than by
an instrument in writing signed by the
majority in interest of the Buyer.
f Notices. AU notices, demands, requests, consents, approvals, and other
complications required or permitted hereunder shall be in
writing and,
unless otherwise specified herein, shall be (i)
personally served, (n) deposited in the mail,
registered or certified,
return receipt requested,
postage prepaid, (iii)
delivered by
reputable air courier
service with charges prepaid, or (iv)
transmitted by
hand delivery, telegram,
email, or facsimile, addressed as set
forth below or to
such other address as such
party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall be
deemed effective (a)
upon hand delivery or delivery
by email or facsimile,
with accurate confirmation generated
by the transmitting facsimile machine, at
the address or
number designated below
(if delivered on a
business day during normal
business hours where
such notice is to be
received), or the
1irst business day following such delivery (if delivered other than on
a business day during
normal business hours
where such notice
is to be received) or (b) on
the second business day following
the date of mailing
by express courier service, fully
prepaid, addressed
to such address, or
upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall
be:
If to the
Company, to:
Guided Therapeutics, Inc.
5835 Peachtree Comers
East, Suite
D
Norcross, GA
30092
Attn:
Gene Cartwright
E-mail:
infu@guidedinc.com
With a
copy to (which copy shall
not constitute
notice):
Jones Day
[420 Peachtreet St.
Norcross,
GA 30092
E-mail:
hdrodman@jonesday.com
If to
the Buyer:
Auctus Fund, LLC
545
Boylston Street, 2nd Floor
Boston,
MA 02[[6
Attn:
Lou Posner
Facsimile: (617) 532-6420
With a
copy to (which copy shall not
constitute notice):
Chad
Friend, Esq., LL.M.
Legal & Compliance, LLC
330
Clematis Street, Suite 217
West Pahn Beach, FL
3340 [
e-mail: CFriend@LegalandCompliance.com
Each party shall provide notice
to the other party
of any change in
address.
g. Successors and Assigns.
1bis Agreement shan be
binding upon and
inure to the benefit
of the parties
and their successors and assigns. Neither
the Company
nor the Buyer shall assign this
Agreement or any rights
or obligations hereunder without the prior
written consent of the
other. Notwithstanding
the furegoing, subject to Section
2(f), the Buyer
may assign its
rights hereunder
to any person that purchases
Securities in a private transaction from the Buyer or to any of its
"affiliates,"
as that term is defined under the 1934 Act,
without the consent of the Company.
h. Third Party Beneficiaries. This
Agreement is intended for the benefit of the parties
hereto and their respective permitted successors
and assigns, and is not fur the benefit 01; nor
may any provision hereof be enforced by, any
other person.
i. Survival
The representations and warranties of the Company
and the
agreements and covenants
set forth in this Agreement shall survive the closing hereunder not withstanding any due
diligence investigation conducted by or on behalf of the
Buyer. The Company agrees
to indemnify and hold harmless the Buyer and
all their officers, directors, employees
and agents fur loss or damage arising as a result
of or related
to any breach or alleged
breach by the Company of any of its
representations,
warranties and covenants
set forth in this Agreement or any of its
covenants and obligations under this
Agreement, including advancement of expenses as they
are incurred.
j. Further
Assurances.
Each party shall
do and perform, or cause to be
done and
performed, all such
further acts and things,
and shall execute and deliver all
such other agreements,
certificates, instruments
and documents, as the other
party may reasonably
request in order to carry out
the intent and accomplish the purposes of this Agreement and
the consumption
of the transactions contemplated
hereby.
k. No
Strict Construction. The language used
in this Agreement will be deemed
to be the language chosen by the parties
to express their mutual intent,
and no rules of strict construction will
be applied
against any party.
1 Remedies.
The Company acknowledges that a breach by it of its
obligations hereunder will cause
in'eparable harm to the Buyer by vitiating the intent
and purpose of the transaction contemplated
hereby. Accordingly, the Company
acknowledges that the
remedy at law
for a breach of its
obligations under this Agreement will be inadequate
and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this
Agreement, that the Buyer shall
be entitled, in
addition to all other available remedies at Jawor
in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to
enforce specifically
the te= and
provisions hereo1;without
the necessity of showing
economic loss and
without any bond or other security being
required.
ill Publicity. The Company, and
the Buyer shall
have the right to review a reasonable
period of time before
issuance of any press releases, SEC, OTCQB
or FINRA filings, or any other public statements with respect
to the transactions contemplated
hereby;provided, however, that the Company shall
be entitled, without
the prior approval of the Buyer, to
make any press release or SEC, OTCQB (or other applicable trading market) or FINRA
filings with respect to such
transactions as is required by applicable law and regulations
(although the Buyer shall be consulted by the Company in connection
with any such press release prior to its release
and shall be
provided
with a copy thereof and be given an
opportunity to comment thereon). Notwithstanding the foregoing, the
Company shall not be required to submit fur review any
such disclosure contained
in filings with the SEC if it shall
have previously provided substantially the same
disclosure for review in
connection with a
previous filing.
o Indemnification. Subject to the
provisions of
this Section 9(n), the Company will
indemnify and hold Buyer
and its directors,
officers, shareholders,
members, partners, employees and
agents (each, a "Buyer
Party") harmless from any
and all losses,
liabilities, obligations, claims, contingencies,
damages, costs and expenses, including all
judgments, amounts paid
in settlements, court
costs and reasonable
attorneys' fees and
costs of investigation that any
such Buyer Party may suffer or incur as a result of
or relating to (a) any
breach of any of the representations,
warranties, covenants or agreements made by the Company in
this Agreement
or the Note,
or any other agreement,
certificate, instrument,
or document contemplated hereby or thereby, (b)
any action instituted against the Buyer Parties in any
capacity, or any of them
or their respective affiliates, by any
stockholder of the Company
who is not an
affiliate of such
Buyer Party, with respect
to any of the transactions contemplated by this Agreement (unless such action is based upon a breach of
such Buyer Party's
representations, warranties
or covenants under this Agreement or any agreements or understandings such Buyer Party may have
with any such stockholder
or any violations by
such Buyer Party
of state or federal securities laws or any
conduct by such
Buyer Party that constitutes fraud,
gross negligence, willful misconduct or malfeasance)
or (c) any untrue or alleged untrue statement of a
material fact contained in any
registration statement,
any prospectus or any form
of prospectus or in any amendment or supplement thereto or in
any preliminary prospectus, or arising
out of or relating to any
omission or alleged omission of
a material fact required to
be stated therein or necessary to
make the statements therein (in the
case of any prospectus or
supplement thereto, in light of
the circumstances under which they were made) not
misleading. If any action
shall be brought against any
Buyer Party in respect of which
indemnity may be sought
pursuant to this Agreement, such Buyer Party shall
promptly notify the Company in
writing, and
the Company
shall have the right to assume the defense thereof with
counsel of its own
choosing reasonably acceptable
to the Buyer Party. Any Buyer Party shall
have the right to employ separate counsel in
any such
action and participate in the defense thereof; but the fees and expenses of such
counsel shall be
at the expense of such Buyer Party except to the extent that (i) the
employment thereof has been specifically authorized by the
Company in writing, (iJ) the Company has
failed after a
reasonable period of time to
assume such defense and to employ counselor (rn) in
such action there is, in the reasonable opinion of counsel
material conflict on any
material issue between the position of
the Company and
the position of such Buyer Party,
in which case the Company shall be responsible for the reasonable
tees and expenses of no more
than one such separate
counsel The Company will not be liable
to any Buyer Party prior this Agreement (y) fur any settlement by a Buyer Party effected without the Company's prior written consent, which shall not be
unreasonably withheld, conditioned, or
delayed;or
(z) to the extent, but only to
the extent that a
loss, claim,
damage or liability is
attributable
to any Buyer Party's breach of
any of the representations, warranties, covenants
or agreements made by such
Buyer Party in this Agreement
The indemnification required by this
Section 9.0 shall
be made by
periodic payments of
the amount thereof during the
course of the investigation or defense, as
and when bills are
received or are
incurred. The
indemnity agreements contained
herein shall
be in addition to any cause of action or similar
right of any
Buyer Party against
the Company
or others and any
liabilities the Company may be
subject to pursuant to law.
[signature
page follows]
IN WTINESS WHEREOF, the undersigned Buyer and the Company
have caused this Agreement to be duly executed as of the date first
above written
GUIDED THERAPEUTICS, INC.
/s/
Gene S. Cartwright
Name:
Gene S. Cartwright
Title: Chief
Executive Officer
AUCTUS FUND, LLC
By: /s/ Lou
Posner
Name:
Lou Posner
Title: Managing Director
AGGREGATE
SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Note:
US$89,250.00
Aggregate Purchase Price: US$85,000.00
PROMISSORY NOTE
|
Original Issuance Date: August 22,
2018
|
Principal
Amount: $150,000.00
|
THIS
PROMISSORY NOTE is duly authorized and validly Note of Guided
Therapeutics, Inc., a Delaware corporation, (the "Company"), having
its principal place of business at 5835 Peachtree Comers East,
Suite D, Norcross, Georgia 30092.
FOR
VALUE RECEIVED, the undersigned promises to pay to the Flynn D.
Case Living Trust, Flynn
D.
Case signing as trustee, with an address of P.O. Box 5639, Salem,
Oregon, 97304 ("Holder") the principal sum of $150,000.00 plus a
$7,500.00 loan origination fee for a total of ONE HUNDRED FIFTY
SEVEN THOUSAND FIVE HUNDRED DOLLARS AND no CENTS ($157,500.00) in
lawful money of the United States of America at such place as
Holder may designate in writing. The note shall earn 6% interest
per annum payable to the Holder in quarterly installments beginning
90 days after funds are received by the Company for any amount of
the principle plus loan origination fee that is
unpaid.
The
entire unpaid principal balance on this Promissory Note (this
''Note''), together with all accrued and unpaid interest and loan
origination fees, if any, at the choice of the Holder, shall be due
and payable in full from the funds received by the Company from a
financing of at least $2,000,000.00 DOLLARS (two million U.S.
dollars, zero cents) or, at the option of the Holder, to be
included as part of the Company's financing under the same terms as
the new investors with the most favorable terms making a cash
investment. If the Company does not complete a financing of at
least two million dollars within 90 days of the execution of this
Promissory Note, any unpaid amounts shall be due in full to the
Holder and shall accrue interest at 12% (instead of 6%) per annum
from the date thereof (90 days after execution), if not paid in
full.
Whether or not the Holder of this Note converts
the note into the next Company financing, the Holder shall be
granted 10 (ten) warrants for each dollar of the Principle Amount
loaned to the Company (or $1,500,000 warrants) under this
Promissory Note. The warrants shall be issued and vest upon the
financing of at least $2,000,000.00 DOLLARS ("2 million dollars")
and expire on the third anniversary of said financing. The warrant
exercise price shall be set at the same price as for warrants
granted to the investors with the most favorable terms as part of
any $2 million dollars or more financing. of the
Company or $0.25, whichever is lower. The warrants shall have
standard anti-dilution features to protect the holder from dilution
due to down rounds off financing.
All
parties to this Note, including maker and any sureties, endorsers,
or guarantors, hereby waive protest, presentment, notice of
dishonor, and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and
all other sums due under this Note, notwithstanding any change or
changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and
interest, if any; and all such parties waive all and every kind of
notice of such change or changes and agree that the same may be
made without notice or consent of any of them.
This
Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia, regardless of laws that might
otherwise govern under applicable principles of conflicts of
law.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed the day and year first above written.
GUIDED THERAPEUTICS, INC.
By: /s/ Gene S. Cartwright
Name: Gene S. Cartwright
Title: CEO
Exhibit 10.26
PROMISSORY NOTE
|
Original Issuance Date: September 6, 2018
|
Principal Amount: $50,000
|
THIS
PROMISSORY NOTE is duly authorized and validly Note of Guided
Therapeutics, Inc., a Delaware corporation, (the "Company"), having
its principal place of business at 5835 Peachtree Corners East,
Suite B, Norcross, Georgia 30092.
FOR
VALUE RECEIVED, the undersigned promises to pay to John Gould
("Holder"), with an address of 3854 43rd Ave NE, Seattle, WA 98105
the principal sum of $50,000.00 plus a $2,500 origination fee for a
total of FIFTY-TWO THOUSAND FIVE HUNDRED DOLLARS AND no CENTS
($52,500.00) in lawful money of the United States of America at
such place as Holder may designate in writing. The note shall earn
6% interest per annum payable to the Holder in quarterly
installments beginning 90 days after funds are received by the
Company for any amount of the principle plus loan origination fee
that is unpaid.
The entire unpaid principal balance due on this
Promissory Note (this "Note"), together with all accrued and unpaid
interest and loan origination fees, if any, at the choice of the
Holder, shall be due and payable in full from the funds received by
the Company from a financing of at least $2,000,000.00 DOLLARS (two
million U.S. dollars, zero cents) or, at the option of the Holder,
to be included as part of the Company's financing under the same
terms as the new investors with the most favorable terms making a
cash investment. If the Company does not complete a financing of at
least $2,000,000 within 90 days of the execution of this Promissory
Note, any unpaid amounts shall be due in full to the Holder and
shall accrue interest at 12% (instead of 6%) per annum from the
date thereof (90 days after execution) if not paid in
full.
Whether
or not the Holder of this Note converts the note into the next
Company financing, the Holder shall be granted 10 (ten) warrants
for each dollar of the Principle Amount loaned to the Company (or
500,000 warrants) under this Promissory Note. The warrants shall be
issued and vest upon the financing of at least $2,000,000.00 ("2
MILLION DOLLARS") and expire on the third anniversary of said
financing. The warrant exercise price shall be set at the same as
for warrants granted to the investors with the most favorable terms
as part of any $2 million dollar or more financing of the Company
or $.25, whichever is lower. The warrants shall have standard
anti-dilution features to protect the holder from dilution due to
down rounds of financing.
All
parties to this Note, including maker and any sureties, endorsers,
or guarantors, hereby waive protest, presentment, notice of
dishonor, and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and
all other sums due under this Note, notwithstanding any change or
changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and
interest, if any; and all such parties waive all and every kind of
notice of such change or changes and agree that the same may be
made without notice or consent of any of them.
This
Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia, regardless of laws that might
otherwise govern under applicable principles of conflicts of
law.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed the day and year first above written.
GUIDED
THERAPEUTICS, INC
By:
Gene S. Cartwright
Gene
S. Cartwright
CEO
PROMISSORY NOTE
(Replaces deferred compensation of $207,110.86)
|
$207,110.86
|
September
4, 2018
|
FOR
VALUE RECEIVED, Guided Therapeutics, loc., a Delaware corporation
(referred to hereinafter as "Maker" and "Company"), hereby promises
to pay to Mark Faupel ("Holder") the principal sum of Two Hundred
Seven Thousand, One Hundred Ten Dollars AND Eighty Six Cents
($207,110,86), plus accrued interest from the date hereof. The
unpaid principal amount under this Note ("Promissory Note") shall
accrue and pay simple interest at the rate of six percent (6%) per
annum, no compounding.
The
entire unpaid principal balance due on this Promissory Note (this
''Note''), together with all accrued and unpaid interest shall be
due and payable in full on the third anniversary of this
Note.
This
Note may be prepaid in full or in part at the time and from time to
time without penalty or premium. Each payment hereunder shall be
applied first to payment of interest then accrued and due on the
unpaid principal balance, with the remainder applied to the unpaid
principal. The undersigned shall be considered in default on this
Note if any payment of principal and accrued interest to Holder is
not received prior to or on the date the same becomes due.
Following and during the continuation of a default, Holder may,
without further notice to the undersigned, employ an attorney to
enforce Holder's rights and remedies under this Note in which case
the undersigned and any principal, surety, guarantor or endorser of
this Note hereby agree to pay to Holder all of Holder's reasonable
attorneys' fees in connection therewith. The failure by Holder to
exercise any such right or remedy shall not be a waiver or release
of such rights or remedies or the right to exercise any of them at
another time.
In
lieu of the partially forgiven deferred compensation, the Holder
will also receive 75,000 of the Company's stock options. The price
of the stock options shall be set at the market rate in accordance
with the Company's stock options Plan. 25,000 of the granted
options shall vest immediately, with the remaining 50,000 stock
options vesting monthly over the period of three years from the
grant date.
All
parties to this Note, including maker and any sureties, endorsers,
or guarantors, hereby waive protest, presentment, notice of
dishonor, and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and
all other sums due under this Note, notwithstanding any change or
changes by way of release, sun-ender, exchange, modification or
substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and
interest; and all such parties waive all and every kind of notice
of such change or changes and agree that the same may be made
without notice or consent of any of them.
This
Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia, regardless of laws that might
otherwise govern under applicable principles of conflicts of
law.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed the day and year first above written.
|
|
GUIDED
THERAPEUTICS, INC.
|
|
|
|
|
|
|
|
By:
|
/s/ Gene
S Cartwright
|
|
|
|
|
Gene
S Cartwright
|
|
|
|
|
President
and CEO
|
|
PROMISSORY
NOTE
(Replaces deferred compensation of $319,204.30)
|
$319,204.30
|
September
4, 2018
|
FOR
VALUE RECEIVED, Guided Therapeutics, Inc., a Delaware corporation
(referred to hereinafter as “Maker” and
“Company”), hereby promises to pay to Gene Cartwright
(“Holder”) the principal sum of Three Hundred Nineteen
Thousand, Two Hundred Four Dollars and Thirty Cents ($319,204.30),
plus accrued interest from the date hereof. The unpaid principal
amount under this Note (“Promissory Note”) shall accrue
and pay simple interest at the rate of six percent (6%) per annum,
no compounding.
The
entire unpaid principal balance due on this Promissory Note (this
“Note”), together with all accrued and unpaid interest
shall be due and payable in full on the third anniversary of this
Note.
This
Note may be prepaid in full or in part at the time and from time to
time without penalty or premium. Each payment hereunder shall be
applied first to payment of interest then accrued and due on the
unpaid principal balance, with the remainder applied to the unpaid
principal. The undersigned shall be considered in default on this
Note if any payment of principal and accrued interest to Holder is
not received prior to or on the date the same becomes due.
Following and during the continuation of a default, Holder may,
without further notice to the undersigned, employ an attorney to
enforce Holder's rights and remedies under this Note in which case
the undersigned and any principal, surety, guarantor or endorser of
this Note hereby agree to pay to Holder all of Holder's reasonable
attorneys' fees in connection therewith. The failure by Holder to
exercise any such right or remedy shall not be a waiver or release
ofsuch rights or remedies or the right to exercise any of them at
another time.
In
lieu of partially forgiven deferred compensation, the Holder will
also receive 100,000 of the Company's stock options. The price of
the stock options shall be set at the market rate in accordance
with the Company's stock options Plan. 25,000 of the granted
options shall vest immediately, with the remaining 50,000 stock
options vesting monthly over the period of three years from the
grant date.
All
parties to this Note, including maker and any sureties, endorsers,
or guarantors, hereby waive protest, presentment, notice of
dishonor, and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and
all other sums due under this Note, notwithstanding any change or
changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and
interest; and all such parties waive all and every kind of notice
of such change or changes and agree that the same may be made
without notice or consent of any of them.
This
Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia, regardless of laws that might
otherwise govern under applicable principles of conflicts of
law.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed the day and year first above written.
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GUIDED
THERAPEUTICS, INC.
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By:
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/s/ Mark L
Faupel
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Mark L
Faupel
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COO
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EQUITY
FINANCING AGREEMENT
This EQUITY FINANCING AGREEMENT (the
“Agreement”), dated as of March _1_, 2018 (the
“Execution Date”), is entered into by and
between Guided Therapeutics, Inc., a
__Delaware_______ corporation with its principal executive
office at __5835 Peachtree Corners East, Norcross, Georgia 30092_
(the “Company”),and GHS
Investments LLC, a Nevada limited liability company, with offices
at 420 Jericho Turnpike, Suite 207, Jericho, NY 11753. (the
“Investor”).
RECITALS:
WHEREAS, the parties desire that, upon the terms
and subject to the conditions contained herein, the Investor shall
invest up to Ten Million Dollars ($10,000,000) (the "Commitment
Amount"), from time to time over the course of twenty-four (24)
months after an effective registration of the underlying shares
(the “Contract Period”) to purchase the Company’s
common stock par value $_0.001_ per share (the
“Common Stock”);
WHEREAS, such investments will be made in reliance
upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the
“1933
Act”), Rule 506 of
Regulation D promulgated by the SEC under the 1933 Act, and/or upon
such other exemption from the registration requirements of the 1933
Act as may be available with respect to any or all of the
investments in Common Stock to be made hereunder;
and
WHEREAS, contemporaneously with the execution and
delivery of this Agreement, the parties hereto are executing and
delivering a Registration Rights Agreement substantially in the
form attached hereto as Exhibit A
(the “Registration Rights
Agreement”) pursuant to
which the Company has agreed to provide certain registration rights
under the 1933 Act, and the rules and regulations promulgated
thereunder, and applicable state securities
laws.
NOW
THEREFORE, in consideration of the foregoing recitals, which shall
be considered an integral part of this Agreement, the covenants and
agreements set forth hereafter, and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Investor hereby agree as
follows:
SECTION I.
DEFINITIONS
For
all purposes of and under this Agreement, the following terms shall
have the respective meanings below, and such meanings shall be
equally applicable to the singular and plural forms of such defined
terms.
“1933 Act” shall have the meaning set forth in the
recitals.
“1934 Act” shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and
regulations of the SEC thereunder, all as the same will then be in
effect.
“Affiliate” shall have the meaning set forth in
Section
5.7.
“Agreement” shall have the meaning set forth in the
preamble.
“Articles of
Incorporation” shall have
the meaning set forth in Section
4.3.
“By-laws” shall have the meaning set forth in
Section
4.3.
“Closing” shall have the meaning set forth in
Section
2.4.
“Closing Date” shall have the meaning set forth in
Section
2.4.
“Common Stock” shall have the meaning set forth in the
recitals.
“Control” or “Controls” shall have the meaning set forth in
Section
5.7.
“Effective
Date” shall mean the date
the SEC declares effective under the 1933 Act the Registration
Statement covering the Securities.
“Environmental
Laws” shall have the
meaning set forth in Section
4.13.
“Execution
Date” shall have the
meaning set forth in the preamble.
“Indemnified
Liabilities” shall have
the meaning set forth in Section
10.
“Indemnitees” shall have the meaning set forth in
Section
10.
“Indemnitor” shall have the meaning set forth in
Section
10.
“Ineffective
Period” shall mean any
period of time that the Registration Statement or any supplemental
registration statement becomes ineffective or unavailable for use
for the sale or resale, as applicable, of any or all of the
Registrable Securities (as defined in the Registration Rights
Agreement) for any reason (or in the event the prospectus under
either of the above is not current and deliverable) during any time
period required under the Registration Rights
Agreement.
“Investor” shall have the meaning set forth in the
preamble.
“Market
Price” shall mean the
average of the two (2) lowest volume weighted average prices of the
Company's Common Stock during the Pricing
Period.
“Material Adverse
Effect” shall have the
meaning set forth in Section
4.1.
“Maximum Common Stock
Issuance” shall have the
meaning set forth in Section
2.5.
“Open Period” shall mean the period beginning on and
including the Trading Day immediately following the Effective Date
and ending on the earlier to occur of (i) the date which is twenty
four (24) months from the Effective Date; or (ii) termination of
the Agreement in accordance with Section
8.
“Pricing
Period” shall mean
fifteen (15) consecutive trading days preceding the receipt of the
applicable Put Notice.
“Principal
Market” shall mean the
New York Stock Exchange, the NYSE Amex, the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market or the
OTC Markets, whichever is the principal market on which the Common
Stock is listed.
“Prospectus” shall mean the prospectus, preliminary
prospectus and supplemental prospectus used in connection with the
Registration Statement.
“Purchase
Amount” shall mean the
total amount being paid by the Investor on a particular Closing
Date to purchase the Securities.
“Purchase
Price” shall mean eighty
percent (80%) of the Market Price.
“Put” shall mean the Company is entitled to
request equity investments (the “Put” or
“Puts”) by the Investor during the Contract Period,
pursuant to which the Company will issue Common Stock to the
Investor with an aggregate Purchase Price equal to the value of the
Put, subject to a price per share calculation based on the Market
Price.
“Put Amount” shall mean the total dollar amount
requested by the Company pursuant to an applicable Put. The timing
and amounts of each Put shall be at the discretion of the Company.
The maximum dollar amount of each Put will not exceed two (2) times
the average daily trading dollar volume for the Company’s
Common Stock during the ten (10) trading days preceding the Put
Date. No Put will be made in an amount greater than four hundred
thousand dollars ($400,000). Puts are further limited to the
Investor owning no more than 9.99% of the outstanding stock of the
Company at any given time.
“Put Notice” shall mean a written notice sent to the
Investor by the Company stating the Put Amount in U.S. dollars that
the Company intends to sell to the Investor pursuant to the terms
of the Agreement and stating the current number of Shares issued
and outstanding on such date.
“Put Notice
Date” shall mean the
Trading Day, as set forth below, on which the Investor receives a
Put Notice.
“Put
Restriction” shall mean a
minimum of ten (10) trading days following a Put Notice Date.
During this time, the Company shall not be entitled to deliver
another Put Notice.
“Put Shares
Due” shall have the
meaning set forth in Section
2.4.
“Registered Offering Transaction
Documents” shall mean
this Agreement, and the Registration Rights Agreement between the
Company and the Investor as of the date
herewith.
“Registration Rights
Agreement” shall have the
meaning set forth in the recitals.
“Registration
Statement” means the
registration statement of the Company filed under the 1933 Act
covering the Securities issuable hereunder.
“Related
Party” shall have the
meaning set forth in Section
5.7.
“Resolution” shall have the meaning set forth in
Section
7.5.
“SEC” shall mean the U.S. Securities and
Exchange Commission.
“SEC
Documents” shall have the
meaning set forth in Section
4.6.
“Securities” shall mean the shares of Common Stock
issued pursuant to the terms of this Agreement.
“Settlement
Date” shall have the
meaning set forth in Section
6.2.
“Shares” shall mean the shares of the
Company’s Common Stock.
“Subsidiaries” shall have the meaning set forth in
Section
4.1.
“Trading Day” shall mean any day on which the Principal
Market for the Common Stock is open for trading, from the hours of
9:30 am until 4:00 pm.
“Waiting
Period” shall have the
meaning set forth in Section
2.2.
SECTION II
PURCHASE AND SALE OF COMMON STOCK
2.1 PURCHASE
AND SALE OF COMMON STOCK.
Subject to the terms and conditions set forth herein, the Company
shall issue and sell to the Investor, and the Investor shall
purchase from the Company, up to that number of Shares having an
aggregate Purchase Price of Ten Million Dollars
($10,000,000).
2.2 DELIVERY
OF PUT NOTICES. Subject to the
terms and conditions herein, and from time to time during the Open
Period, the Company may, in its sole discretion, deliver a Put
Notice to the Investor which states the dollar amount (designated
in U.S. Dollars), which the Company intends to sell to the Investor
on a Closing Date (the “Put”). The Put Notice shall be in the form
attached hereto as Exhibit C
and incorporated herein by reference.
The price of the Put shall be eighty (80%) percent of the
“Market Price”, which is the average of the two (2)
lowest volume weighted average prices of the Company’s Common
Stock for fifteen (15) consecutive trading days preceding the Put
Date. During the Open Period, the Company shall not be entitled to
submit a Put Notice until after the previous Closing has
been completed. There will be a minimum of ten (10) trading days
between Put Notices.
2.3 CONDITIONS
TO INVESTOR’S OBLIGATION TO PURCHASE
SHARES. Notwithstanding
anything to the contrary in this Agreement, the Company shall not
be entitled to deliver a Put Notice and the Investor shall not be
obligated to purchase any Shares at a Closing unless each of the
following conditions are satisfied:
i.
a
Registration Statement shall have been declared effective and shall
remain effective and available for the resale of all the
Registrable Securities (as defined in the Registration Rights
Agreement) at all times until the Closing with respect to the
subject Put Notice;
ii.
at
all times during the period beginning on the related Put Notice
Date and ending on and including the related Closing Date, the
Common Stock shall have been listed or quoted for trading on the
Principal Market and shall not have been suspended from trading
thereon for a period of two (2) consecutive Trading Days during the
Open Period and the Company shall not have been notified of any
pending or threatened proceeding or other action to suspend the
trading of the Common Stock;
iii.
the
Company has complied with its obligations and is otherwise not in
breach of or in default under, this Agreement, the Registration
Rights Agreement or any other agreement executed between the
parties, which has not been cured prior to delivery of the
Investor’s Put Notice Date;
iv.
no
injunction shall have been issued and remain in force, or action
commenced by a governmental authority which has not been stayed or
abandoned, prohibiting the purchase or the issuance of the
Securities; and
v.
the
issuance of the Securities will not violate any shareholder
approval requirements of the Principal Market.
If
any of the events described in clauses (i) through (v) above occurs
during a Pricing Period, then the Investor shall have no obligation
to purchase the Put Amount of Common Stock set forth in the
applicable Put Notice.
2.4 MECHANICS
OF PURCHASE OF SHARES BY INVESTOR. Subject to the satisfaction of the conditions set
forth in Sections 2.5, 7 and 8 of this Agreement, at the end
of the Pricing Period, the Purchase Price shall be established and
the number of Put Shares shall be delivered for a particular Put.
In the event that (i) the lowest volume-weighted average price (the
“VWAP”) of the
Company’s Common Stock for any given trading day during the
ten (10) trading days following a Put Notice (the
“Trading
Period”) is less than 75% of the Market Price used to
determine the Purchase Price in connection with the Put and (ii) as
of the end of such Trading Period, the Investor holds Shares issued
pursuant to such Put Notice (the “Trading Period Shares”), then the
Company shall issue such additional Shares, on the Trading Day
immediately following the Trading Period, as may be necessary to
adjust the Purchase Price for that portion of the Put represented
by the Trading Period Shares, to equal the lowest VWAP during the
Trading Period.
The
Closing of a Put shall occur upon the first Trading Day following
the receipt and approval (before 9:30am Eastern Standard Time) by
Investor's broker of the Put Shares, whereby the Company shall have
caused the Transfer Agent to electronically transmit, prior to the
applicable Closing Date, the applicable Put Shares by crediting the
account of the Investor's broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system, and the Investor shall
deliver the Investment Amount specified in the Put Notice by wire
transfer of immediately available funds to an account designated by
the Company ("Closing Date" or "Closing"). In addition, on or prior
to such Closing Date, each of the Company and Investor shall
deliver to each other all documents, instruments and writings
required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the
transactions contemplated herein.
2.5 OVERALL
LIMIT ON COMMON STOCK ISSUABLE.
Notwithstanding anything contained herein to the contrary, if
during the Open Period the Company becomes listed on an exchange
which limits the number of shares of Common Stock that may be
issued without shareholder approval, then the number of Shares
issuable by the Company and purchasable by the Investor, shall not
exceed that number of the shares of Common Stock that may be
issuable without shareholder approval (the
“Maximum Common Stock
Issuance”). If such
issuance of shares of Common Stock could cause a delisting on the
Principal Market, then the Maximum Common Stock Issuance shall
first be approved by the Company’s shareholders in accordance
with applicable law and the By-laws and the Articles of
Incorporation of the Company, if such issuance of shares of Common
Stock could cause a delisting on the Principal Market. The parties
understand and agree that the Company’s failure to seek or
obtain such shareholder approval shall in no way adversely affect
the validity and due authorization of the issuance and sale of
Securities or the Investor’s obligation in accordance with
the terms and conditions hereof to purchase a number of Shares in
the aggregate up to the Maximum Common Stock Issuance, and that
such approval pertains only to the applicability of the Maximum
Common Stock Issuance limitation provided in this
Section
2.5.
2.6 LIMITATION
ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the
contrary in this Agreement, in no event shall the Investor be
entitled to purchase that number of Shares, which when added to the
sum of the number of shares of Common Stock beneficially owned (as
such term is defined under Section 13(d) and Rule 13d-3 of the 1934
Act), by the Investor, would exceed 9.99% of the number of shares
of Common Stock outstanding on the Closing Date, as determined in
accordance with Rule 13d-1(j) of the 1934 Act.
SECTION III
INVESTOR’S REPRESENTATIONS, WARRANTIES AND
COVENANTS
The
Investor represents and warrants to the Company, and covenants,
that to the best of the Investor's knowledge:
3.1 SOPHISTICATED
INVESTOR. The Investor has, by
reason of its business and financial experience, such knowledge,
sophistication and experience in financial and business matters and
in making investment decisions of this type that it is capable of
(I) evaluating the merits and risks of an investment in the
Securities and making an informed investment decision; (II)
protecting its own interest; and (III) bearing the economic risk of
such investment for an indefinite period of
time.
3.2 AUTHORIZATION;
ENFORCEMENT. This Agreement has
been duly and validly authorized, executed and delivered on behalf
of the Investor and is a valid and binding agreement of the
Investor enforceable against the Investor in accordance with its
terms, subject as to enforceability to general principles of equity
and to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws relating to, or
affecting generally, the enforcement of applicable creditors’
rights and remedies.
3.3 SECTION
9 OF THE 1934 ACT. During the
term of this Agreement, the Investor will comply with the
provisions of Section 9 of the 1934 Act, and the rules promulgated
thereunder, with respect to transactions involving the Common
Stock.
3.4 ACCREDITED
INVESTOR. Investor is an
“Accredited Investor” as that term is defined in Rule
501(a) of Regulation D of the 1933 Act.
3.5 NO
CONFLICTS. The execution,
delivery and performance of the Documents by the Investor and the
consummation by the Investor of the transactions contemplated
hereby and thereby will not result in a violation of Partnership
Agreement or other organizational documents of the
Investor.
3.6 OPPORTUNITY
TO DISCUSS. The Investor has
received all materials relating to the Company’s business,
finance and operations which it has requested. The Investor has had
an opportunity to discuss the business, management and financial
affairs of the Company with the Company’s
management.
3.7 INVESTMENT
PURPOSES. The Investor is
purchasing the Securities for its own account for investment
purposes and not with a view towards distribution and agrees to
resell or otherwise dispose of the Securities solely in accordance
with the registration provisions of the 1933 Act (or pursuant to an
exemption from such registration provisions).
3.8 NO
REGISTRATION AS A DEALER. The
Investor is not required to be registered as a “dealer”
under the 1934 Act, either as a result of its execution and
performance of its obligations under this Agreement or
otherwise.
3.9 GOOD
STANDING. The Investor is a
limited liability company, duly organized, validly existing and in
good standing in the State of its Nevada.
3.10 TAX
LIABILITIES. The Investor
understands that it is liable for its own tax
liabilities.
3.11 REGULATION
M. The Investor will comply
with Regulation M under the 1934 Act, if
applicable.
3.12 NO
SHORT SALES. No short sales
shall be permitted by the Investor or its affiliates during the
period commencing on the Execution Date and continuing through the
termination of this Agreement.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except
as set forth in the Schedules attached hereto, or as disclosed on
the Company’s SEC Documents, the Company represents and
warrants to the Investor that:
4.1 ORGANIZATION
AND QUALIFICATION. The Company
is a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware, and has the
requisite corporate power and authorization to own its properties
and to carry on its business as now being conducted. Both the
Company and the companies it owns or controls
(“Subsidiaries”) are duly qualified to do business and are
in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such
qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a Material
Adverse Effect. As used in this Agreement,
“Material Adverse
Effect” means a change,
event, circumstance, effect or state of facts that has had or is
reasonably likely to have, a material adverse effect on the
business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements and instruments to be
entered into in connection herewith, or on the authority or ability
of the Company to perform its obligations under the Registered
offering Transaction Documents.
4.2 AUTHORIZATION;
ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
i.
The Company has the requisite corporate power and
authority to enter into and perform this Investment Agreement and
the Registration Rights Agreement (collectively, the
“Registered Offering Transaction
Documents”), and to issue
the Securities in accordance with the terms hereof and
thereof.
ii.
The
execution and delivery of the Registered Offering Transaction
Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without
limitation the issuance of the Securities pursuant to this
Agreement, have been duly and validly authorized by the
Company’s Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors,
or its shareholders.
iii.
The
Registered Offering Transaction Documents have been duly and
validly executed and delivered by the Company.
iv.
The
Registered Offering Transaction Documents constitute the valid and
binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may
be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement
of creditors’ rights and remedies.
4.3 CAPITALIZATION.
As of the date hereof, the authorized capital stock of the Company
consists of ____1,000,000,000_____ shares of the Common Stock, par
value $___0.001______per share, of which as of the date hereof
___108,461,949_____shares are issued and outstanding. All of such
outstanding shares have been, or upon issuance will be, validly
issued and are fully paid and nonassessable.
Except
as disclosed in the Company’s publicly available filings with
the SEC or as otherwise set forth on Schedule 4.3:
i.
no
shares of the Company’s capital stock are subject to
preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company;
ii.
there
are no outstanding debt securities;
iii.
there
are no outstanding shares of capital stock, options, warrants,
scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any
of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional shares of capital stock of the
Company or any of its Subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company or any of its
Subsidiaries;
iv.
there
are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of their
securities under the 1933 Act (except the Registration Rights
Agreement);
v.
there
are no outstanding securities of the Company or any of its
Subsidiaries which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or
may become bound to redeem a security of the Company or any of its
Subsidiaries;
vi.
there
are no securities or instruments containing anti-dilution or
similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement;
vii.
the
Company does not have any stock appreciation rights or
“phantom stock” plans or agreements or any similar plan
or agreement; and
viii.
there
is no dispute as to the classification of any shares of the
Company’s capital stock.
The Company has furnished to the Investor, or the
Investor has had access through EDGAR to, true and correct copies
of the Company’s Articles of Incorporation, as in effect on
the date hereof (the “Articles of
Incorporation”), and the
Company’s By-laws, as in effect on the date hereof (the
“By-laws”), and the terms of all securities
convertible into or exercisable for Common Stock and the material
rights of the holders thereof in respect
thereto.
4.4 ISSUANCE
OF SHARES. The Company has
reserved the amount of Shares included in the Company’s
registration statement for issuance pursuant to the Registered
Offering Transaction Documents, which have been duly authorized and
reserved (subject to adjustment pursuant to the Company’s
covenant set forth in Section 5.5
below) pursuant to this Agreement.
Upon issuance in accordance with this Agreement, the Securities
will be validly issued, fully paid for and non-assessable and free
from all taxes, liens and charges with respect to the issuance
thereof. In the event the Company cannot register a sufficient
number of Shares for issuance pursuant to this Agreement, the
Company will use its best efforts to authorize and reserve for
issuance the number of Shares required for the Company to perform
its obligations hereunder as soon as reasonably
practicable.
4.5 NO
CONFLICTS. The execution,
delivery and performance of the Registered Offering Transaction
Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in
a violation of the Articles of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of
preferred stock of the Company or the By-laws; or (ii) conflict
with, or constitute a material default (or an event which with
notice or lapse of time or both would become a material default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, contract,
indenture mortgage, indebtedness or instrument to which the Company
or any of its Subsidiaries is a party, or to the Company’s
knowledge result in a violation of any law, rule, regulation,
order, judgment or decree (including United States federal and
state securities laws and regulations and the rules and regulations
of the Principal Market or principal securities exchange or trading
market on which the Common Stock is traded or listed) applicable to
the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or
affected. Neither the Company nor its Subsidiaries is in violation
of any term of, or in default under, the Articles of Incorporation,
any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws
or their organizational charter or by-laws, respectively, or any
contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation
applicable to the Company or its Subsidiaries, except for possible
conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations that would not individually or in the
aggregate have or constitute a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being
conducted, and shall not be conducted, in violation of any law,
statute, ordinance, rule, order or regulation of any governmental
authority or agency, regulatory or self-regulatory agency, or
court, except for possible violations the sanctions for which
either individually or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act or any securities laws
of any states, to the Company’s knowledge, the Company is not
required to obtain any consent, authorization, permit or order of,
or make any filing or registration (except the filing of a
registration statement as outlined in the Registration Rights
Agreement between the parties) with, any court, governmental
authority or agency, regulatory or self-regulatory agency or other
third party in order for it to execute, deliver or perform any of
its obligations under, or contemplated by, the Registered Offering
Transaction Documents in accordance with the terms hereof or
thereof. All consents, authorizations, permits, orders, filings and
registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior
to the date hereof and are in full force and effect as of the date
hereof. The Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing. The
Company is not, and will not be, in violation of the listing
requirements of the Principal Market as in effect on the date
hereof and on each of the Closing Dates and is not aware of any
facts which would reasonably lead to delisting of the Common Stock
by the Principal Market in the foreseeable
future.
4.6 SEC
DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by
reference therein, and amendments thereto, being hereinafter
referred to as the “SEC
Documents”). The Company
has delivered to the Investor or its representatives, or they have
had access through EDGAR to, true and complete copies of the SEC
Documents. As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC or the time they were
amended, if amended, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with
generally accepted accounting principles, by a firm that is a
member of the Public Companies Accounting Oversight Board
(“PCAOB”) consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations
and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No
other written information provided by or on behalf of the Company
to the Investor which is not included in the SEC Documents,
including, without limitation, information referred to in
Section
4.3of this Agreement, contains
any untrue statement of a material fact or omits to state any
material fact necessary to make the statements therein, in the
light of the circumstance under which they are or were made, not
misleading. Neither the Company nor any of its Subsidiaries or any
of their officers, directors, employees or agents have provided the
Investor with any material, nonpublic information which was not
publicly disclosed prior to the date hereof and any material,
nonpublic information provided to the Investor by the Company or
its Subsidiaries or any of their officers, directors, employees or
agents prior to any Closing Date shall be publicly disclosed by the
Company prior to such Closing Date.
4.7 ABSENCE
OF CERTAIN CHANGES. Except as
otherwise set forth in the SEC Documents, the Company does not
intend to change the business operations of the Company in any
material way. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to
any bankruptcy law nor does the Company or its Subsidiaries have
any knowledge or reason to believe that its creditors intend to
initiate involuntary bankruptcy proceedings.
4.8 ABSENCE
OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, there
is no action, suit, proceeding, inquiry or investigation before or
by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the executive
officers of Company or any of its Subsidiaries, threatened against
or affecting the Company, the Common Stock or any of the
Company’s Subsidiaries or any of the Company’s or the
Company’s Subsidiaries’ officers or directors in their
capacities as such, in which an adverse decision could have a
Material Adverse Effect.
4.9 ACKNOWLEDGMENT
REGARDING INVESTOR’S PURCHASE OF SHARES. The Company acknowledges and agrees that the
Investor is acting solely in the capacity of an arm’s length
Investor with respect to the Registered Offering Transaction
Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that the Investor is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Registered Offering Transaction
Documents and the transactions contemplated hereby and thereby and
any advice given by the Investor or any of its respective
representatives or agents in connection with the Registered
Offering Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Investor’s
purchase of the Securities, and is not being relied on by the
Company. The Company further represents to the Investor that the
Company’s decision to enter into the Registered Offering
Transaction Documents has been based solely on the independent
evaluation by the Company and its
representatives.
4.10 NO
UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. Except as set
forth in the SEC Documents, as of the date hereof, no event,
liability, development or circumstance has occurred or exists, or
to the Company’s knowledge is contemplated to occur, with
respect to the Company or its Subsidiaries or their respective
business, properties, assets, prospects, operations or financial
condition, that would be required to be disclosed by the Company
under applicable securities laws on a registration statement filed
with the SEC relating to an issuance and sale by the Company of its
Common Stock and which has not been publicly
announced.
4.11 EMPLOYEE
RELATIONS. Neither the Company
nor any of its Subsidiaries is involved in any union labor dispute
nor, to the knowledge of the Company or any of its Subsidiaries, is
any such dispute threatened. Neither the Company nor any of its
Subsidiaries is a party to a collective bargaining agreement, and
the Company and its Subsidiaries believe that relations with their
employees are good. No executive officer (as defined in Rule 501(f)
of the 1933 Act) has notified the Company that such officer intends
to leave the Company’s employ or otherwise terminate such
officer’s employment with the Company.
4.12 INTELLECTUAL
PROPERTY RIGHTS. The Company
and its Subsidiaries own or possess adequate rights or licenses to
use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade
secrets and rights necessary to conduct their respective businesses
as now conducted. Except as set forth in the SEC Documents, none of
the Company’s trademarks, trade names, service marks, service
mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights
necessary to conduct its business as now or as proposed to be
conducted have expired or terminated, or are expected to expire or
terminate within two (2) years from the date of this Agreement. The
Company and its Subsidiaries do not have any knowledge of any
infringement by the Company or its Subsidiaries of trademark, trade
name rights, patents, patent rights, copyrights, inventions,
licenses, service names, service marks, service mark registrations,
trade secret or other similar rights of others, or of any such
development of similar or identical trade secrets or technical
information by others and, except as set forth in the SEC
Documents, there is no claim, action or proceeding being made or
brought against, or to the Company’s knowledge, being
threatened against, the Company or its Subsidiaries regarding
trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement; and the Company
and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and its
Subsidiaries have taken commercially reasonable security measures
to protect the secrecy, confidentiality and value of all of their
intellectual properties.
4.13 ENVIRONMENTAL
LAWS. The Company and its
Subsidiaries (i) are, to the knowledge of the management and
directors of the Company and its Subsidiaries, in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“Environmental
Laws”); (ii) have, to the
knowledge of the management and directors of the Company, received
all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses; and (iii) are in compliance, to the knowledge of the
management and directors of the Company, with all terms and
conditions of any such permit, license or approval where, in each
of the three (3) foregoing cases, the failure to so comply would
have, individually or in the aggregate, a Material Adverse
Effect.
4.14 TITLE.
The Company and its Subsidiaries have good and marketable title to
all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and
clear of all liens, encumbrances and defects except such as are
described in the SEC Documents or such as do not materially affect
the value of such property and do not interfere with the use made
and proposed to be made of such property by the Company or any of
its Subsidiaries. Any real property and facilities held under lease
by the Company or any of its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company
and its Subsidiaries.
4.15 INSURANCE.
Each of the Company’s Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as management of the Company reasonably
believes to be prudent and customary in the businesses in which the
Company and its Subsidiaries are engaged. Neither the Company nor
any of its Subsidiaries has been refused any insurance coverage
sought or applied for and neither the Company nor its Subsidiaries
has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material
Adverse Effect.
4.16 REGULATORY
PERMITS. With the exception of
US FDA approval and the CE Mark, the Company and its Subsidiaries
have in full force and effect all certificates, approvals,
authorizations and permits from the appropriate federal, state,
local or foreign regulatory authorities and comparable foreign
regulatory agencies, necessary to own, lease or operate their
respective properties and assets and conduct their respective
businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any such certificate, approval, authorization or
permit, except for such certificates, approvals, authorizations or
permits which if not obtained, or such revocations or modifications
which, would not have a Material Adverse
Effect.
4.17 INTERNAL
ACCOUNTING CONTROLS. Except as
otherwise set forth in the SEC Documents, the Company and each of
its Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles by a firm
with membership to the PCAOB and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company’s management has
determined that the Company’s internal accounting controls
were not effective as of the date of this Agreement as further
described in the SEC Documents.
4.18 NO
MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its Subsidiaries
is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation which in the
judgment of the Company’s officers has or is expected in the
future to have a Material Adverse Effect. Neither the Company nor
any of its Subsidiaries is a party to any contract or agreement
which in the judgment of the Company’s officers has or is
expected to have a Material Adverse Effect.
4.19 TAX
STATUS. The Company and each of
its Subsidiaries has made or filed all United States federal and
state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries
has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes
and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has
set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid
taxes that have not been resolved by written agreement for payment
with a taxing authority in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
4.20 CERTAIN
TRANSACTIONS. Except as set
forth in the SEC Documents filed at least ten (10) days prior to
the date hereof and except for arm’s length transactions
pursuant to which the Company makes payments in the ordinary course
of business upon terms no less favorable than the Company could
obtain from disinterested third parties , none of the officers,
directors, or employees of the Company is presently a party to any
transaction with the Company or any of its Subsidiaries (other than
for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or
personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of
the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, such that
disclosure would be required in the SEC
Documents..
4.21 DILUTIVE
EFFECT. The Company understands
and acknowledges that the number of shares of Common Stock issuable
upon purchases pursuant to this Agreement will increase in certain
circumstances including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines
during the period between the Effective Date and the end of the
Open Period. The Company’s executive officers and directors
have studied and fully understand the nature of the transactions
contemplated by this Agreement and recognize that they have a
potential dilutive effect on the shareholders of the Company. The
Board of Directors of the Company has concluded, in its good faith
business judgment, and with full understanding of the implications,
that such issuance is in the best interests of the Company. The
Company specifically acknowledges that, subject to such limitations
as are expressly set forth in the Registered Offering Transaction
Documents, its obligation to issue shares of Common Stock upon
purchases pursuant to this Agreement is absolute and unconditional
regardless of the dilutive effect that such issuance may have on
the ownership interests of other shareholders of the
Company.
4.22 NO
GENERAL SOLICITATION. Neither
the Company, nor any of its affiliates, nor any person acting on
its behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Common Stock to be offered
as set forth in this Agreement.
4.23 NO
BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR
COMMISSIONS. No brokers,
finders or financial advisory fees or commissions will be payable
by the Company, its agents or Subsidiaries, with respect to the
transactions contemplated by this Agreement.
4.24 EXCLUSIVITY.
The Company shall not pursue a similar Equity Financing transaction
with any other party unless and until good faith negotiations have
terminated between the Investor and the Company or until such time
as the registration statement has been declared effective by the
SEC.
SECTION
V
COVENANTS
OF THE COMPANY
5.1 BEST EFFORTS. The Company shall
use all commercially reasonable efforts to timely satisfy each of
the conditions set forth in Section 7 of this
Agreement.
5.2 REPORTING STATUS. Until one of
the following occurs, the Company shall file all reports required
to be filed with the SEC pursuant to the 1934 Act, and the Company
shall not terminate its status, or take an action or fail to take
any action, which would terminate its status as a reporting company
under the 1934 Act: (i) this Agreement terminates pursuant to
Section 8 and the
Investor has the right to sell all of the Securities without
restrictions pursuant to Rule 144 promulgated under the 1933 Act,
or such other exemption, or (ii) the date on which the Investor has
sold all the Securities and this Agreement has been terminated
pursuant to Section
8.
5.3 USE OF PROCEEDS. The Company
will use the proceeds from the sale of the Shares (excluding
amounts paid by the Company for fees as set forth in the Registered
Offering Transaction Documents) for general corporate and working
capital purposes and acquisitions or assets, businesses or
operations or for other purposes that the Board of Directors, in
good faith deem to be in the best interest of the
Company.
5.4 FINANCIAL INFORMATION. During
the Open Period, the Company agrees to make available to the
Investor via EDGAR or other electronic means the following
documents and information on the forms set forth: (i) within five
(5) Trading Days after the filing thereof with the SEC, a copy of
its Annual Reports on Form 10-K, its Quarterly Reports on Form
10-Q, any Current Reports on Form 8-K and any Registration
Statements or amendments filed pursuant to the 1933 Act; (ii)
copies of any notices and other information made available or given
to the shareholders of the Company generally, contemporaneously
with the making available or giving thereof to the shareholders;
and (iii) within two (2) calendar days of filing or delivery
thereof, copies of all documents filed with, and all correspondence
sent to, the Principal Market, any securities exchange or market,
or the Financial Industry Regulatory Association, unless such
information is material nonpublic information.
5.5 RESERVATION OF SHARES. The
Company shall take all action necessary to at all times have
authorized, and reserved the amount of
Shares included in the Company’s registration statement for
issuance pursuant to the Registered Offering Transaction
Documents. In the event that the Company determines that it
does not have a sufficient number of authorized shares of Common
Stock to reserve and keep available for issuance as described in
this Section 5.5,
the Company shall use all commercially reasonable efforts to
increase the number of authorized shares of Common Stock by seeking
shareholder approval for the authorization of such additional
shares.
5.6 LISTING. The Company shall
promptly secure and maintain the listing of all of the Registrable
Securities (as defined in the Registration Rights Agreement) on the
Principal Market and each other national securities exchange and
automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and
shall maintain, such listing of all Registrable Securities from
time to time issuable under the terms of the Registered Offering
Transaction Documents. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably
expected to result in the delisting or suspension of the Common
Stock on the Principal Market (excluding suspensions of not more
than one (1) Trading Day resulting from business announcements by
the Company). The Company shall promptly provide to the Investor
copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing
on such automated quotation system or securities exchange. The
Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 5.6.
5.7 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall cause each of its Subsidiaries not
to, enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any
agreement, transaction, commitment or arrangement with any of its
or any Subsidiary’s officers, directors, persons who were
officers or directors at any time during the previous two (2)
years, shareholders who beneficially own 5% or more of the Common
Stock, or Affiliates or with any individual related by blood,
marriage or adoption to any such individual or with any entity in
which any such entity or individual owns a 5% or more beneficial
interest (each a “Related
Party”), except for (i) customary employment
arrangements and benefit programs on reasonable terms, (ii) any
agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been
obtainable from a disinterested third party other than such Related
Party, or (iii) any agreement, transaction, commitment or
arrangement which is approved by a majority of the disinterested
directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such
agreement, transaction, commitment or arrangement.
“Affiliate” for
purposes hereof means, with respect to any person or entity,
another person or entity that, directly or indirectly, (i) has a 5%
or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls
that person or entity, or (iv) is under common control with that
person or entity. “Control” or “Controls” for purposes hereof
means that a person or entity has the power, directly or
indirectly, to conduct or govern the policies of another person or
entity.
5.8 FILING OF FORM 8-K. On or
before the date which is four (4) Trading Days after the Execution
Date, the Company shall file a Current Report on Form 8-K with the
SEC describing the terms of the transaction contemplated by the
Registered Offering Transaction Documents in the form required by
the 1934 Act, if such filing is required.
5.9 CORPORATE EXISTENCE. The
Company shall use all commercially reasonable efforts to preserve
and continue the corporate existence of the Company.
5.10 NOTICE
OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO
MAKE A PUT. The Company shall promptly notify the Investor
upon the occurrence of any of the following events in respect of a
Registration Statement or related prospectus in respect of an
offering of the Securities: (i) receipt of any request for
additional information by the SEC or any other federal or state
governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by
the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the
Securities for sale in any jurisdiction or the initiation or notice
of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or
related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration
Statement, related prospectus or documents so that, in the case of
a Registration Statement, it will not contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and that in the case of the related prospectus, it will
not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (v) the
Company’s reasonable determination that a post-effective
amendment or supplement to the Registration Statement would be
appropriate, and the Company shall promptly make available to
Investor any such supplement or amendment to the related
prospectus. The Company shall not deliver to Investor any Put
Notice during the continuation of any of the foregoing events in
this Section
5.10.
5.11 TRANSFER
AGENT. The Company shall deliver instructions to its
transfer agent to issue Shares to the Investor that are issued to
the Investor Pursuant to the Transactions contemplated
herein.
5.12 ACKNOWLEDGEMENT
OF TERMS. The Company hereby represents and warrants to the
Investor that: (i) it is voluntarily entering into this Agreement
of its own freewill, (ii) it is not entering this Agreement under
economic duress, (iii) the terms of this Agreement are reasonable
and fair to the Company, and (iv) the Company has had independent
legal counsel of its own choosing review this Agreement, advise the
Company with respect to this Agreement, and represent the Company
in connection with this Agreement.
SECTION
VI
CONDITIONS
OF THE COMPANY’S OBLIGATION TO SELL
The
obligation hereunder of the Company to issue and sell the
Securities to the Investor is further subject to the satisfaction,
at or before each Closing Date, of each of the following conditions
set forth below. These conditions are for the Company’s sole
benefit and may be waived by the Company at any time in its sole
discretion.
6.1 The Investor shall
have executed this Agreement and the Registration Rights Agreement
and delivered the same to the Company.
6.2 The Investor shall
have delivered to the Company the Purchase Price for the Securities
being purchased by the Investor.
6.3 No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
SECTION
VII
FURTHER
CONDITIONS OF THE INVESTOR’S OBLIGATION TO
PURCHASE
The
obligation of the Investor hereunder to purchase Securities is
subject to the satisfaction, on or before each Closing Date, of
each of the following conditions set forth below.
7.1 The Company shall
have executed the Registered Offering Transaction Documents and
delivered the same to the Investor.
7.2 The representations
and warranties of the Company shall be true and correct as of the
date when made and as of the applicable Closing Date as though made
at that time and the Company shall have performed, satisfied and
complied with the covenants, agreements and conditions required by
the Registered Offering Transaction Documents to be performed,
satisfied or complied with by the Company on or before such Closing
Date. The Investor may request an update as of such Closing Date
regarding the representation contained in Section 4.3.
7.3 The Company shall
have executed and delivered to the Investor the certificates
representing, or have executed electronic book-entry transfer of,
the Securities (in such denominations as the Investor shall
request) being purchased by the Investor at such
Closing.
7.4 The Board of
Directors of the Company shall have adopted resolutions consistent
with Section
4.2(ii) (the “Resolutions”) and such Resolutions
shall not have been amended or rescinded prior to such Closing
Date.
7.5 No statute, rule,
regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or
governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this
Agreement.
7.6 Within thirty (30)
days after the Agreement is executed, the Company agrees to use its
best efforts to file with the SEC a registration statement covering
the shares of stock underlying the Equity Financing contemplated
herein. Such registration statement shall conform to the
requirements of the rules and regulations of the SEC and the terms
and conditions of Equity Financing this agreement as expressed in
the registration statement shall be reviewed and approved by the
Investor. The Company will take any and all steps necessary to have
its registration statement declared effective by the SEC within 30
days but no more than 90 days after the Company has filed its
registration statement. Such registration Statement shall conform
to the requirements of the rules and regulations of the SEC and the
terms and conditions of the equity financing Equity Financing as
expressed in the Registration Statement and shall be reviewed and
approved by the Investor. The Registration Statement shall be
effective on each Closing Date and no stop order suspending the
effectiveness of the Registration statement shall be in effect or
to the Company’s knowledge shall be pending or threatened.
Furthermore, on each Closing Date (I) neither the Company nor the
Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to such Registration
Statement or that the SEC otherwise has suspended or withdrawn the
effectiveness of such Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the
SEC’s concerns have been addressed), and (II) no other
suspension of the use or withdrawal of the effectiveness of such
Registration Statement or related prospectus shall
exist.
7.7 At the time of each
Closing, the Registration Statement (including information or
documents incorporated by reference therein) and any amendments or
supplements thereto shall not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or which would require public disclosure or an update
supplement to the prospectus.
7.8 If applicable, the
shareholders of the Company shall have approved the issuance of any
Shares in excess of the Maximum Common Stock Issuance in accordance
with Section 2.5 or
the Company shall have obtained appropriate approval pursuant to
the requirements of applicable state and federal laws and the
Company’s Articles of Incorporation and By-laws.
7.9 The conditions to
such Closing set forth in Section 2.3 shall have been
satisfied on or before such Closing Date.
7.10 The
Company shall have certified to the Investor the number of Shares
of Common Stock outstanding when a Put Notice is given to the
Investor. The Company’s delivery of a Put Notice to the
Investor constitutes the Company’s certification of the
existence of the necessary number of shares of Common Stock
reserved for issuance.
SECTION
VIII
TERMINATION
This
Agreement shall terminate upon any of the following
events:
8.1 when the Investor
has purchased an aggregate of Ten Million Dollars ($10,000,000) in
the Common Stock of the Company pursuant to this Agreement;
or
8.2 on the date which
is twenty four (24) months after the Effective Date;
or
8.3 at such time that
the Registration Statement is no longer in effect.
Any and
all shares, or penalties, if any, due under this Agreement shall be
immediately payable and due upon termination of this
Agreement.
SECTION
IX
SUSPENSION
This
Agreement shall be suspended upon any of the following events, and
shall remain suspended until such event is rectified:
i.
The trading of the
Common Stock is suspended by the SEC, the Principal Market or FINRA
for a period of two (2) consecutive Trading Days during the Open
Period; or
ii.
The Common Stock
ceases to be quoted, listed or traded on the Principal Market or
the Registration Statement is no longer effective (except as
permitted hereunder). Immediately upon the occurrence of one of the
above-described events, the Company shall send written notice of
such event to the Investor.
SECTION
X
INDEMNIFICATION
In
consideration of the parties mutual obligations set forth in the
Transaction Documents, the Company ( the “Indemnitor”) shall defend,
protect, indemnify and hold harmless the Investor and all of the
investor’s shareholders, officers, directors, employees,
counsel, and direct or indirect investors and any of the foregoing
person’s agents or other representatives (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the
“Indemnitees”)
from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages,
and reasonable expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including reasonable
attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or
relating to (I) any misrepresentation or breach of any
representation or warranty made by the Indemnitor or any other
certificate, instrument or document contemplated hereby or thereby;
(II) any breach of any covenant, agreement or obligation of the
Indemnitor contained in the Registered Offering Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby; or (III) any cause of action, suit
or claim brought or made against such Indemnitee by a third party
and arising out of or resulting from the execution, delivery,
performance or enforcement of the Registered Offering Transaction
Documents or any other certificate, instrument or document
contemplated hereby or thereby, except insofar as any such
misrepresentation, breach or any untrue statement, alleged untrue
statement, omission or alleged omission is made in reliance upon
and in conformity with information furnished to Indemnitor which is
specifically intended for use in the preparation of any such
Registration Statement, preliminary prospectus, prospectus or
amendments to the prospectus. To the extent that the foregoing
undertaking by the Indemnitor may be unenforceable for any reason,
the Indemnitor shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The indemnity provisions
contained herein shall be in addition to any cause of action or
similar rights Indemnitor may have, and any liabilities the
Indemnitor or the Indemnitees may be subject to.
SECTION
XI
GOVERNING
LAW; DISPUTES SUBMITTED TO ARBITRATION.
11.1 LAW
GOVERNING THIS AGREEMENT. This Agreement shall be governed
by and construed in accordance with the laws of the State of Nevada
without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the
transactions contemplated by this Agreement shall be brought only
in the state or federal courts located in New York City, New York
State. The parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non conveniens.
The parties executing this
Agreement and other agreements referred to herein or delivered in
connection herewith on behalf of the Company agree to submit to the
in personam jurisdiction of such courts and hereby irrevocably
waive trial by jury. The prevailing party shall be entitled
to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement
or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or
proceeding in connection with this Agreement or any other
Transaction Documents by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.
11.2 LEGAL
FEES; AND MISCELLANEOUS FEES. Except as otherwise set forth
in the Registered Offering Transaction Documents (including but not
limited to Section V of the Registration Rights Agreement), each
party shall pay the fees and expenses of its advisers, counsel, the
accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. Any
attorneys’ fees and expenses incurred by either the Company
or the Investor in connection with the preparation, negotiation,
execution and delivery of any amendments to this Agreement or
relating to the enforcement of the rights of any party, after the
occurrence of any breach of the terms of this Agreement by another
party or any default by another party in respect of the
transactions contemplated hereunder, shall be paid on demand by the
party which breached the Agreement and/or defaulted, as the case
may be. The Company shall pay all stamp and other taxes and duties
levied in connection with the issuance of any
Securities.
11.3 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
the different signatories hereto on separate counterparts, each of
which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument. This
Agreement may be executed by facsimile transmission, PDF,
electronic signature or other similar electronic means with the
same force and effect as if such signature page were an original
thereof.
11.4 HEADINGS;
SINGULAR/PLURAL. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. Whenever required by the context
of this Agreement, the singular shall include the plural and
masculine shall include the feminine.
11.5 SEVERABILITY.
If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in
any other jurisdiction.
11.6 ENTIRE
AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT
between the Company and the Investor with respect to the terms and
conditions set forth herein, and, the terms of this Agreement may
not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the Parties. No provision of this
Agreement may be amended other than by an instrument in writing
signed by the Company and the Investor, and no provision hereof may
be waived other than by an instrument in writing signed by the
party against whom enforcement is sought. The execution and
delivery of the Registered Offering Transaction Documents shall not
alter the force and effect of any other agreements between the
Parties, and the obligations under those agreements.
11.7 NOTICES.
Any notices or other communications required or permitted to be
given under the terms of this Agreement must be in writing and will
be deemed to have been delivered (I) upon receipt, when delivered
personally; (II) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (III) one (1)
day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such
communications shall be:
|
If to
the Company:
With a
copy to:
|
|
Guided
Therapeutics, Inc Attn: Gene Cartwright
5835
Peachtree Corners East
Suite D
Norcross, GA 30092
Fax:770-242-8639
Guided
Therapeutics, Inc
Attn:
Mark Faupel
5835
Peachtree Corners East
Suite
D
Norcross, GA
30092
Fax:
770-242-8639
|
|
|
|
|
|
If to
the Investor:
|
|
GHS
Investments, LLC
420
Jericho Turnpike, Suite 207Jericho, NY 11753
|
Each
party shall provide five (5) days prior written notice to the other
party of any change in address or facsimile number.
11.8 NO
ASSIGNMENT. This Agreement may not be assigned.
11.9 NO
THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and is not for the benefit of,
nor may any provision hereof be enforced by, any other person,
except that the Company acknowledges that the rights of the
Investor may be enforced by its general partner.
11.10 SURVIVAL.
The representations and warranties of the Company and the Investor
contained in Sections 3 and 4, the agreements and covenants set
forth in Sections 5 and 6, and the indemnification provisions set
forth in Section
10, shall survive each of the Closings and the termination
of this Agreement.
11.11 PUBLICITY.
The Investor acknowledges that this Agreement and all or part of
the Registered Offering Transaction Documents may be deemed to be
“material contracts” as that term is defined by Item
601(b)(10) of Regulation S-K, and that the Company may therefore be
required to file such documents as exhibits to reports or
registration statements filed under the 1933 Act or the 1934 Act.
The Investor further agrees that the status of such documents and
materials as material contracts shall be determined solely by the
Company, in consultation with its counsel.
11.12 FURTHER
ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
11.13 PLACEMENT
AGENT. If so required, the Company agrees to pay a
registered broker dealer, to act as placement agent, a percentage
of the Put Amount on each Put toward the fee as outlined in that
certain placement agent agreement entered into between the Company
and the placement agent. The Investor shall have no obligation with
respect to any fees or with respect to any claims made by or on
behalf of other persons or entities for fees of a type contemplated
in this Section that may be due in connection with the transactions
contemplated by the Registered
Offering Transaction Documents. The Company shall indemnify
and hold harmless the Investor, their employees, officers,
directors, agents, and partners, and their respective affiliates,
from and against all claims, losses, damages, costs (including the
costs of preparation and attorney’s fees) and expenses
incurred in respect of any such claimed or existing fees, as such
fees and expenses are incurred.
11.14 NO
STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be
applied against any party, as the parties mutually agree that each
has had a full and fair opportunity to review this Agreement and
seek the advice of counsel on it.
11.15 REMEDIES.
The Investor shall have all rights and remedies set forth in this
Agreement and the Registration Rights Agreement and all rights and
remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which the
Investor has by law. Any person having any rights under any
provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to
recover damages by reason of any default or breach of any provision
of this Agreement, including the recovery of reasonable attorneys
fees and costs, and to exercise all other rights granted by
law.
11.16 PAYMENT
SET ASIDE. To the extent that the Company makes a payment or
payments to the Investor hereunder or under the Registration Rights
Agreement or the Investor enforces or exercises its rights
hereunder or thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
11.17 PRICING
OF COMMON STOCK. For purposes of this Agreement, the price
of the Common Stock shall be as reported by Quotestream
Media.
SECTION
XII
NON-DISCLOSURE
OF NON-PUBLIC INFORMATION
The
Company shall not disclose non-public information to the Investor,
its advisors, or its representatives.
Nothing
herein shall require the Company to disclose non-public information
to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided,
however, that notwithstanding anything herein to the contrary, the
Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any,
underwriters, of any event or the existence of any circumstance
(without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically
or generally during the course of due diligence by such persons or
entities), which, if not disclosed in the prospectus included in
the Registration Statement would cause such prospectus to include a
material misstatement or to omit a material fact required to be
stated therein in order to make the statements, therein, in light
of the circumstances in which they were made, not misleading.
Nothing contained in this Section 12 shall be construed
to mean that such persons or entities other than the Investor
(without the written consent of the Investor prior to disclosure of
such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of
this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on
such due diligence by such persons or entities, that the
Registration Statement contains an untrue statement of material
fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were
made, not misleading.
SECTION
XIII
ACKNOWLEDGEMENTS
OF THE PARTIES
Notwithstanding
anything in this Agreement to the contrary, the parties hereto
hereby acknowledge and agree to the following: (i) the Investor
makes no representations or covenants that it will not engage in
trading in the securities of the Company, other than the Investor
will not short the Company’s common stock at any time during
this Agreement; (ii) the Company shall, by 8:30 a.m. EST on the
second Trading Day following the date hereof, file a current report
on Form 8-K disclosing the material terms of the transactions
contemplated hereby and in the other Registered Offering
Transaction Documents; (iii) the Company has not and shall not
provide material non-public information to the Investor unless
prior thereto the Investor shall have executed a written agreement
regarding the confidentiality and use of such information; and (iv)
the Company understands and confirms that the Investor will be
relying on the acknowledgements set forth in clauses (i) through
(iii) above if the Investor effects any transactions in the
securities of the Company.
[Signature
page follows]
Your
signature on this Signature Page evidences your agreement to be
bound by the terms and conditions of the Investment Agreement as of
the date first written above. The undersigned signatory hereby
certifies that he has read and understands the Investment
Agreement, and the representations made by the undersigned in this
Investment Agreement are true and accurate, and agrees to be bound
by its terms.
GHS
INVESTMENTS, LLC
By:
_/s/ Mark Grober____
Name:
Mark Grober
Title:
_Member____________
GUIDED
THERAPEUTICS, INC.
By: /s/
Gene S. Cartwright
Name:
Gene S. Cartwright
Title:
_CEO
[SIGNATURE
PAGE OF EQUITY FINANCING AGREEMENT]
LIST OF EXHIBITS
|
EXHIBIT A
|
Registration
Rights Agreement
|
|
EXHIBIT B
|
Notice of Effectiveness
|
|
EXHIBIT C
|
Put
Notice
|
|
EXHIBIT D
|
Put
Settlement Sheet
|
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
See
attached.
EXHIBIT B
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
[TRANSFER
AGENT]
Re: Guided Therapeutics Inc.,
Ladies
and Gentlemen:
We are counsel to Guided
Therapeutics, Inc., a _________
corporation (the “Company”), and have represented the
Company in connection with that certain Equity Financing Agreement
(the “Investment Agreement”) entered into by and among
the Company and GHS Investments LLC(the “Investor”)
pursuant to which the Company has agreed to issue to the Investor
shares of the Company’s common stock, $___ par value per
share (the “Common Stock”) on the terms and conditions
set forth in the Investment Agreement. Pursuant to the Investment
Agreement, the Company also has entered into a Registration Rights
Agreement with the Investor (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common
Stock issued or issuable under the Investment Agreement under the
Securities Act of 1933, as amended (the “1933 Act”). In
connection with the Company’s obligations under the
Registration Rights Agreement, on ____________ ___, 20__, the
Company filed a Registration Statement on Form S- ___ (File No.
__-________) (the “Registration Statement”) with the
Securities and Exchange Commission (the “SEC”) relating
to the Registrable Securities which names the Investor as a selling
shareholder thereunder.
In connection with the foregoing, we advise you that a member of
the SEC's staff has advised us by telephone that the SEC has
entered an order declaring the Registration Statement effective
under the 1933 Act at ______ on __________, 20__ and we have no
knowledge, after telephonic inquiry of a member of the SEC's staff,
that any stop order suspending its effectiveness has been issued or
that any proceedings for that purpose are pending before, or
threatened by, the SEC and the Registrable Securities are available
for sale under the 1933 Act pursuant to the Registration
Statement
EXHIBIT C
FORM OF PUT NOTICE
Date:
RE:
Put Notice Number __
Dear
Mr./Ms.__________,
This is to inform you that as of today,
Guided Therapeutics, Inc., a _______
corporation (the “Company”), hereby elects to exercise
its right pursuant to the Equity Financing Agreement to require GHS
Investments LLC to purchase shares of its common stock. The Company
hereby certifies that:
The
amount of this put is $__________.
The
Pricing Period runs from _______________ until
_______________.
The
Purchase Price is: $_______________
The
number of Put Shares Due:___________________.
The
current number of shares of common stock issued and outstanding is:
_________________.
The
number of shares currently available for issuance on the S-1 is:
________________________.
Regards,
Guided
Therapeutics, Inc.,
By:
__________________________________
Name:
Title:
EXHIBIT D
PUT SETTLEMENT SHEET
Date:
________________
Dear
Mr. ________,
Pursuant to the Put given by Guided
Therapeutics, Inc., to GHS Investments
LLC (“GHS”) on _________________ 201_, we are now
submitting the amount of common shares for you to issue to
GHS.
Please
have a certificate bearing no restrictive legend totaling
__________ shares issued to GHS immediately and send via DWAC to
the following account:
[INSERT]
If
not DWAC eligible, please send FedEx Priority Overnight
to:
[INSERT ADDRESS]
Once
these shares are received by us, we will have the funds wired to
the Company.
Regards,
GHS
INVESTMENTS LLC
By:
_/s/ Gene S
Cartwright________________________________
Gene
CartwrightPresident, Chief Executive Officer and
Acting
Chief Financial Officer
Exhibit 10.30
BUSINESS
FUNDING PAYMENT RIGHTS PURCHASE AND SALE AGREEMENT This Payment
Rights Purchase and Sale Agreement ("Agreement") dated 02/14/2019.
is made by and between EBF Partners, LLC d/b/a Everest Business
Funding ("Purchaser") and the business identified below ("Seller").
SELLER'S IN FORMATION
OFFER
TO SELL AND PURCHASE PAYMENT RIGHTS
Seller
hereby sells, assigns and transfers to Purchaser, without recourse,
upon payment of the Purchase Price, the Purchased Amount of Future
Receipts by delivering to Purchaser the Specified Percentage of the
proceeds of each future sale by Seller. "Future Receipts" includes
all payments made by cash, check, ACH or other electronic transfer,
credit card, debit card, bank card, charge card (each such card
shall be referred to herein as a "Credit Card") or other form of
monetary payment in the ordinary course of Seller's business. BASED
UPON SELLER'S CALCULATIONS AND EXPERIENCE IN OPERATING ITS
BUSINESS, SELLER IS CONFIDENT THAT THE PURCHASE PRICE PAID BY
PURCHASER IN EXCHANGE FOR THE PURCHASED AMOUNT OF FUTURE RECEIPTS
WILL BE USED IN A MANNER THAT WILL BENEFIT SELLER'S CURRENT AND
FUTURE BUSINESS OPERATIONS.
|
Legal
Business Name
|
GUIDED
THERAPEUTICS, INC
|
|
|
|
|
|
D/B/A
!
|
|
|
|
|
|
Type
of Business Entity
|
Corp.
I Limited Liability Company
|
|
Partnership
|
|
Limited
Partnership
|
|
|
|
Limited
Liability Partnership
|
|
Sole
Proprietorship
|
|
Other
|
|
|
|
Physical
Address
|
5835
Peachtree Corners E Ste B
|
|
|
|
|
|
City
|
Norcross
! State
|
GA
!ZiP
|
|
30092
|
|
|
|
Mailing
Address
|
5835
Peachtree Corners E Ste B
|
|
|
|
|
|
City
|
Norcross
/State
|
GA
/ZiP
|
|
30092
|
|
|
|
Contact
Name
|
JOHN
EDWIN IMHOFF
|
|
|
Position
|
|
|
|
|
Business
Phone
|
770-242-8723
|
Cell
Phone
|
|
|
|
|
|
Email
|
|
Website
|
|
|
|
|
|
Date
Business Started
|
10/1992
|
Federal
Tax Id
|
|
58-2029543
|
|
|
|
Monthly
Avg Sales
|
$71,926.22
|
Annual
Sales
|
|
$863,114.68
|
|
|
|
Purchase
Price I$50,000.00 I Purch Amt I$68,500.00 IDaily Payment
1$535.16
|
Specified %
Percentage
|
|
OFFER
TO SELL AND PURCHASE PAYMENT RIGHTS
Seller
hereby sells, assigns and transfers to Purchaser, without recourse,
upon payment of the Purchase Price, the Purchased Amount of Future
Receipts by delivering to Purchaser the Specified Percentage of the
proceeds of each future sale by Seller.
"Future
Receipts" includes all payments made by cash, check, ACH or other
electronic transfer, credit card, debit card, bank card, charge
card (each such card shall be referred to herein as a "Credit
Card") or other form of monetary payment in the ordinary course of
Seller's business. BASED UPON SELLER'S CALCULATIONS AND EXPERIENCE
IN OPERATING ITS BUSINESS, SELLER IS CONFIDENT THAT THE PURCHASE
PRICE PAID BY PURCHASER IN EXCHANGE FOR THE PURCHASED AMOUNT OF
FUTURE RECEIPTS WILL BE USED IN A MANNER THAT WILL BENEFIT SELLER'S
CURRENT AND FUTURE BUSINESS OPERATIONS.
|
|
Daily Payment =(Monthly Average Sales X Specified Percentage) /
Average Weekdays in a Calendar Month
|
|
|
Seller's
Business Name
|
GUIDED
THERAPEUTICS, INC
|
|
|
|
|
Seller's
D/B/A
|
|
|
|
|
|
Physical
Address
|
5835
Peachtree Corners E Ste B
|
City
|
Norcross
|
|
|
State
/GA
|
IZip
130092
|
Federal
Tax Id
|
58-2029543
|
|
Seller
shall (1) deposit all Future Receipts into only one bank account,
which must be acceptable to and pre-approved by Purchaser (the
"Account") and (2) instruct Seller's Credit Card processor, which
processor must be acceptable to and pre-approved by Purchaser (the
"Processor") who shall serve as Seller's sole Credit Card
processor, to deposit all Credit Card receipts of Seller into the
Account. Purchaser will debit the Daily Payment from the Account
each Weekday (Monday -Friday). Seller authorizes Purchaser to
initiate electronic checks or ACH debits from the Account equal to
the Daily Payment each
business day and will provide Purchaser with all required
access codes. Seller understands that it is responsible for
ensuring that the Daily Payment is available in the Account and
will be responsible for any fees incurred by Purchaser resulting
from a rejected electronic check or ACH debit attempt. Purchaser is
not responsible for any overdrafts or rejected transactions that
may result from Purchaser's debiting any amount authorized under
the terms of this Agreement.
Purchaser
Acknowledgement. There is no interest rate or payment schedule and
no time period during which the Purchased Amount must be collected
by Purchaser. Seller going bankrupt or going out of business, in
and of itself, does not constitute a breach of this Agreement.
Purchaser is entering into this Agreement knowing the risks that
Seller's business may slow down or fail, and Purchaser assumes
these risks based on Seller's representations warranties and
covenants in this Agreement, which are designed to give Purchaser a
reasonable and fair opportunity to receive the benefit of its
bargain.
Seller's Right to
Request a Reconciliation. The Daily Payment amount is intended to
represent the Specified Percentage of Seller's Future Receipts.
Seller may request that Purchaser reconcile Seller's actual
receipts by either crediting or debiting the difference back to or
from the Account so that the amount Purchaser debited in the most
recent calendar month equaled the Specified Percentage of Future
Receipts that Seller collected in that calendar month. Any
reconciliation request must be: (1) in writing; (2) include a copy
of Seller's bank statement for the calendar month at issue; and (3)
be sent to Everest Business Funding at 5 West 37th Street, Suite
1100, New York NY 10018 within 30 days after the last day of the
calendar month at issue. It is solely the Seller's responsibility
to send a complete bank statement. Failure to send a written
reconciliation request within 30 days after the last day of the
calendar month at issue forfeits that month's reconciliation.
Notwithstanding anything to the contrary in this Agreement or any
other agreement between Purchaser and Seller, upon the occurrence
of an Event of Default, the Specified Percentage shall equal 100%.
A list of all fees applicable under this Agreement is contained in
Appendix A.
THE
"PAYMENT RIGHTS PURCHASE AND SALE AGREEMENT TERMS AND CONDITIONS"
AND THE "PERFORMANCE GUARANTY" ARE All HEREBY INCORPORATED IN AND
MADE A PART OF THIS PAYMENT RIGHTS PURCHASE AND SALE
AGREEMENT.
For
the Seller #1
/s/
John E. Imhoff
John
E. Imhoff
Director
of Guided Therapeutics, Inc
For
the Owner/ Guarantor #1
/s/
John E. Imhoff
John
E. Imhoff
Director
of Guided Therapeutics, Inc
Seller
or any of its Owners for the purpose of this Agreement, and (ii)
obtain credit reports, including consumer credit reports at any
time now or for so long as Seller and/or Owners(s) continue to have
any obligation owed to Purchaser as a consequence of this Agreement
or for Purchaser’s ability to determine Seller's eligibility
ty to enter into any future agreement with Purchaser.
ANY
MISREPRESENTATION MADE BY SELLER OR OWNER IN CONNECTION WITH THIS
AGREEMENT MAY CONSTITUTE A SEPARATE CAUSE OF ACTION FOR FRAUD,
INTENTIONAL MISREPRESENTATION AND/OR UNJUST ENRICHMENT IN WHICH
EVENT PURCHASER WILL BE ENTITLED TO THE RECOVERY OF NOT ONLY ITS
LOSSES BUT ALSO ALL OF ITS COSTS AND EXPENSES AND ITS REASONABLE
LEGAL FEES.
PAYMENT
RIGHTS PURCHASE AND SALE AGREEMENT TERMS AN D
CONDITIONS
I.
TERMS OF ENROLLMENT IN PROGRAM
II
(a) ACH
Authorization. Seller shall execute an agreement (the "ACH
Authorization") acceptable to Purchaser to authorize the use of the
Automated Clearinghouse System (ACH) to retrieve the Daily Payment
from the Account. Seller shall provide Purchaser and/or its
authorized agent(s) with all of the information, authorizations and
passwords necessary for verifying Seller's receivables, receipts,
deposits and withdrawals into and from the Account. Seller hereby
authorizes Purchaser and/or its agent(s) to deduct from the Account
the Purchased Amount and any other amounts owed by Seller to
Purchaser as specified herein and to pay such amounts to Purchaser.
If an ACH transaction is rejected by Seller's financial institution
for any reason other than a stop payment order placed by Seller
with its financial institution, including without limitation
insufficient funds, Seller agrees that Purchaser may resubmit any
ACH transaction that is dishonored as permitted under the NACHA
rules. In the event Purchaser makes an error in processing any
payment or credit, Seller authorizes Purchaser to initiate ACH
entries to or from the Account to correct the error. These
authorizations apply not only to the approved Account but also to
any subsequent or alternate account used by the Seller for these
deposits, whether preapproved by Purchaser or not. This additional
authorization is not a waiver of Purchaser's right to declare
Seller in default if Seller uses an account that Purchaser did not
first preapprove in writing. This authorization shall be
irrevocable without the prior written consent of
Purchaser.
(b)
Bank Holidays and Other Exceptions. Purchaser will debit the Daily
Payment each Weekday on which the Bank is open and able to process
ACH transactions. On the Weekday immediately following any Weekday
or Weekdays on which the Bank was not open to process ACH
transactions, Purchaser will debit the designated account for an
amount equal to the sum of: (i) the Daily Payment amount due on
that Weekday, plus (ii) the Daily Payment amount due on the
preceding Weekday when the Bank was not open or could not process
ACH transactions.
1.2
Financial
Condition. Seller and Guarantor(s) authorize Purchaser and its
agents to investigate their financial responsibility and history,
and will provide to Purchaser any authorizations, bank or financial
statements, tax returns, etc., as Purchaser deems necessary in its
sole discretion prior to or at any time after execution of this
Agreement. A photocopy of this authorization will be deemed
acceptable as an authorization for release of financial and credit
information. Purchaser is authorized to update such information and
financial and credit profiles from time to time as it deems
appropriate.
1.3
Transactional
History. Seller authorizes all of its banks and brokers and Credit
Card processors to provide Purchaser with Seller's banking,
brokerage and/or processing history to determine qualification or
continuation in this program.
1.4
Indemnification.
Seller and Guarantor(s) jointly and severally indemnify and hold
harmless Processor, its officers, directors and shareholders
against all losses, damages, claims, liabilities and expenses
(including reasonable attorney's fees) incurred by Processor
resulting from (a) claims asserted by Purchaser for monies owed to
Purchaser from Seller and (b) actions taken by Processor in
reliance upon any fraudulent, misleading or deceptive information
or instructions provided by Purchaser.
1.5
No Liability. In no
event will Purchaser be liable for any claims asserted by Seller or
Guarantor(s) under any legal theory for lost profits, lost
revenues, lost business opportunities, exemplary, punitive,
special, incidental, indirect or consequential damages, each of
which is waived by both Seller and Guarantor(s). I n the event
these claims are nonetheless raised, Seller and Guarantor(s) will
be jointly liable for all of Purchaser's legal fees and expenses
resulting therefrom. Seller and each Owner and each Guarantor
hereby and each waives to the maxi mum extent permitted by I aw any
cl aim for da mages against Purchaser or any of its affiliates
relating to any (i)investigation undertaken by or on behalf of
Purchaser as permitted by this Agreement or (ii) disclosure of
information as permitted by this Agreement.
1.6.
Reliance on Terms.
Sections 1.1, l.3, 1.4, 1.6 and l.8 of this Agreement are agreed to
for the benefit of Seller, Purchaser and Processor, and
notwithstanding the fact that Processor is not a party of this
Agreement, Processor may rely upon their terms and raise them as a
defense in any action.
Accounting Records.
and Place of Business. Purchaser or its designated representatives
and agents shall have the right during Seller's normal business
hours and at any other reasonable time to examine the interior and
exterior of any of Seller's places of business. Purchaser may
examine, among other things, whether Seller) has a place of
business that is separate from any personal residence, (b) is open
for business, and (c) has sufficient inventory to conduct Seller's
business. When performing an examination, Purchaser may photograph
the interior and exterior of any of Seller's places of business,
including any signage, and may photograph any Owner. Purchaser or
any of its agents shall have the right to inspect, audit, check,
and make extracts from any copies of the books, records, journals,
orders, receipts, correspondence that relate to Seller's accounts
or other transactions between the parties thereto and the general
financial condition of Seller and Purchaser may remove any of such
records temporarily for the purpose of having copies made thereof.
Purchaser shall have the right to hire a Certified Public
Accountant, licensed in the state where the business is located to
perform analysis of the accounting records for the purpose of
determining if the Specified Percentage of receipts has been made
available for remittance to Purchaser. Seller hereby agrees to
fully cooperate with such analysis upon the request of
Purchaser.
1.8 Power of Attorney. Seller
irrevocably appoints Purchaser as its agent and attorney-in-fact
with full authority to take any action or execute any instrument or
document to settle all obligations due to Seller from any bank or
Processor, or in the case of an occurrence of an Event of Default
under Section 3 hereof, to Purchaser under this Agreement,
including without limitation (i) to obtain and adjust
insurance; (ii) to collect monies due or to become due under or in
respect of any of the Purchased Amount; (iii) to receive, endorse
and collect any checks, notes, drafts, instruments, documents or
chattel paper in connection with clause 0) or clause (ii) above;
(iii) to sign Seller's name on any invoice, bill of lading, or
assignment directing customers or account debtors to make payment
directly to Purchaser; (iv) to file any claims or take any action
or institute any proceeding that Purchaser may deem necessary for
the collection of any of the unpaid Purchased Amount, or otherwise
to enforce its rights with respect to payment of the Purchased
Amount. I n connection therewith, all costs, expenses and fees,
including legal fees, shall be payable by and from Seller and
Purchaser is authorized to use Seller's funds to pay for same; and
(v) Purchaser shall have the right, without waiving any of its
rights and remedies and without notice to Seller or any
Owner/Guarantor, to notify any Credit Card processor of the sale of
Future Receipts and re-direct the remittance of da i I y
settlements to a n account of Purchaser 's choosing in order to
settle all obligations due to Purchaser under this
Agreement.
1.,9.
Confidentiality.
Seller understands and agrees that the terms and conditions of the
products and services offered by Purchaser, including this
Agreement and any other Purchaser documentations (collectively,
"ConfidentiaI Information") are proprietary and confidential
information of Purchaser. Accordingly, unless disclosure is
required by law or court order, Seller shall not disclose
Confidential Information of Purchaser to any person other than an
attorney, accountant, financial advisor or employee of Seller who
needs to know such information for the purpose of advising Seller
("Advisor"), provided such Advisor uses Confidential Information
solely for the purpose of advising Seller and first agrees in
writing to be bound by the terms of this section. A breach hereof
entitles Purchaser to not only damages and legal fees but also to
both a temporary restraining order and a preliminary injunction
without bond or security.
1.10
Publicity. Seller
and each of Seller's Owners and all Guarantors hereby authorize
Purchaser to use its, his or her name in listings of clients and in
advertising and marketing materials.
1.11
D/S/As.
Seller hereby acknowledges and agrees that Purchaser may be using
"doing business as" or "d/b/a" names in connection with various
matters relating to the transaction between Purchaser and Seller,
including the filing of UCC-l financing statements and any other
notices or filings.
1.12
Application of
Amounts Received. Subject to applicable law, Purchaser reserves the
right to apply any amounts received from Seller to any fees or
other charges due to Purchaser from Seller prior to applying such
amounts to reduce the amount of any outstanding Purchased
Amount.
1.13
Acknowledgment of
Security Interest and Security Agreement. The Future Receipts sold
by Seller to Purchaser pursuant to this Agreement are "accounts",
"general intangibles", or "payment intangibles" as those terms are
defined in the Uniform Commercial Code as in effect in the state in
which the Seller is located (the "UCC") and such sale shall
constitute and shall be construed and treated for all purposes as a
true and complete sale, conveying good title to the Future Receipts
free and clear of any liens and encumbrances, from Seller to
Purchaser. To the extent the Future Receipts are "accounts" or
"payment intangibles" then (i) the sale of the Future Receipts
creates a security interest as defined in the UCC, (ii) this Agreement
constitutes a "security agreement" under the UCC, and (iii)
Purchaser has all the rights of a secured party under the UCC with
respect to such Future Receipts. Seller further agrees that, with
or without an Event of Default, Purchaser may notify account
debtors, or other persons obligated on the Future Receipts, of
Seller's sale of the Future Receipt and may instruct them to make
payment or otherwise render performance to or for the benefit of
Purchaser.
1.14
Financing Statements. Seller hereby authorizes Purchaser to file
one or more financing statements in order to give
notice
that the Purchased Amount of Future Receipts is the sole property
of Purchaser. Each such filing may state that
such
sale is intended to be a sale and not an assignment for security
and may state that the Seller is prohibited from
obtaining
any financing that impairs the value of the Future Receipts or
Purchaser's right to collect same. Seller authorizes
Purchaser
to apply amounts received from Seller to costs incurred by
Purchaser associated with the filing, amendment or
termination
of any such filings.
II.
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1
Good Faith. Best
Efforts and Due Diligence. Seller will conduct its business in good
faith and will use its best efforts to maintain and grow its
business, to ensure that Purchaser obtains the Purchased Amount.
Furthermore, Seller agrees, warrants and represents hereby that
Seller will constantly perform all appropriate Due Diligence and
credit checks of all of the customers' finances, cash flow,
solvency, good faith, payment histories and business reputations
(the "Due Diligence Requirements") as may be commercially
reasonable to ensure any and all products and/or services provided,
sold or delivered by Seller to said customers will be paid for by
customers in full and on time, and will not result in the creation
of an unpaid account. This is not a guaranty of payment by Seller's
customers, but is an obligation of commercially reasonable Due
Diligence investigation and credit check of customers before
extending credit to them and continuing no less frequently than
monthly so long as sums are still due.
2.2
Nonrecourse Sale of
Payment Rights. Seller represents and warrants that it is selling
the Purchased Amount of Future Receipts to Purchaser in Seller's
normal course of business and the Purchase Price paid by Purchaser
is good and valuable consideration for the sale. Seller is selling
a portion of a future revenue stream to Purchaser at a discount,
not borrowing money from Purchaser. If Future Receipts are remitted
more slowly than Purchaser may have antic pated or projected
because Seller 's business has slowed down, or if the full
Purchased Amount is never remitted because Seller's business went
bankrupt or otherwise ceased operations in the ordinary course of
business, and Seller has not breached this Agreement, Seller would
not owe anything to Purchaser and would not be in breach of or
default under this Agreement. By this Agreement, Seller transfers
to Purchaser full and complete ownership of the Purchased Amount of
Future Receipts and Seller retains no legal or equitable interest
therein.
2.3
Financial Condition
and Financial Information. Seller's and Guarantors' bank and
financial statements, copies of which have been furnished to
Purchaser, and future statements that will be furnished hereafter
at the request of Purchaser, fairly represent the financial
condition of Seller and Guarantor(s) at such dates, and since those
dates there has been no material adverse changes, financial or
otherwise, in the condition, operation or ownership of Seller.
Seller and Guarantor(s) have a continuing, affirmative obligation
to advise Purchaser of any material adverse change in their
financial condition, operation or ownership. Purchaser may request
statements at any time during the performance of this Agreement and
the Seller and Guarantor(s) shall provide them to Purchaser within
5 business days. Seller's or Guarantors' failure to do so is a
material breach of this Agreement.
2.4
Governmental
Approvals. Seller is in compliance and shall comply with all laws
and has valid permits, authorizations and licenses to own, operate
and lease its properties and to conduct the business in which it is
presently engaged and/or will engage in hereafter.
2.5
Authorization.
Seller and the person(s) signing this Agreement on behalf of
Seller, have full power and authority to incur and perform the
obligations under this Agreement, all of which have been duly
authorized.
2.6
Insurance. Seller
will maintain business-interruption insurance naming Purchaser as
loss payee and additional insured in amounts and against risks as
are satisfactory to Purchaser and shall provide Purchaser proof of
such insurance upon request.
2.7
Processor and Bank
Account. Seller will not change its Credit Card processor, add
terminals, change its financial institution or bank account(s) or
take any similar action that could have an adverse effect upon
Seller's obligations under this Agreement, without Purchaser's
prior written consent. Any such changes shall be a material breach
of this Agreement.
2.8
Change of Name,
Type. Location or Sale of Business.
other
than as disclosed to Processor and Purchaser, nor will Seller
change any of its places of business or the type of business
without prior written consent by Purchaser. Seller will not sell,
dispose, transfer or otherwise convey its business or assets
without (i) the express prior written consent of Purchaser, and
(ii) the written agreement of any purchaser or transferee assuming
all of Seller's obligations under this Agreement pursuant to
documentation satisfactory to Purchaser.
2.9
Daily Batch Out.
Seller will ensure that all Credit Card transactions are
communicated daily to the Processor and not later than the day on
which such transactions occurred.
2.10
Estoppel
Certificate. Seller will at all times, and from time to time, upon
at least 1 day's prior notice from Purchaser to Seller, execute,
acknowledge and deliver to Purchaser and/or to any other person,
firm or corporation specified by Purchaser, a statement certifying
that this Agreement is unmodified and in full force and effect (or,
if there have been modifications, that the same is in full force
and effect as modified and stating the modifications) and stating
the dates which the Purchased Amount or any portion thereof has
been delivered to Purchaser or the amount of the Purchased Amount
that has not been delivered to Purchaser.
2.11
No Bankruptcy. As
of the date of this Agreement, Seller is not insolvent and does not
contemplate and has not filed any petition for bankruptcy
protection under Title 11 of the United States Code and there has
been no involuntary petition brought or pending against Seller.
Seller represents that it has not consulted with a bankruptcy
attorney within 6
months prior to the date of this Agreement, and that it has no
present intention of closing its business or ceasing to operate its
business, either permanently or temporarily, during the
6 month period
after the date of this Agreement. Seller further warrants that it
does not anticipate filing any such bankruptcy petition and it does
not anticipate that an involuntary petition will be filed against
it.
2.12
Sharing of
Information. Seller hereby authorizes Purchaser to share
information regarding Seller's performance under this Agreement
with affiliates and unaffiliated third parties.
2.13
Unencumbered
Receipts. Seller has good, complete, unencumbered and marketable
title to all Future Receipts, free and clear of any and all
liabilities, liens, claims, changes, restrictions, conditions,
options, rights, mortgages, security interests, equities, pledges
and encumbrances of any kind or nature whatsoever or any other
rights or interests that may be inconsistent with the transactions
contemplated with, or adverse to the interests of
Purchaser.
2.14
Business Purpose.
Seller is a valid business in good standing under the laws of the
jurisdictions in which it is organized and/or operates. Seller
agrees to use the Purchase Price solely for business purposes, and
not for personal, family or household purposes. Seller understands
that Seller's agreement not to use the Purchase Price for personal,
family or household purposes means certain important rights
conferred upon consumers pursuant to federal or state law will not
apply to this Agreement. Seller agrees that a breach by Seller of
the provisions of this section will not affect Purchaser's rights
to the Purchased Amount or to use any remedy legally available to
Purchaser to obtain delivery of the Purchased Amount.
2.15
Defaults under
Other Contracts. Seller's execution of, and/or performance under
this Agreement, will not cause or create an Event of Default by
Seller under any contract with another person or
entity.
2.16
Account. Seller
represents and warrants that (i) the Account is Seller's bank
account; (ii) the person executing this Authorization on behalf of
Seller is an authorized signer on the Account and has the power and
authority to authorize Purchaser to initiate ACH transactions to
and from the Account; (iii) the Account is a legitimate, open, and
active bank account used sol el y for business s purposes and not
for persona I, family or household purposes.
III.
EVENTS OF DEFAULT AND REMEDIES
3.1.
Events of Default.
The occurrence of any of the following events shall constitute an
"Event of Default": (a) Seller intentionally interferes with
Purchaser's right to collect the Daily Payment in violation of this
Agreement; (b) Seller violates any term or covenant in this
Agreement;(c) Any
representation or warranty by Seller in this Agreement proves to
have been incorrect, false or misleading in any material respect
when made; (d) the sending of notice of termination by Seller; (e)
Seller transports, moves, interrupts, suspends, dissolves or
terminates its business; (f) Seller transfers or sells all or
substantially all of its assets; (g) Seller makes or sends notice
of ny intended bulk sale or transfer by Seller; (h) Seller uses
consent of Purchaser (i) Seller changes its depositing account or
the Processor without the prior written consent of Purchaser; (j)
Seller defaults under any of the terms, covenants and conditions of
any other agreement with Purchaser; or (k) Seller fails to provide
timely notice to Purchaser such that in any given calendar month
there is on e or more AC H transaction attempted by Purchaser that
is rejected by Seller's bank for insufficient funds.
3.2
Remedies. If any Event of Default occurs, A Purchaser may
proceed to protect and enforce its rights including, but not
limited to, the following: & The Specified Percentage shall
equal 100%. The full uncollected Purchased Amount plus all fees
(including legal fees) due under this Agreement wiII become due and
payable in full immediately.
B
Purchaser may
enforce the provisions of the Performance Guaranty against the
Guarantor(s).
C
Seller hereby
authorizes Purchaser to execute in the name of the Seller a
Confession of Judgment in favor of Purchaser in the full
uncollected Purchased Amount and enter that Confession of Judgment
as a Judgment with the Clerk of any Court and execute
thereon.
D
Purchaser may
proceed to protect and enforce its rights and remedies by lawsuit.
In any such lawsuit, under which Purchaser shall recover Judgment
against Seller, Seller shall be liable for all of Purchaser's costs
of the Iawsuit, including but not Iimited to aII reasonable
attorneys' fees and court costs.
E
This Agreement
shall be deemed Seller's Assignment of Seller's Lease of Seller's
business premises to Purchaser. Upon an Event of Default, Purchaser
may exercise its rights under this Assignment of Lease without
prior notice to Seller.
F
Purchaser may debit
Seller's depository accounts wherever situated by means of ACH
debit or facsimile signature on a computer-generated check drawn on
Seller's bank account or otherwise for all sums due to
Purchaser.
G
Seller shall pay to
Purchaser all reasonable costs associated with the Event of Default
and the enforcement of Purchaser's remedies set forth above,
including but not limited to court costs and attorneys'
fees.
All
rights, powers and remedies of Purchaser in connection with this
Agreement may be exercised at any time by Purchaser after the
occurrence of a n Event of Default , are cumulative and not
exclusive, and s ha II be in addition to any other rights, powers
or remedies provided by law or equity.
3.3.
Required
Notifications. Seller is required to give Purchaser written notice
within 24 hours of any filing under Title 11 of the United States
Code. Seller is required to give Purchaser 7 days' written notice
prior to the closing of any sale of all or substantially all of the
Seller's assets or stock.
IV.
MISCELLANEOUS
4.1
Modifications:
Agreements. No modification, amendment, waiver or consent of any
provision of this Agreement shall be effective unless the same
shall be in writing and signed by Purchaser.
4.2
Assignment.
Purchaser may assign, transfer or sell its rights to receive the
Purchased Amount or delegate its duties hereunder, either in whole
or in part, with or without prior written notice to
Seller.
4.3
Notices. All
notices, requests, consents, demands and other communications
hereunder shall be delivered by certified mail, return receipt
requested, to the respective parties to this Agreement at the
addresses set forth in this Agreement. Notices to Purchaser shall
become effective only upon receipt by Purchaser. Notices to Seller
shall become effective three days after mailing.
4.4
No Waiver of
Remedies. No failure on the part of Purchaser to exercise, and no
delay in exercising, any right under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of
any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The remedies
provided hereunder are cumulative and not exclusive of any remedies
provided by law or equity.
4.5
Binding Effect;
Governing Law, Venue and Jurisdiction. This Agreement shall be
binding upon and inure to the benefit of Seller, Purchaser and
their respective successors and assigns, except that Seller shall
not have the right to assign its rights hereunder or any interest
herein without the prior written consent of Purchaser which consent
may be withheld in Purchaser's sole discretion. This Agreement
shall be governed by and construed in accordance with the laws of
the state of New York, without regards to any applicable principals
of conflicts of I a w. Any suit, action or proceeding arising
hereunder, or the interpretation, performance or breach of this
Agreement, shall, if Purchaser so elects, be instituted in any
court sitting in New York, (the "Acceptable Forums"). Seller agrees
that the Acceptable Forums are convenient to it, and submits to the
jurisdiction of the Acceptable Forums and waives any and all
objections to jurisdiction or venue. Should such proceeding be
initiated in any other forum, Seller waives any right to oppose any
motion or application made by Purchaser to transfer such proceeding
to an Acceptable Forum. ADDITIONALLY, MERCHANT AND GUARANTOR AGREE
THAT ANY SUMMONS AND/OR COMPLAINT OR OTHER PROCESS TO COMMENCE ANY
LITIGATION BY PURCHASER WILL BE PROPERLY SERVED IF MAILED BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE MAILING AD DR
ESS{ES) LI STED 0 N PAGE 1 0 F TH I 5 AG REEM ENT.
4.6
Survival of
Representation, etc. All representations, warranties and covenants
herein shall survive the execution and delivery of this Agreement
and shall continue in full force until all obligations under this
Agreement shall have been satisfied in full and this Agreement
shall have terminated.
4.7
Interpretation. All
Parties hereto have reviewed this Agreement with a n attorney of
their own choosing and have relied only on their own attorney's
guidance and advice. No construction determinations shall be made
against either Party hereto as drafter.
4.8
Severability. In
case any of the provisions in this Agreement is found to be
invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of any other provision contained herein
shall not in any way be affected or impaired.
4.9
Entire Agreement.
Any provision hereof prohibited by law shall be ineffective only to
the extent of such prohibition without invalidating the remaining
provisions hereof. This Agreement and the Performance Guaranty
embody the entire agreement between Seller and Purchaser pertaining
to the subject matter thereof and supersede all prior agreements
and understandings relating to the subject matter
hereof.
4.10 Facsimile
Acceptance. Facsimile signatures hereon shall be deemed acceptable
for all purposes.
4.11
Monitoring,
Recording. and Solicitations. If any Event of Default occurs,
Purchaser may proceed to protect and enforce its rights including,
but not limited to, the following:
A.
AUTHORIZATION TO
CONTACT SELLER BY PHONE. Seller and each Owner authorize Purchaser,
its affiliates, agents and independent contractors to contact
Seller and each Owner at any telephone number Seller or any Owner
provides to Purchaser or from which Seller or any Owner places a
call to Purchaser, or any telephone number where Purchaser believes
it may reach Seller or any Owner, using any means of communication,
including but not limited to calls or text messages to mobile,
cellular, wireless or similar devices or calls or text messages
using an automated telephone dialing system and/or artificial
voices or prerecorded messages, even if Seller or and Owner incurs
charges for receiving such communications .
B
AUTHORIZATION TO
CONTACT SELLER BY OTHER MEANS. Seller and each Owner also agree
that Purchaser, its affiliates, agents and independent contractors,
may use any other medium not prohibited by law including, but not
limited to, mail, e-mail and facsimile, to contact Seller and each
Owner. Seller and each Owner expressly consent to conduct business
by electronic means.
C
RIGHTS TO OPT-OUT
OR MAKE CHANGES. Seller and each Owner are not required to agree to
Sections 4.11{A) or 4.11{B) in order to enter into this Agreement.
I f Seller or any Owner wishes to opt out of Section 4.11{A) and/or
4.11{B)' or if Seller or any Owner wants to change how Purchaser
contacts them, including with respect to any telephone number that
Purchaser might use, please call Everest Business Funding at
800-558-0654 (and select Customer Service from the menu
prompts).
V. JURY
TRIAL WAIVER.
THE
PARTIES HERETO WAIVE TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTERS ARISING IN
CONNECTION WITH OR IN ANY WAY RELATED TO THE TRANSACTIONS OR THE
ENFORCEMENT HEREOF. THE PARTIES HERETO ACKNOWLEDGE THAT EACH MAKES
THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND WITHOUT
DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS
OF THIS WAIVER WITH THEIR ATTORNEYS.
|
Seller's
Business Name
|
GUIDED
THERAPEUTICS, INC
|
|
|
|
Seller's
D/B/A
|
|
|
|
|
Physical
Address
|
5835
Peachtree Corners E Ste B
|
ICity
|
Norcross
|
|
State
/GA
|
IZip
130092
|
jFederal
Tax Id
|
58-2029543
|
VI.
CLASS ACTION WAIVER.
PURCHASER, SELLER,
AND EACH GUARANTOR ACKNOWLEDGE AND AGREE THAT THE AMOUNT AT ISSUE
IN THIS TRANSACTION AND ANY DISPUTES THAT ARISE BETWEEN THEM ARE
LARGE ENOUGH TO JUSTIFY DISPUTE RESO LUTI 0 NON AN IN DI VI DUAL
BASI S. EACH PARTY HERETO WAI VES ANY RI GHT TO ASSERT ANY CLAI MS
AGAI NST THE OTHER PARTY AS A REPRESENTATIVE OR MEMBER IN ANY CLASS
OR REPRESENTATIVE ACTION, EXCEPT WHERE SUCH WAIVER IS PROHIBITED BY
LAW OR DEEMED BY A COURT OF LAW TO BE AGAINST PUBLIC POLICY. TO THE
EXTENT EITHER PARTY IS PERMITTED BY LAW OR COURT OF LAW TO PROCEED
WITH A CLASS OR REPRESENTATIVE ACTION AGAINST THE OTHER, THE
PARTIES AGREE THAT:(I) THE PREVAILING PARTY SHALL NOT BE ENTITLED
TO RECOVER ATTORNEYS' FEES OR COSTS ASSOCIATED WITH PURSUING THE
CLASS OR REPRESENTATIVE ACTION (NOT WITHSTANDING ANY OTHER
PROVISION IN THIS AGREEMENT); AND (II) THE PARTY WHO INITIATES OR
PARTICIPATES AS A MEMBER OF THE CLASS WILL NOT SUBMIT A CLAIM OR
OTHERWISE PARTICIPATE IN ANY RECOVERY SECURED THROUGH THE CLASS OR
REPRESENTATIVE ACTION.
VII.
ARBITRATION.
I F
Purchaser, Seller or a Guarantor requests, the other party and the
Guarantor(s) agree to arbitrate all disputes and claims arising out
of or relating to this Agreement. I f a party or a Guarantor seeks
to have a dispute settled by arbitration, that party or Guarantor
must first s end to the other party, by certified ma i I, a written
Notice of Intent to Arbitrate. I f the parties or the Guarantor(s)
do not reach an agreement to resolve the claim within 30 days after
the Notice is received, either party or the Guarantor(s) may
commence an arbitration proceeding with the American Arbitration
Association ("AAA"). Purchaser will promptly reimburse Seller or
the Guarantor any arbitration filing fee, however, in the event
that both the Seller and the Guarantor must pay filing fees,
Purchaser will only reimburse the Seller's arbitration filing fee.
Except as provided in the next sentence, Purchaser will pay all
administration and arbitrator fees. If the arbitrator finds that
either the substance of the claim raised by Seller or the
Guarantor(s) or the relief sought by Seller or the Guarantor(s) is
improper or not warranted, as measured by the standards set forth
in Federal Rule of Procedure l1(b), then Purchaser will pay these
fees only if required by the AAA Rules. If the arbitrator grants
relief to the Seller or the Guarantor(s) that is equal to or
greater than the value of what the Seller or the Guarantor(s)
requested in the arbitration, Purchaser shall reimburse Seller or
the Guarantor(s) for that person's reasonable attorneys' fees and
expenses incurred for the arbitration. Seller and the Guarantor(s)
agree that, by entering into this Agreement, they are waiving the
right to trial by jury. EACH PARTY AND THE GUARANTOR(S) MAY BRING
CLAIMS AGAINST ANY OTHER PARTY ONLY IN THEIR INDIVIDUAL CAPACITY,
and not as a plaintiff or class member in any purported class or
representative proceeding. Further, the parties and the
Guarantor(s) agree that the arbitrator may not consolidate
proceedings for more than one person's claims, and may not
otherwise preside over any form of a representative or class
proceeding, and that if this specific provision is found
unenforceable, then the entirety of this arbitration clause shall
be null and void. SELLER AND ANY G UARANTO R MAY 0 PT 0 UT 0 F TH I S CLAUS E. To opt
out of this Arbitration CI a use, Seller and/or Guarantor may send
Purchaser a notice that the Sell r or Guarantor does not want this
clause to apply to this Agreement. For any opt-out to be effective,
Seller and/or Guarantor must send an opt-out notice to the
following address by registered mail, within 14 days after the date
of this Agreement:
Customer
Service Department Everest Business Funding 5 West 37th Street
Suite 1100 New York, NY 10018
Personal Guaranty
of Performance. EBF Partners, LLC d/b/a Everest Business Funding
("Purchaser") is buying the Purchased Amount of Future Receipts
from the above-referenced Seller, knowing the risks that Seller's
business may slow down or fail, and Purchaser assumes these risks
based on Seller's representations, warranties and covenants in the
Payment Rights Purchase and Sale Agreement (the "Agreement")' which
are designed to give Purchaser a reasonable and fair opportunity to
receive the benefit of its bargain. The undersigned Guarantor{s}
hereby unconditionally guarantees to Purchaser, Seller's good
faith, truthfulness and prompt and complete performance of a II of
the representations, warranties, covenants made by Sell er in the
Agreement as each may be renewed, amended, extended or otherwise
modified (the "Guaranteed Obligations"). Guarantor's obligations
are due a t the time of any Event of Default {a s defined in the
Agreement}.
Guarantor Waivers.
In the Event of Default, Purchaser may seek recovery from Guarantor
for all of Purchaser's losses and damages by enforcement of
Purchaser's rights under this Performance Guaranty without first
seeking to obtain payment from Seller or any other guarantor, or
any other guaranty.
Purchaser does not
have to notify Guarantor of any of the following events and
Guarantor will not be released from its obligations under the
Agreement and this Performance Guaranty if it is not notified of:
Ii} Seller's failure to pay timely any amount owed under the
Agreement; Iii) any adverse change in Seller's financial condition
or business;{iii} Purchaser's acceptance of the Agreement; and {iv}
any renewal, extension or other modification of the Agreement or
Seller's other obligations to Purchaser. In addition, Purchaser may
take any of the following actions without releasing Guarantor from
any of its obligations under the Agreement and this Performance
Guaranty: {i}renew, extend or otherwise
modify the Agreement or Seller's other obligations to Purchaser;
and {ii} release Seller from its obligations to Purchaser.
Guarantor shall not seek reimbursement from Seller or any other
guarantor for any amounts paid by it under the Agreement or this
Performance Guaranty. Guarantor permanently waives and shall not
seek to exercise any of the following rights that it may have
against Seller, or any other guarantor, for any amounts paid by it,
or acts performed by it, under the Agreement or this Performance
Guaranty: Ii} subrogation; Iii) reimbursement;{iii} performance;
(iv) indemnification; or (v) contribution. I n the event that
Purchaser must return any amount paid by Seller or any other
guarantor of the Guaranteed Obligations because that person has
become subject to a proceeding under the United States Bankruptcy
Code or any similar law, Guarantor's obligations under the
Agreement and this Performance Guaranty shall include that
amount.
Guarantor
Acknowledgement. Guarantor acknowledges that: {i} He / She / They
understand the seriousness of the provisions of the Agreement,
including the Jury TriaI Waiver and Arbitration sections, and this
Performance Guaranty; (i i) He / She / They have had a full
opportunity to consult with counsel of his / her /their choice; and
(iii) He / She / They have consulted with counsel of hi s / her /
their choice or have decided not to prevail himself / hers elf /
themselves of that opportunity.
Joint
and Several liability. The obligations hereunder of the persons or
entities constituting Guarantor under the Agreement and this
Performance Guaranty are joint and several.
THE
TERMS, DEFINITIONS, CONDITIONS AND INFORMATION SET FORTH IN THE
PAYMENT RIGHTS PURCHASE AND SALE AGREEMENT, INCLUDING THE PAYMENT
RIGHTS PURCHASE AND SALE AGREEMENT TERMS AND CONDITIONS, ARE HEREBY
INCORPORATED IN AND MADE A PART OF THIS PERFORMANCE GUARANTY.
CAPITALIZED TERMS NOT DEFINED IN THIS PERFORMANCE GUARANTY, SHALL
HAVE THE MEANING SET FORTH IN THE PAYMENT RIGHTS PURCHASE AND SALE
AGREEMENT, INCLUDING THE PAYMENT RIGHTS PURCHASE AND SALE AGREEMENT
TERMS AND CONDITIONS.
MUST
SIGN AS OWNER
GUARANTOR:
/s/
John Edwin Imhoff
John
Edwin Imhoff
Director
Guided
Therapeutics, Inc.
PROMISSORY NOTE
|
Original Issuance
Date: February 15,2019
|
Principal Amount: $50,000.00
|
THIS PROMISSORY NOTE is
duly authorized and validly
Note of Guided
Therapeutics,
Inc.,
a Delaware corporation, (the "Company"), having
its principal
place of business
at 5835 Peachtree Corners
East, Suite
B, Norcross, Georgia 30092.
FOR VALUE
RECEIVED, the undersigned
promises to pay
to John W.
Gould ("Holder") the
principal sum of
FIFTY THOUSAND DOLLARS AND
00/100 CENTS ($50,000.00),
and no fee or interest,
for the total of FIFTY THOUSAND DOLLARS AND
00/
100 CENTS
($50,000.00), in lawful
money of the United States of
America, at such
place as Holder may designate
in writing.
The entire unpaid principal balance due
on this
Promissory
Note (this "Note"),
together with all accrued and unpaid interest and
fees, if any, at the choice
of the
Holder, shall be due and payable in
full from the funds received
by the Company
from a financing of
at least $1
,000,000.00
DOLLARS (one
million U.S.
dollars, zero
cents) or to be included
as part of
the Company's financing. Should the Company not
complete a financing of
at least $1,000,000 within 90 days of
the execution of thi s
Promissory Note, any
unpaid amounts shall
be due in full to the Holder
and shall
accrue 6% annual interest from the date
thereof if not paid in full.
In addition, the
Holder of this Note
shall be granted 10 (ten)
warrants for each dollar
loaned to the Company under
this Promissory
Note. The warrants shall
vest upon the financing of
at least
$1,000,000.00 DOLLARS and
expire on the third
anniversary of said
financing. The warrant exercise price shall be set
at market price
as defined by the five
day volume adjusted weighted price (VW
AP), or alternatively the same
as for
warrants granted to
investors
as part of any
$1 million dollar
or more financing of the
Company.
All parties to thi s Note,
including maker and any
sureties, endorsers, or
guarantors, hereby waive protest,
presentment,
notice of dishonor,
and notice of acceleration
of maturity and agree to continue to
remain bound for the
payment of principal, interest and
all other sums due under
this Note, notwithstanding any change or changes by way
of release,
surrender, exchange,
modification or substitution of any security for
this Note or by way of
any extension or extensions of time for the payment of
principal and interest, if
any; and all such parties waive
all and every kind
of notice of such
change or changes and agree that the same
may be
made without
notice or consent
ofany of them.
This Note shall be governed by,
and construed in accordance with, the laws
of the State of
Georgia, regardless of
laws that might otherwise govern under applicable principles of conflicts
of law.
IN WITNESS WHEREOF, the
undersigned has caused this
instrument to be duly executed the
day and year first above
written.
GUIDED
THERAPEUTICS, INC.
/s/ Mark Faupel
Mark
Faupel
COO
SECURITIES PURCHASE
AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March
29, 2019, by and between GUIDED THERAPEUTICS, INC., a Delaware
corporation, with headquarters located at 5835 Peachtree Comers
East, Suite B, Norcross, GA 30092 (the "Company"), and AUCTUS FUND,
LLC, a Delaware limited liability company, with its address at 545
Boylston Street, 2nd Floor, Boston, MA 02116 (the
"Buyer").
WHEREAS:
A.
The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the rules and regulations as promulgated
by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933
Act");
B.
Buyer desires to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement the
12% convertible note of the Company, in the form attached hereto as
Exhibit A, in the aggregate principal amount of US$65,000.00
(together with any note(s) issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the "Note"), convertible into shares of
common stock, $0.001 par value per share, of the Company (the
"Common Stock"), upon the terms and subject to the limitations and
conditions set forth in such Note.
C.
The Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto;
and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly)
hereby agree as follows:
I.
PURCHASE AND SALE OF NOTE.
a.
Purchase of Note. On the Closing Date (as defined below), the
Company shall issue and sell to the Buyer and the Buyer agrees to
purchase from the Company such principal amount of Note as is set
forth immediately below the Buyer's name on the signature pages
hereto. In connection with the issuance of the Note, the Company
shall issue warrants to Buyer to purchase 325,000 shares of common
stock.
b.
Form of Payment. On the Closing Date (as defined below), (i) the
Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the "Purchase Price")
by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against
delivery of the Note in the principal amount equal to the Purchase
Price as is set forth immediately below the Buyer's name on the
signature pages hereto, and (ii) the Company shall deliver such
duly executed Note on behalf of the Company, to the Buyer, against
delivery of such Purchase Price.
c.
Closing Date. Subject to the satisfaction (or written waiver) of
the conditions thereto set forth in Section 7 and Section 8 below,
the date and time of the issuance and sale of the Note pursuant to
this Agreement (the "Closing Date") shall be 12:00 noon, Eastern
Standard Time on or about March 29,2019, or such other mutually
agreed upon time. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on the Closing Date at
such location as may be agreed to by the parties.
2.
REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer represents
and warrants to the Company that:
a.
Investment Purpose. As of the date hereof, the Buyer is purchasing
the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note (including, without limitation,
such additional shares of Common Stock, if any, as are issuable (i)
on account of interest on the Note (ii) as a result of the events
described in Sections 1.3 and 1.4(g) of the Note or (iii) in
payment of the Standard Liquidated Damages Amount (as defined in
Section 2(i) below) pursuant to this Agreement, such shares of
Common Stock being collectively referred to herein as the
"Conversion Shares" and, collectively with the Note, the
"Securities") for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the 1933 Act
and Buyer is able to bear the economic risk of holding the
Conversion Shares for an indefinite period (including total loss of
its investment), and has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating
the merits and risk of its investment. provided, however, that by
making the representations herein, the Buyer does not agree to hold
any of the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
b.
Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D (an
"Accredited Investor").
c.
Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the· Securities.
d.
Information. The Buyer and its advisors, if any, have been, and for
so long as the Note remains outstanding will continue to be,
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by the Buyer or
its advisors. The Buyer and its advisors, if any, have been, and
for so long as the Note remains outstanding will continue to be,
afforded the opportunity to ask questions of the Company.
Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic information and will not disclose such
information unless such information is disclosed to the public
prior to or promptly following such disclosure to the Buyer.
Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The
Buyer understands that its investment in the Securities involves a
significant degree of risk. The Buyer is not aware of any facts
that may constitute a breach of any of the Company's
representations and warranties made herein.
e.
Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of
the Securities.
f.
Transfer or Re-sale. The Buyer understands that (i) the sale or
re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are
sold pursuant to an effective registration statement under the 1933
Act, (b) the Buyer shall have delivered to the Company an opinion
of counsel of Buyer reasonably satisfactory to the Company's
transfer agent that shall be in form, substance and scope customary
for opinions of counsel in comparable transactions to the effect
that the Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration, which
opinion shall be accepted by the Company, (c) the Securities are
sold or transferred to an "affiliate" (as defined in Rule 144
promulgated under the 1933 Act (or a successor rule) ("Rule 144"))
of the Buyer who agrees in writing to be bound by this Agreement
and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the Securities are sold pursuant to
Regulation S under the 1933 Act (or a successor rule) ("Regulation
S"), and the Buyer shall have delivered to the Company an opinion
of counsel of Buyer reasonably satisfactory to the Company's
transfer agent that shall be in form, substance and scope customary
for opinions of counsel in corporate transactions, which opinion
shall be accepted by the Company; (ii) any sale of such Securities
made in reliance on Rule 144 may be made only in accordance with
the terms of said Rule and further, if said Rule is not applicable,
any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (iii) neither
the Company nor any other person is under any obligation to
register such Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption
thereunder (in each case). Notwithstanding the foregoing or
anything else contained herein to the contrary, the Securities may
be pledged as collateral in connection with a bona fide margin
account or other lending arrangement.
g.
Legends. The Buyer understands that the Note and, until such time
as the Conversion Shares have been registered under the 1933 Act
may be sold pursuant to Rule 144 or Regulation S without any
restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):
"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY TEUS
CERTWICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I)
IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RVLE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER DEALER OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES WITH A FINANCIAL INSTITUTION THAT IS AN
"ACCREDITED INVESTOR" AS DEFINED IN RVLE 501(a) UNDER THE
SECURITIES ACT."
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel
reasonably satisfactory to the Borrower's transfer agent, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such
Security may be made without registration under the 1933 Act, which
opinion shall be accepted by the Company so that the sale or
transfer is effected. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable prospectus
delivery requirements, if any.
h.
Authorization; Enforcement. Buyer has all necessary company power
and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
authorized. This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes a valid and
binding agreement of the Buyer enforceable in accordance with its
terms.
i.
Residency. The Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the state
of Delaware.
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer that, except as otherwise
disclosed in the SEC Documents (as defined below):
a.
Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its
properties and to carryon its business as and where now owned,
leased, used, operated and conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect (except with respect to the re-registration
of the Company's ISO certification and CE Mark). "Material Adverse
Effect" means any material adverse effect on the business,
operations, assets, financial condition or prospects of the Company
or its Subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith provided,
however, that "Material Adverse Effect" shall not include any
event, occurrence, fact, condition or change, directly or
indirectly, arising out of or attributable to: (i) general economic
or political conditions; (ii) conditions generally affecting the
industries in which the Company operates; (iii) any changes in
financial, banking or securities markets in general, including any
disruption thereof and any decline in the price of any security or
any market index or any change in prevailing interest rates; (iv)
acts of war (whether or not declared), armed hostilities or
terrorism, or the escalation or worsening thereof; (v) any action
required or permitted by this Agreement or any action taken (or
omitted to be taken) with the written consent of or at the written
request of Buyer; (vi) any matter of which Buyer is aware on the
date hereof; (vii) any changes in applicable Laws or accounting
rules (including GAAP) or the enforcement, implementation or
interpretation thereof; (viii) the announcement, pendency or
completion of the transactions contemplated by this Agreement,
including losses or threatened losses of employees, customers,
suppliers, distributors or others having relationships with the
Company; (ix) any natural or man-made disaster or acts of God; or
(x) any failure by the Company to meet any internal or published
projections, forecasts or revenue or earnings predictions (provided
that the underlying causes of such failures (subject to the other
provisions of this definition) shall not be excluded).
"Subsidiaries" means any corporation or other organization, whether
incorporated or unincorporated, in which the Company owns, directly
or indirectly, any equity or other ownership interest.
b.
Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this
Agreement, the Note and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Note by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including
without limitation, the issuance of the Note and the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion or exercise thereof) have been duly authorized by the
Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.
c.
Capitalization. 15,000,000 shares (initially) are reserved for
issuance upon conversion of the Note. All of such outstanding
shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and non-assessable. No
shares of capital stock of the Company are subject to preemptive
rights or any other similar rights of the shareholders of the
Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. As of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Note or the Conversion Shares. The
Company has filed in its SEC Documents true and correct copies of
the Company's Certificate of Incorporation as in effect on the date
hereof ("Certificate of Incorporation"), the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect
thereto. The Company shall provide the Buyer with a written update
of this representation signed by the Company's Chief Executive on
behalf of the Company as of the Closing Date.
d.
Issuance of Shares. The issuance of the Note is duly authorized
and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and free from
all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. The Conversion
Shares are duly authorized and reserved for issuance and, upon
conversion of the Note in accordance with its respective terms,
will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances with respect to the
issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company and will not
impose personal liability upon the holder thereof.
e.
Acknowledgement of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of the
Note. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Note in accordance with
this Agreement, the Note is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
f.
No Conflicts. The execution, delivery and performance of this
Agreement and the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor
any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under,
and neither the Company nor any of its Subsidiaries has taken any
action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any
of its Subsidiaries is a party or by which any property or assets
of the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity, the result of which would have a Material
Adverse Effect. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Note in accordance with the
terms hereof or thereof or to issue and sell the Note in accordance
with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company is not in violation of
the listing requirements of the OTC Pink (the "OTC Pink"), the
OTCQB or any similar quotation system, and does not reasonably
anticipate that the Common Stock will be delisted by the OTC Pink,
the OTCQB or any similar quotation system, in the foreseeable
future nor are the Company's securities "chilled" by DTC. The
Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.
g.
SEC Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements
and schedules thereto and documents (other than exhibits to such
documents) incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents"). The Company has
delivered to the Buyer true and complete copies of the SEC
Documents, except for such exhibits and incorporated documents. As
of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the
rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under
applicable law (except for such statements as have been amended or
updated in subsequent filings prior the date hereof). As of their
respective dates, the financial statements of the Company included
in the SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial
statements complied with all respects with United States generally
accepted accounting principles ("GAAP"), consistently applied,
during the periods involved, except as may otherwise be specified
in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the financial statements
of the Company included in the SEC Documents, the Company has no
liabilities, contingent Of otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to September
30, 2018, and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under
GAAP to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial
condition or operating results of the Company. The Company is
subject to the reporting requirements of the 1934 Act. For the
avoidance of doubt, filing of the documents required in this
Section 3(g) via the SEC's Electronic Data Gathering, Analysis, and
Retrieval system ("EDGAR") shall satisfy all delivery requirements
of this Section 3(g).
h.
Absence of Certain Changes. Since September 30, 2018, there has
been no Material Adverse Effect and the Company has not incurred
any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not
required to be reflected in the Company's financial statements
pursuant to GAAP or disclosed in filings made with the SEC. Except
for the issuance of the Securities contemplated by this Agreement,
no event, liability, fact, circumstance, occurrence or development
has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective
businesses, prospects, properties, operations, assets or financial
condition that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is
made that has not been publicly disclosed prior to the date of this
Agreement.
i.
Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect (except with
respect to the lawsuit brought against the Company by its previous
controller). Schedule 3(i) contains a complete list and summary
description of any pending or, to the knowledge of the Company,
threatened proceeding against or affecting the Company or any of
its Subsidiaries involving estimated damages in excess of $200,000,
without regard to whether it would have a Material Adverse Effect.
The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.
j.
Patents, Copyrights, etc. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights ("Intellectual Property")
necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future).
There is no claim or action by any person pertaining to, or
proceeding pending, or to the Company's knowledge threatened, which
challenges the right of the Company or of a Subsidiary with respect
to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, as presently contemplated to be
operated in the future); to the best of the Company's knowledge,
the Company's or its Subsidiaries' current and intended products,
services and processes do not infringe on any Intellectual Property
or other rights held by any person; and the Company is unaware of
any facts or circumstances which might give rise to any of the
foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy,
confidentiality and value of their Intellectual
Property.
k.
No Materially Adverse Contracts, Etc. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or
is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse
Effect.
1.
Tax Status. Except as would not reasonably be expected to have
Material Adverse Effect, the Company and each of its Subsidiaries
has made or filed all federal, state and foreign income and all
other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent
that the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its
books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim. The Company has not executed a waiver with respect
to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the
Company's tax returns is presently being audited by any taxing
authority.
m.
Certain Transactions. Except for arm's length transactions pursuant
to which the Company or any of its Subsidiaries makes payments in
the ordinary course of business upon terms no less favorable than
the Company or any of its Subsidiaries could obtain from third
parties and other than the grant of stock options described in
Schedule 3( c), none of the officers, directors, or employees of
the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or
partner.
n.
Disclosure. All information relating to or concerning the Company
or any of its Subsidiaries set forth in this Agreement and provided
to the Buyer pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has
occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by
the Company but which has not been so publicly announced or
disclosed.
o.
Acknowledgment Regarding Buyer' Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the
capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further
acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any
statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer' purchase of the Securities.
The Company further represents to the Buyer that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its
representatives.
p.
No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its
securities.
q.
No Brokers. Except with respect to payments to Moody Capital
Solutions, Inc., the Company has taken no action which would give
rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or
the transactions contemplated hereby.
r.
Permits; Compliance. Except as would not reasonably be expected to
have Material Adverse Effect, the Company and each of its
Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the "Company
Permits"), and there is no action pending or, to the knowledge of
the Company, threatened regarding suspension or cancellation of any
of the Company Permits. Neither the Company nor any of its
Subsidiaries is in conflict with, or in default or violation of,
any of the Company Permits, except for any such conflicts, defaults
or violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Since
September 30, 2018, neither the Company nor any of its Subsidiaries
has received any notification with respect to possible conflicts,
defaults or violations of applicable laws, except for notices
relating to possible conflicts, defaults or violations, which
conflicts, defaults or violations would not have a Material Adverse
Effect.
s.
Environmental Matters.
(i)
Except as would not reasonably be expected to have Material Adverse
Effect, there are, to the Company's knowledge, with respect to the
Company or any of its Subsidiaries or any predecessor of the
Company, no past or present violations of Environmental Laws (as
defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither the
Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to
the Company's knowledge, threatened in connection with any of the
foregoing. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human
health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals,
pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
(ii)
Other than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company's or any of its Subsidiaries' business.
(iii)
To the Company's knowledge, there are no underground storage tanks
on or under any real property owned, leased or used by the Company
or any of its Subsidiaries that are not in compliance with
applicable law.
t.
Title to Property. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in
each case free and clear of all liens, encumbrances and defects or
such as would not have a Material Adverse Effect. Any real property
and facilities held under lease by the Company and its Subsidiaries
are held by them under valid, subsisting and enforceable leases
with such exceptions as would not have a Material Adverse
Effect.
u.
Internal Accounting Controls. The Company and each of its
Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, to
provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's
general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect
to any differences.
v.
Foreign Corrupt Practices. Except as would not be reasonably
expected to have a Material Adverse Effect, neither the Company,
nor any of its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any
Subsidiary has, in the course of his actions for, or on behalf of,
the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic
government official or employee.
w.
Solvency. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (i.e., its assets have a
fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute
and matured) and currently the Company has no information that
would lead it to reasonably conclude that the Company would not,
after giving effect to the transaction contemplated by this
Agreement, have the ability to, nor does it intend to take any
action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with
respect to its most recent fiscal year end and, after giving effect
to the transactions contemplated by this Agreement, does not
anticipate or know of any basis upon which its auditors might issue
a qualified opinion in respect of its current fiscal year. For the
avoidance of doubt any disclosure of the Borrower's ability to
continue as a "going concern" shall not, by itself, be a violation
of this Section 3(w).
x.
No Investment Company. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will
not be an "investment company" required to be registered under the
Investment Company Act of 1940 (an "Investment Company"). The
Company is not controlled by an Investment Company.
y.
Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have
a Material Adverse Effect. Upon written request the Company will
provide to the Buyer true and correct copies of an policies
relating to directors' and officers' liability coverage, errors and
omissions coverage, and commercial general liability
coverage.
z.
Bad Actor. To the Company's knowledge, no officer or director of
the Company would be disqualified under Rule 506( d) of the
Securities Act as amended on the basis of being a "bad actor" as
that term is established in the September 19, 2013 Small Entity
Compliance Guide published by the SEC.
aa.
Shell Status. The Company is not a "shell" issuer and has never
been a "shell" issuer, or that if it previously has been a "shell"
issuer, that at least twelve (12) months have passed since the
Company has reported Form 10 type information indicating that it is
no longer a "shell" issuer.
bb.
No-Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of
its Subsidiaries and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Company in its 1934
Act filings and is not so disclosed or that otherwise could be
reasonably likely to have a Material Adverse Effect.
cc.
Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has: (i) taken, directly or indirectly,
any action designed to cause or to result, or that could reasonably
be expected to cause or result, in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase
any other securities of the Company.
dd.
[Intentionally Omitted]
ee.
Employee Relations. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any
member of a union. The Company believes that its and its
Subsidiaries' relations with their respective employees are good.
No executive officer (as defined in Rule 50l(f) promulgated under
the 1933 Act) or other key employee of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that
such officer intends to leave the Company or any such Subsidiary or
otherwise terminate such officer's employment with the Company or
any such Subsidiary. To the knowledge of the Company, no executive
officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, noncompetition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject
the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters.
ff.
Breach of Representations and Warranties by the Company. The
Company agrees that if the Company breaches any of the
representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement and it being considered an Event of Default under
Section 3.5 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Company, until such breach is cured. If
the Company elects to pay the Standard Liquidated Damages Amounts
in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.
4.
COVENANTS.
a.
Best Efforts. The parties shall use their commercially reasonable
best efforts to satisfy timely each of the conditions described in
Section 7 and 8 of this Agreement.
b.
Blue Sky Laws. The Company shall, on or before the Closing Date,
take such action as the Company shall reasonably determine may be
necessary to qualify the Securities for sale to the Buyer at the
applicable closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States
(or to qualify for or obtain an exemption from such qualification
for sale), and shall provide evidence of any such action so taken
to the Buyer on or prior to the Closing Date.
c.
Use of Proceeds. The Company shall use the proceeds from the sale
of the Note for working capital and other general corporate
purposes and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with
its currently existing direct or indirect
Subsidiaries).
d.
Expenses. Except as otherwise expressly provided in Section 5, all
costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants,
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs
and expenses, whether or not the Closing shall have
occurred.
e.
Financial Information. The Company agrees to send or make available
the following reports to the Buyer until the Buyer transfers,
assigns, or sells all of the Securities:
(i)
within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or any
of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of
any notices or other information the Company makes available or
gives to such shareholders. For the avoidance of doubt, filing the
documents required in (i) above via EDGAR or releasing any
documents set forth in (ii) above via a recognized wire service
shall satisfy the delivery requirements of this Section
4(f).
f.
Listing. The Company shall use commercially reasonable efforts to
secure the listing of the Conversion Shares upon each national
securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official
notice of issuance) and, so long as the Buyer owns any of the
Securities, shall use commercially reasonable efforts to maintain,
so long as any other shares of Common Stock shall be so listed,
such listing of all Conversion Shares from time to time issuable
upon conversion of the Note. So long as the Buyer owns any of the
Securities, The Company will use commercially reasonable efforts to
maintain the listing and trading of its Common Stock on the OTC
Pink, OTCQB or any equivalent replacement exchange, the Nasdaq
National Market ("Nasdaq"), the Nasdaq SmallCap Market ("Nasdaq
SmallCap"), the New York Stock Exchange ("NYSE"), or the NYSE MKT
and will use commercially reasonable efforts to comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Financial Industry Regulatory
Authority ("FINRA") and such exchanges, as applicable. The Company
shall promptly provide to the Buyer copies of any material notices
it receives from the OTC Pink, OTCQB and any other exchanges or
quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing
on such exchanges and quotation systems. The Company shall pay any
and all fees and expenses in connection with satisfying its
obligation under this Section 4(g).
g.
Corporate Existence. So long as the Buyer beneficially owns any
Note, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except
in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTC
Pink, OTCQB, OTCQX, Nasdaq, NasdaqSmallCap, NYSE or
AMEX.
h.
No Integration. The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
i.
Failure to Comply with the 1934 Act. So long as the Buyer
beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall
continue to be subject to the reporting requirements of the 1934
Act.
j.
Trading Activities. Neither the Buyer nor its affiliates has an
open short position (or other hedging or similar transactions) in
the common stock of the Company and the Buyer agree that it shall
not, and that it will cause its affiliates not to, engage in any
short sales of or hedging transactions with respect to the common
stock of the Company.
k.
Restriction on Activities. Commencing as of the date first above
written, and until the sooner of the six month anniversary of the
date first written above or payment of the Note in full, or full
conversion of the Note, the Company shall not, directly or
indirectly, without the Buyer's prior written consent, which
consent shall not be unreasonably withheld: (a) change the nature
of its business; (b) sell, divest, acquire, change the structure of
any material assets other than in the ordinary course of business;
or (c) solicit any offers for, respond to any unsolicited offers
for, or conduct any negotiations with any other person or entity in
respect of any variable rate debt transactions (i.e., transactions
were the conversion or exercise price of the security issued by the
Company varies based on the market price of the Common Stock) above
$500,000, whether a transaction similar to the one contemplated
hereby or any other investment.
1.
Legal Counsel Opinions. Upon the request of the Buyer from to time
to time, the Company shall be responsible (at its cost) for
promptly supplying to the Company's transfer agent and the Buyer a
customary legal opinion letter of its counsel (the "Legal Counsel
Opinion") to the effect that the sale of Conversion Shares by the
Buyer or its affiliates, successors and assigns is exempt from the
registration requirements of the 1933 Act pursuant to Rule 144
(provided the requirements of Rule 144 are satisfied and provided
the Conversion Shares are not then registered under the 1933 Act
for resale pursuant to an effective registration statement). Should
the Company's legal counsel fail for any reason to issue the Legal
Counsel Opinion, the Buyer may (at the Company's cost) secure
another legal counsel to issue the Legal Counsel Opinion, and the
Company will instruct its transfer agent to accept such
opinion.
m.
Par Value. If the closing bid price at any time the Note is
outstanding falls below $0.001, the Company shall use all
commercially reasonable efforts to obtain shareholder consent, to
reduce the par value of its Common Stock to $0.0001 or less and
shall effect such action promptly upon obtaining such
approval.
n.
Breach of Covenants. The Company agrees that if the Company
breaches any of the covenants set forth in this Section 4, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement, it will be considered an Event of Default under
Section 3.4 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Buyer, until such breach is cured, or
with respect to Section 4( d) above, the Company shall pay to the
Buyer the Standard Liquidated Damages Amount in cash or shares of
Common Stock, at the option of the Buyer, upon each violation of
such provision. If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock, such shares
shall be issued at the Conversion Price at the time of
payment.
1.
Transaction Expense Amount. Upon Closing, the
Company shall pay an amount equal to Five Thousand and
00/100
United States Dollars (US$5,000.00),
to Auctus Fund Management, LLC ("Auctus Management") to cover the
Holder's due diligence, monitoring, and other transaction costs
incurred for services rendered in connection
herewith.
2.
Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the
Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance
with the terms thereof (the "Irrevocable Transfer Agent
Instructions"). In the event that the Borrower proposes to replace
its transfer agent, the Borrower shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to
the provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower
and the Borrower. Prior to registration of the Conversion Shares
under the 1933 Act or the date on which the Conversion Shares may
be sold pursuant to Rule 144 without any restriction as to the
number of Securities as of a particular date that can then be
immediately sold, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company
warrants that: (i) no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section, and stop
transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act or the date on which the
Conversion Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date
that can then be immediately sold), will be given by the Company to
its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Note; (ii) it will
not direct its transfer agent not to transfer or delay, impair,
and/or hinder its transfer agent in transferring (or issuing)(
electronically or in certificated form) any certificate for
Conversion Shares to be issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note and
this Agreement; and (iii) it will not fail to remove (or directs
its transfer agent not to remove or impairs, delays, and/or hinders
its transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any Conversion Shares issued to the Buyer upon
conversion of or otherwise pursuant to the Note as and when
required by the Note and this Agreement. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sa1e of the
Securities. If the Buyer provides the Company with (i) an opinion
of counsel of Buyer reasonably satisfactory to the Company's
transfer agent in form, substance and scope customary for opinions
in comparable transactions, to the effect that a public sale or
transfer of such Securities may be made without registration under
the 1933 Act and such sale or transfer is effected or (ii) the
Buyer provides reasonable assurances that the Securities can be
sold pursuant to Rule 144, the Company shall permit the transfer,
and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates, free from
restrictive legend, in such name and in such denominations as
specified by the Buyer. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the
Buyer, by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section
may be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section,
that the Buyer shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and
requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being
required.
7.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS TO SELL. The
obligation of the Company hereunder to issue and sell the Note to
the Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole
discretion:
a.
The Buyer shall have executed this Agreement and delivered the same
to the Company.
b.
The Buyer shall have delivered the Purchase Price in accordance
with Section l(b) above.
c.
The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
d.
No litigation, statue, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
8.
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO PURCHASE. The
obligation of the Buyer hereunder to purchase the Note at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these
conditions are for the Buyer's sole benefit and may be waived by
the Buyer at any time in its sole discretion:
a.
The Company shall have executed this Agreement and delivered the
same to the Buyer.
b.
The Company shall have delivered to the Buyer the duly executed
Note (in such denominations as the Buyer shall request) and in
accordance with Section l(b) above.
c.
The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the Company's
Transfer Agent.
d.
The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, but not limited to
certificates with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating
to the transactions contemplated hereby.
e.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f.
No event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g.
The Conversion Shares shall have been authorized for quotation on
the OTC Pink, OTCQB or any similar quotation system and trading in
the Common Stock on the OTC Pink, OTCQB or any similar quotation
system shall not have been suspended by the SEC or the OTC Pink,
OTCQB or any similar quotation system.
h.
The Buyer shall have received an officer's certificate described in
Section 3(c) above, dated as of the Closing Date.
9.
GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Nevada
without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the
transactions contemplated by this Agreement, the Note or any other
agreement, certificate, instrument or document contemplated hereby
shall be brought only in the state courts of Massachusetts or in
the federal courts located in the state of Massachusetts. The
parties to this Agreement hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or
based upon forum non conveniens.
EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY OTHER
TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be
entitled to recover from the other party its reasonable attorney's
fees and costs. In the event that any provision of this Agreement
or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or
proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.
b.
Counterparts; Signatures by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This
Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this
Agreement.
c.
Construction; Headings. This Agreement shall be deemed to be
jointly drafted by the Company and the Buyer and shall not be
construed against any person as the drafter hereof. The headings of
this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this
Agreement.
d.
Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision
hereof.
e.
Entire Agreement; Amendments. This Agreement, the Note and the
instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither
the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by an
instrument in writing signed by the majority in interest of the
Buyer.
f.
Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, email, or facsimile,
addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by
email or facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If
to the Company, to:
Guided
Therapeutics, Inc.
5835
Peachtree Comers East, Suite B
Norcross,
GA 30092
Attn:
Gene Cartwright
E-mail:
info@guidedinc.com
With
a copy to (which copy shall not constitute notice):
Jones
Day
1420
Peachtreet St.
Norcross,
GA 30092
E-mail:
hdrodman@jonesday.com
lfto
the Buyer:
Auctus
Fund, LLC
545
Boylston Street, 2nd Floor
Boston,
MA 02116
Attn:
Lou Posner
Facsimile:
(617) 532-6420
With
a copy to (which copy shall not constitute notice):
Chad
Friend, Esq., LL.M.
Anthony
L.G., PLLC
625
N. Flagler Drive, Suite 600
West
Palm Beach, FL 33401
e-mail:
CFriend@AnthonyPLLC.com
Each
party shall provide notice to the other party of any change in
address.
g.
Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and
assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing,
subject to Section 2(f), the Buyer may assign its rights hereunder
to any person that purchases Securities in a private transaction
from the Buyer or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of the
Company.
h.
Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i.
Survival. The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder not withstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
j.
Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
k.
No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
l.
Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the
Buyer shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security
being required.
m.
Publicity. The Company, and the Buyer shall have the right to
review a reasonable period of time before issuance of any press
releases, SEC, OTCQB or FINRA filings, or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the
prior approval of the Buyer, to make any press release or SEC,
OTCQB (or other applicable trading market) or FINRA filings with
respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company
in connection with any such press release prior to its release and
shall be provided with a copy thereof and be given an opportunity
to comment thereon). Notwithstanding the foregoing, the Company
shall not be required to submit for review any such disclosure
contained in filings with the SEC if it shall have previously
provided substantially the same disclosure for review in connection
with a previous filing.
n.
Indemnification. Subject to the provisions of this Section 9(n),
the Company will indemnify and hold Buyer and its directors,
officers, shareholders, members, partners, employees and agents
(each, a "Buyer Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements,
court costs and reasonable attorneys' fees and costs of
investigation that any such Buyer Party may suffer or incur as a
result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the
Company in this Agreement or the Note, or any other agreement,
certificate, instrument, or document contemplated hereby or
thereby, (b) any action instituted against the Buyer Parties in any
capacity, or any of them or their respective affiliates, by any
stockholder of the Company who is not an affiliate of such Buyer
Party, with respect to any of the transactions contemplated by this
Agreement (unless such action is based upon a breach of such Buyer
Party's representations, warranties or covenants under this
Agreement or any agreements or understandings such Buyer Party may
have with any such stockholder or any violations by such Buyer
Party of state or federal securities laws or any conduct by such
Buyer Party that constitutes fraud, gross negligence, willful
misconduct or malfeasance) or (c) any untrue or alleged untrue
statement of a material fact contained in any registration
statement, any prospectus or any form of prospectus or in any
amendment or supplement thereto or in any preliminary prospectus,
or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any prospectus or
supplement thereto, in light of the circumstances under which they
were made) not misleading. If any action shall be brought against
any Buyer Party in respect of which indemnity may be sought
pursuant to this Agreement, such Buyer Party shall promptly notify
the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Buyer Party. Any Buyer Party shall
have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Buyer Party except to
the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed
after a reasonable period of time to assume such defense and to
employ counselor (iii) in such action there is, in the reasonable
opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Buyer
Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Buyer Party under
this Agreement (y) for any settlement by a Buyer Party effected
without the Company's prior written consent, which shall not be
uureasonab1y withheld, conditioned, or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Buyer Party's breach of any of the
representations, warranties, covenants or agreements made by such
Buyer Party in this Agreement. The indemnification required by this
Section 9.n. shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or
similar right of any Buyer Party against the Company or others and
any liabilities the Company may be subject to pursuant to
law.
[signature
page follows]
IN
WITNESS THEREOF, the undersigned Buyer and the Company have caused
this agreement to be duly executed as of date first above
written.
GUIDED THERAPEUTICS, INC.
/s/
Gene S. Cartwright
Gene
S. Cartwright
Chef
Executive Officer
AUCTUS FUND, LLC
/s/
Lou Posner
Lou
Posner
Managing
Director
SECURITIES PURCHASE
AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the
"Agreement"), dated as of May 15,
2019, by
and between Guided Therapeutics,
Inc., a Delaware corporation,
with headquarters
located at 5835
Peachtree Comers
East, Suite B, Norcross, GA
30092, (the "Company")and
EAGLE EQUITIES,
LLC,
a Nevada limited liability company, with
its address at
390 Whalley Ave., New Haven,
CT 06511 (the "Buyer").
WHEREAS:
A. The
Company and the Buyer are executing
and delivering this
Agreement in reliance upon the exemption from securities registration afforded by
the rules and regulations
as promulgated by the
United States Securities and Exchange Commission (the "SEC")
under the Securities
Act of 1933,
as amended (the " 1933
Act");
B. Buyer
desires
to purchase and the
Company desires to issue and
sell, upon the terms and
conditions set forth
in this Agreement an 8% convertible note of the Company, in the
form attached hereto as Exhibit A in the aggregate principal amount of$57,750.00 (together
with any note(s) issued in
replacement thereof or as
a dividend thereon or otherwise with respect thereto in accordance
with the terms
thereof, the "Note"),
convertible into
shares of common stock, of the Company
(the "Common Stock"), upon the
terms and subject to the
limitations and conditions
set forth in such
Note. The Note
shall contain an OID of $5,250.00
such that the purchase
price of the Note shall
be $52,500.00.
C. The
Buyer wishes to
purchase, upon the terms and
conditions stated in
this Agreement, such principal amount of Note as is set
forth immediately below its
name on the signature
pages hereto; and
NOW THEREFORE, the Company and the Buyer severally (and
not jointly) hereby
agree as follows:
1.
Purchase
and Sale of Note.
a. Purchase
of Note. On each of the
Closing Dates (as defined below), the
Company shall issue and sell
to the Buyer and the Buyer
agrees to purchase from the Company
such principal amount of Note as is set
forth immediately below
the Buyer's name
on the signature
pages hereto.
b. Form
of Payment. On the
Closing Date
(as defined below), (i) the Buyer
shall pay the
purchase
price for the Note to be
issued and sold to it at the
Closing (as defined below) (the "Purchase Price") by wire transfer of immediately available
funds to the
Company, in accordance with
the Company's written
wiring instructions, against delivery of the Note
in the principal amount equal to the
Purchase Price as is set forth immediately below the Buyer's
name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on
behalf of the Company,
to the Buyer,
against delivery of such Purchase
Price.
Company Initials
c. Closing
Date. The date and
time of the first issuance and sale of
the Note pursuant to this Agreement (the "Closing Date")
shall be on or
about May 15, 2019,
or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "Closing")
shall occur on the Closing
Date at such location
as may be agreed
to by the
parties.
2. Buyer's
Representations and
Warranties. The Buyer represents and warrants to the Company that:
a. Investment
Purpose. As of the date hereof, the
Buyer is purchasing the
Note and the shares
of Common Stock issuable upon
conversion of or otherwise
pursuant to the
Note, such shares of
Common Stock being
collectively referred to
herein as the "Conversion Shares" and, collectively with the Note, the "Securities") for
its own account and not with
a present view towards
the public sale or
distribution thereof, except pursuant to sales registered or exempted from registration under the 1933
Act; provided, however, that by
making the representations
herein, the Buyer does
not agree to hold any of the Securities for any
minimum or other specific term
and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration statement
or an exemption under the 1933 Act.
b. Accredited
Investor Status. The
Buyer is an "accredited investor" as
that term is defined in Rule
501 (a) of Regulation
D (an "Accredited
Investor").
c. Reliance
on Exemptions.
The Buyer understands that the Securities are being offered and sold to it
in reliance upon specific
exemptions from the
registration requirements of United
States federal and
state securities laws and that
the Company is relying upon the truth and accuracy of, and
the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of the
Buyer set forth
herein in order to
determine the availability of
such exemptions and the
eligibility of
the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if
any, have been, and
for so long
as the Note remain
outstanding will
continue to be, furnished
with all materials relating to the business,
finances and
operations of the Company
and materials relating
to the offer and sale
of the Securities which have been requested by the Buyer or its advisors. The Buyer and
its advisors,
if any, have
been, and for so long
as the Note remain
outstanding will continue to
be, afforded the opportunity to ask
questions of the
Company. Notwithstanding
the foregoing, the Company has
not disclosed to the Buyer any
material nonpublic
information and will
not disclose such information unless such information is disclosed to the public prior
to or promptly
following such disclosure to the Buyer. Neither such inquiries nor any other due
diligence investigation
conducted by Buyer or
any of its
advisors or representatives shall modify,
amend or affect Buyer's
right to rely on the
Company’s representations and warranties contained in Section 3 below.
The Buyer understands that its investment in the
Securities involves a
significant degree
of risk. The Buyer is not aware of any facts that may constitute a breach of any
of the Company's representations and warranties made herein.
e. Governmental
Review. The Buyer understands
that no United States federal
or state agency or any other government or governmental
agency has passed upon
or made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer
understands that (i)
the sale or resale of the Securities
has not been and is
not being registered under the 1933 Act or any applicable
state securities laws, and
the Securities
may not be transferred
unless (a) the Securities are sold
pursuant to an effective
registration statement
under the 1933 Act, (b) the Buyer
shall have delivered to
the Company, at
the cost of the Buyer,
an opinion of counsel
that shall be in form,
substance and scope customary
for opinions of
counsel in comparable
transactions to the effect
that the Securities to be sold
or transferred may be
sold or transferred pursuant to
an exemption from such
registration, which opinion shall be accepted by
the Company, (c)
the Securities are sold or transferred
to an "affiliate"
(as defined in Rule 144
promulgated under the 1933 Act
(or a successor rule) ("Rule
144") of the
Buyer who agrees to sell or
otherwise transfer the Securities only in accordance with this Section 2(f) and who is an
Accredited Investor, (d)
the Securities are sold pursuant to
Rule 144, or (e) the Securities are
sold pursuant to Regulation S under the 1933 Act (or a
successor rule)
("Regulation S"), and the
Buyer shall have
delivered to
the Company, at the cost of
the Buyer, an
opinion of counsel that
shall be in form, substance and scope customary for
opinions of counsel in
corporate transactions, which
opinion shall be
accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule
and further, if
said Rule is not
applicable, any re-sale of such
Securities under circumstances in which the
seller (or the person
through whom the sale
is made) may be
deemed to be an underwriter (as that term is defined in the
1933 Act) may
require compliance with some
other exemption under the
1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is
under any obligation
to register such Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder (in
each case). Notwithstanding the foregoing
or anything else contained herein to the contrary, the Securities may be pledged
as collateral in
connection with a bona
fide margin account or other lending arrangement.
g. Legends.
The Buyer understands that the Note
and, until such time as the
Conversion Shares have been registered under the 1933 Act may be sold
pursuant to Rule 144
or Regulation S without any restriction as to the
number of securities as of a
particular date
that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such Securities):
"NEITHER THE ISSUANCE
AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR
ASSIGNED (I)
IN THE
ABSENCE OF
(A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
OR (B)
AN OPINION OF
COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS
NOT REQUIRED UNDER
SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE
PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES."
The legend set forth above
shall be removed and the Company
shall issue a certificate without such legend to the
holder of any Security upon
which it is stamped, if,
unless otherwise required by
applicable state securities laws, (a) such Security
is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise
may be sold pursuant to Rule 144 or Regulation S without
any restriction
as to the number
of securities as
of a particular
date that can then be
immediately sold,
or (b) such holder provides the
Company with an opinion of counsel, in
form, substance
and scope customary for opinions of counsel in comparable
transactions, to the effect that a public
sale or transfer of such Security may be made without
registration under
the 1933 Act, which
opinion shall be accepted by
the Company so that
the sale or transfer is effected. The Buyer
agrees to sell all Securities, including those represented by
a certificate(s) from which the legend has been removed, in
compliance with applicable prospectus delivery requirements, if
any. In the event that
the Company does not accept the opinion of
counsel provided by the
Buyer with
respect to the transfer of Securities pursuant
to an exemption from registration, such as
Rule 144 or Regulation S, within 2 business days, it will be
considered an Event of Default under the Note.
h. Authorization;
Enforcement. This Agreement has
been duly and
validly authorized. This Agreement has been duly
executed and delivered on behalf of the
Buyer, and this Agreement constitutes
a valid and binding agreement of the Buyer enforceable in
accordance with its
terms.
i. Residency.
The Buyer is a
resident of the jurisdiction set forth immediately below
the Buyer's name on the
signature pages hereto.
3. Representations
and Warranties of the Company.
The Company represents
and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its subsidiaries, if
any, is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
is incorporated, with full
power and authority (corporate and other) to
own, lease,
use and operate its properties and to
carryon its business as and
where now owned, leased,
used, operated and conducted.
b. Authorization;
Enforcement. (i) The Company has all
requisite corporate power and
authority to enter into and perform this Agreement, the Note and
to consummate the
transactions contemplated
hereby and thereby and
to issue the
Securities, in
accordance with the
terms hereof and thereof, (ii)
the execution and delivery of this
Agreement, the Note by
the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the
issuance of the Note and the
issuance and
reservation for issuance
of the Conversion Shares
issuable upon conversion or exercise thereof) have been duly authorized by
the Company's
Board of Directors and
no further consent
or authorization of the
Company, its Board of
Directors, or its
shareholders is required, (iii)
this Agreement has been
duly executed
and delivered by the
Company by its authorized
representative, and such
authorized representative is the
true and official representative with authority to sign this Agreement and
the other documents
executed in connection
herewith and
bind the Company accordingly, and (iv) this Agreement constitutes, and
upon execution and
delivery by the Company of the
Note, each of such instruments will constitute, a legal, valid
and binding obligation
of the Company enforceable against the Company in
accordance with its
terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and
reserved for issuance and, upon
conversion of the Note
in accordance with its
respective terms, will be validly
issued, fully paid and non-assessable, and free
from all taxes, liens,
claims and
encumbrances with respect to the issue thereof and shall not be
subject to preemptive
rights or other similar
rights of shareholders of the
Company and will not impose personal liability upon the
holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges
the potentially dilutive
effect to the Common
Stock upon the issuance
of the Conversion Shares upon conversion of
the Note. The Company
further acknowledges
that its obligation to issue Conversion Shares upon conversion of the
Note in accordance with this Agreement, the Note is
absolute and unconditional regardless of the
dilutive effect
that such issuance may
have on the ownership interests of
other shareholders of the
Company.
e. No
Conflicts. The execution, delivery and
performance of
this Agreement,
the Note by the Company and
the consummation by the Company
of the
transactions
contemplated hereby and thereby (including, without limitation, the
issuance and
reservation for issuance
of the Conversion Shares)
will not (i) conflict with or result in
a violation of any provision of the Certificate of Incorporation or By-laws, or (ii)
violate or
conflict with,
or result in
a breach of any provision of,
or constitute a default (or an event
which with notice or lapse of time or both could become a
default) under,
or give to
others any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent,
patent license
or instrument to
which the Company or any
of its Subsidiaries is
a party, or (iii) result in
a violation of
any law, rule,
regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the
Company or its
securities are subject)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the
Company or any of its
Subsidiaries is bound or affected (except for such
conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would not, individually or in
the aggregate, have a
Material Adverse Effect). All consents, authorizations, orders, filings and registrations which the Company is
required to obtain
pursuant to the
preceding sentence have
been obtained
or effected on or
prior to the date
hereof. The Company
is not in violation
of the listing requirements of the OTC Markets Exchange (the "OTC
MARKETS") and does not
reasonably anticipate that the Common Stock will be delisted by the OTC MARKETS in the
foreseeable future, nor are the Company's
securities "chilled"
by FINRA. The Company
and its Subsidiaries are
unaware of any
facts or circumstances which might give rise to any
of the foregoing.
f. Absence
of Litigation. Except as disclosed in the
Company’s public
filings, there is no action, suit, claim, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory
organization or body pending
or, to the knowledge of the Company or any
of its subsidiaries,
threatened against or affecting the Company or
any of its subsidiaries, or their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(t)
contains a complete
list and summary description of
any pending or, to the
knowledge of
the Company, threatened proceeding against or affecting the Company
or any of its
subsidiaries, without regard to whether it
would have a
material adverse effect. The Company and its
subsidiaries are unaware
of any facts or circumstances which might give rise
to any of the foregoing.
g. Acknowledgment
Regarding Buyer' Purchase of Securities.
The Company acknowledges
and agrees that the Buyer is
acting solely
in the capacity of arm’s length
purchasers with respect to this Agreement and the
transactions contemplated
hereby. The Company further acknowledges that the Buyer is
not acting as
a financial advisor or fiduciary of the
Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated hereby and any
statement made by the Buyer or any of its
respective representatives or agents in connection
with this Agreement and
the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer' purchase
of the Securities. The Company further represents to the Buyer
that the Company’s decision to enter into
this Agreement has been based solely on the independent evaluation
of the Company
and its
representatives.
h. No
Integrated Offering. Neither the Company, nor
any of its affiliates, nor any
person acting on its or their behalf, has directly
or indirectly made any offers or sales in
any security
or solicited any
offers to buy any security under
circumstances that would require registration under the 1933 Act of
the issuance of the Securities to the Buyer. The issuance
of the Securities
to the Buyer will not be integrated
with any other issuance of the Company's
securities (past,
current or future) for purposes
of any shareholder approval provisions applicable to the
Company or its securities.
i. Title
to Property. The Company and
its subsidiaries
have good and marketable title in fee
simple to all real property and good and
marketable title to
all personal property
owned by them which is material to the business
of the Company and
its subsidiaries, in
each case free and clear of all liens, encumbrances
and defects except such as are
described in Schedule 3(i) or such as
would not have a material adverse effect. Any real property and facilities held
under lease by the Company and its
subsidiaries are held by them under valid,
subsisting and enforceable leases
with such exceptions as would not have a material adverse
effect.
j. Bad
Actor. No officer or director of the Company would
be disqualified under Rule
506( d) of the Securities Act as amended on the basis
of being a "bad actor"
as that term is established in the
September 19, 2013 Small Entity
Compliance Guide published by the
Securities and Exchange Commission.
k. Breach
of Representations and Warranties by the Company. If
the Company breaches any of the
representations or warranties set forth in this
Section 3, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will
be considered an Event
of default
under the Note.
a. Expenses.
At the Closing, the
Company shall
reimburse Buyer for expenses incurred
by them in connection with the negotiation, preparation,
execution, delivery and performance of this
Agreement and
the other agreements to be
executed in connection herewith ("Documents"), including, without
limitation, reasonable attorneys' and consultants' fees and
expenses, transfer agent fees, fees for stock
quotation services, fees
relating to any
amendments or modifications of the
Documents or any consents or waivers of provisions in the
Documents, fees for the preparation of opinions of counsel, escrow fees,
and costs of
restructuring the transactions
contemplated by the Documents. When possible, the Company must pay
these fees directly,
otherwise the Company must make
immediate payment for
reimbursement to the Buyer for all
fees and expenses immediately upon written notice by the Buyer or
the submission
of an
invoice by the
Buyer.
b. Listing.
The Company shall promptly secure the
listing of the Conversion Shares upon each national
securities exchange or automated quotation system, if
any, upon which shares of
Common Stock are then listed (subject to official
notice of issuance) and, so long
as the Buyer owns any of the Securities, shall
maintain, so
long as any other shares of Common Stock shall
be so listed,
such listing of all
Conversion Shares from time to time issuable upon
conversion of
the Note.
The Company will obtain and, so
long as the
Buyer owns any of the Securities, maintain the listing and
trading of its Common
Stock on the OTC MARKETS or
any equivalent replacement exchange, the Nasdaq
National Market ("Nasdaq"), the Nasdaq
SmallCap Market ("Nasdaq SmallCap")
or the New York Stock
Exchange ("NYSE"), and will comply in all respects with the
Company's reporting, filing and other obligations under the
bylaws or rules of the Financial Industry Regulatory Authority
("FINRA") and such exchanges, as
applicable. The Company
shall promptly provide to the
Buyer copies of any notices it receives from the OTC MARKETS
and any other exchanges or quotation
systems on which the Common Stock
is then listed regarding the continued eligibility of
the Common Stock for listing on
such exchanges and quotation systems.
c. Corporate
Existence. So long as the Buyer
beneficially owns any Note, the Company shall maintain its
corporate existence and shall not sell all or
substantially all of
the Company's assets,
except in the
event of a merger or
consolidation or sale
of all or substantially all of the Company' s
assets, where the surviving
or successor entity in such transaction (i) assumes the Company's
obligations hereunder
and under the agreements and
instruments entered
into in connection herewith and
(ii) is a publicly
traded corporation
whose Common Stock
is listed for trading on the OTC MARKETS, Nasdaq, Nasdaq Small Cap
or NYSE.
d. No
Integration. The Company shall not make any offers or sales of any security
(other than the Securities)
under circumstances
that would require
registration of
the Securities being offered
or sold hereunder under the 1933 Act or cause
the offering of the
Securities to be integrated with any
other offering of
securities by the
Company for the purpose of any stockholder approval provision applicable to the Company or its securities.
e. Breach
of Covenants. If
the Company breaches any of the
covenants set forth in
this Section
4, and in addition to any
other remedies available
to the Buyer
pursuant to this
Agreement, it will be considered an event of default
under the Note.
5.
Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement
shall be governed
by and construed in accordance with the laws of the
State of Nevada without
regard to principles
of conflicts of laws. Any
action brought by either party against the
other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New
York or in the federal courts located in the
state and county of New
York. The parties to this Agreement hereby irrevocably waive any objection to
jurisdiction and venue
of any action instituted
hereunder and shall
not assert any
defense based on lack of jurisdiction or venue or based
upon forum non conveniens.
The Company and
Buyer waive trial
by jury. The prevailing
party shall be 'entitled to
recover from the
other party its
reasonable attorney's
fees and costs. In the event
that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of
law, then such provision shall be
deemed inoperative to the extent that it
may conflict therewith and
shall be deemed modified to
conform with such
statute or rule of law, Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other
provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being
served in any
suit, action or proceeding in connection with this Agreement
or any other Transaction
Document by mailing copy thereof via
registered or certified
mail or overnight
delivery (with evidence
of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute
good and sufficient service of
process and notice thereof.
Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by
law.
b. shall
be deemed to limit in any way any right to serve process
in any other
manner permitted by
law.
c, Counterparts;
Signatures by
Facsimile. This Agreement
may be executed in
one or more
counterparts, each of which
shall be deemed an original but
all of which shall constitute
one and the same
agreement and shall
become effective when counterparts have been
signed by each party and delivered to the other party. This
Agreement, once executed by a party, may
be delivered to
the other party hereto by facsimile
transmission of a copy of this Agreement bearing the
signature of the
party so delivering
this Agreement.
d. Headings.
The headings of this
Agreement are for convenience of
reference only and shall not form part
of, or affect the interpretation of,
this Agreement.
e. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the
extent that it may
conflict therewith and shall be deemed
modified to conform with such statute or
rule of law.
Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof.
f. Entire
Agreement: Amendments. This Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the
matters covered herein
and therein and, except as specifically set forth herein or therein,
neither the Company nor the Buyer
makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an
instrument in writing signed by the majority in interest of the
Buyer.
g. Notices.
All notices,
demands, requests, consents, approvals, and other
communications required
or permitted hereunder shall be in writing and,
unless otherwise specified
herein, shall
be (i)
personally served,
(ii) deposited in
the mail, registered or
certified, return receipt requested, postage
prepaid, (iii)
delivered by reputable
air courier service with
charges prepaid, (iv)
via electronic mail or (v) transmitted by hand
delivery, telegram, or
facsimile, addressed as set forth below
or to such other address as such party shall
have specified most
recently by written
notice. Any notice or
other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile,
with accurate confirmation generated by
the transmitting
facsimile machine, at
the address or number designated below (if delivered on
a business day during normal business hours
where such notice is to be received) or
delivery via electronic mail, or the first
business day following such delivery (if delivered other
than on a business day during
normal business hours where such notice is to
be received) or (b) on the second business day following the date of
mailing by express courier service, fully
prepaid, addressed to such address, or upon
actual receipt of such
mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company, to:
Guided Therapeutics, Inc.
5835 Peachtree Comers East, Suite B
Norcross,
GA 30092
Attn: Gene S. Cartwright,
CEO
If to the
Buyer:
EAGLE
EQUITIES, LLC
390 Whalley
Ave.
New Haven, CT
06511
Attn:
Yakov Borenstein
Each
party shall provide notice to the
other party of any
change in address.
h. Successors
and Assigns.
This Agreement shall be binding upon
and inure to the
benefit of the parties and their
successors and assigns. Neither
the Company nor the Buyer shall
assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other.
Notwithstanding the foregoing, the
Buyer may assign its rights hereunder to any person
that purchases Securities in a private transaction from
the Buyer or to any of
its "affiliates," as that
term is defined under the 1934 Act, without the consent of the
Company.
i. Third
Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto
and their respective permitted
successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced
by, any other person.
j. Survival.
The representations and warranties of the Company and
the agreements and covenants set forth in this Agreement
shall survive the closing hereunder notwithstanding any
due diligence
investigation conducted by or on
behalf of the Buyer. The
Company agrees to
indemnify and hold harmless the Buyer and all their
officers, directors,
employees and agents for
Joss or damage arising as a result of or
related to any breach or alleged breach by the Company of any of
its representations, warranties and covenants set forth in this
Agreement or any of
its covenants and obligations
under this Agreement, including advancement
of expenses as they are incurred.
k. Further
Assurances. Each party
shall do and perform, or cause to be done and
performed, all such further acts and
things, and shall execute and
deliver all such other agreements, certificates,
instruments and documents, as
the other party
may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
I. No
Strict Construction. The language
used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction will be
applied against any party.
m. Remedies.
The Company acknowledges
that breach by it of its obligations hereunder
will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges
that the remedy at law for a breach of
its obligations under this Agreement will be inadequate and
agrees, in the event of a
breach or threatened breach by the Company of the
provisions of this Agreement,
that the Buyer shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to
the penalties assessable herein, to an injunction or
injunctions restraining,
preventing or curing any
breach of this Agreement and to enforce specifically the terms and provisions hereof,
without the necessity of showing
economic loss and without any bond or other security
being required.
[Signature page to follow]
IN WITNESS WHEREOF, the
undersigned Buyer and the Company
have caused this Agreement to be duly executed as of the date
first above written.
GUIDED THERAPEUTICS, Inc.
By:
/s/ Gene
S.
Cartwright
Gene S. Cartwright,
CEO
EAGLE EQUITIES, LLC
By:
/s/
Yakov
Borenstein
Name: Yakov
Borenstein Title: Manager
AGGREGATE SUBSCRIPTION AMOUNT:
|
Aggregate Principal Amount
of the Notes:
|
$57,750
|
Aggregate Purchase Price:
Note 1: $57,750 less $2,500.00 in legal fees,
less $5,000
in brokerage
fees to Moody Capital
Solutions and less $5,250 in
OID.
EXHIBIT A
NOTE 1-$57,750
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE
AGREEMENT (the
"Agreement"), dated as of May 15,
2019, by and
between Guided
Therapeutics, Inc., a Delaware corporation, with headquarters located
at 5835 Peachtree Comers East, Suite B, Norcross, GA 30092, (the "Company")
and ADAR ALEF, LLC, a New York limited liability company, with
its address at
38 Olympia Lane,
Monsey NY 10952 (the "Buyer").
WHEREAS:
A. The
Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the rules and regulations as promulgated
by the United States Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended (the "1933 Act");
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the
terms and conditions
set forth in this
Agreement an 8% convertible note of the Company, in the form
attached hereto as Exhibit A in
the aggregate principal amount of $57,750.00 (together with any
note(s) issued in replacement
thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the
terms thereof, the "Note"),
convertible into shares of common stock, of the
Company (the "Common Stock"), upon the
terms and subject to the limitations and conditions set forth in
such Note. The Note shall contain an OID of
$5,250.00 such that the purchase price of the Note shall
be $52,500.00.
C. The
Buyer wishes to purchase, upon the
terms and conditions stated in this
Agreement, such principal amount of
Note as is set forth
immediately below its name on
the signature pages hereto; and
NOW
THEREFORE,
the Company and
the Buyer severally (and not jointly) hereby agree as
follows:
1.
Purchase and Sale of Note.
a. Purchase
of Note. On each
of the Closing Dates (as defined below), the
Company shall issue and sell to the Buyer and the Buyer
agrees to purchase from
the Company such
principal amount of Note as is set forth immediately below
the Buyer's name on the signature pages hereto.
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the
purchase price for
the Note to be
issued and sold to it at the Closing (as defined below) (the "Purchase
Price") by wire
transfer of immediately
available funds to the Company,
in accordance
with the Company's
written wiring instructions,
against delivery of the Note in the principal amount equal to
the Purchase
Price as is set forth immediately
below the Buyer's name on the signature pages hereto, and (ii) the
Company shall deliver such duly executed Note on
behalf of the
Company, to the Buyer, against
delivery of such
Purchase Price.
Company Initials
c. Closing
Date. The date and time of
the first issuance and sale of the
Note pursuant to this Agreement
(the "Closing Date") shall
be on or about
May 15, 2019,
or such other mutually agreed upon time. The
closing of the transactions contemplated by this Agreement (the "Closing")
shall occur on the
Closing Date at such
location as may
be agreed to by the parties.
2. Buyer's
Representations and Warranties. The
Buyer represents
and warrants to the Company that:
a. Investment
Purpose. As of the date hereof,
the Buyer is purchasing the Note and the shares
of Common Stock issuable
upon conversion
of or otherwise pursuant to
the Note, such shares of Common Stock being
collectively referred to
herein as the "Conversion
Shares" and, collectively
with the
Note, the "Securities") for
its own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales registered or exempted
from registration under the 1933 Act; provided,
however, that by making the representations herein, the
Buyer does not agree to hold
any of the Securities for any
minimum or other specific term and reserves the right to dispose
of the Securities
at any time in
accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an "accredited investor" as
that term is defined
in Rule 501 (a) of
Regulation D (an
"Accredited Investor").
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in
reliance upon specific
exemptions from the
registration requirements of United States federal and state
securities laws
and that the Company is relying
upon the truth and
accuracy of, and the
Buyer' s
compliance with,
the representations, warranties,
agreements, acknowledgments and understandings of the
Buyer set forth herein in order to
determine the availability of such exemptions and the
eligibility of the
Buyer to acquire the
Securities.
d. Information.
The Buyer and
its advisors, if
any, have been, and
for so long
as the Note remain outstanding will continue to be, furnished with all materials relating to the business,
finances and operations of the
Company and materials
relating to the offer and
sale of the Securities which have been requested by
the Buyer or its advisors. The Buyer and its advisors, if any, have
been, and for so
long as the Note remain outstanding will continue to be,
afforded the opportunity
to ask questions of the Company.
Notwithstanding the foregoing, the
Company has not disclosed
to the Buyer any
material nonpublic information and will not
disclose such
information unless
such information is disclosed to the public
prior to or promptly following
such disclosure to the
Buyer. Neither such
inquiries nor any other due
diligence investigation conducted by Buyer or any of its
advisors or representatives shall modifY,
amend or affect Buyer's right to rely on the
Company's representations and warranties contained in Section 3 below. The
Buyer understands that
its investment in the
Securities involves
a significant degree of risk. The Buyer is
not aware of any
facts that may constitute a breach of any of the Company's representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal
or state agency or
any other government
or governmental agency has
passed upon or
made any recommendation or
endorsement of
the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale
or resale of the Securities has
not been and is not being registered under the 1933 Act or any
applicable state
securities laws, and the
Securities may not be transferred unless (a) the
Securities are sold pursuant
to an effective
registration statement under the 1933 Act,
(b) the Buyer shall have delivered to
the Company, at the cost
of the Buyer, an
opinion of counsel that shall be in
form, substance
and scope customary for
opinions of counsel
in comparable transactions to the effect that
the Securities to
be sold
or transferred may be sold or transferred
pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c)
the Securities are sold or transferred to an "affiliate" (as defined in Rule 144 promulgated under the
1933 Act (or a successor rule) ("Rule 144") of the Buyer
who agrees to sell or
otherwise transfer the
Securities only in accordance with this Section 2(f) and who is
an Accredited
Investor, (d)
the Securities are sold pursuant to
Rule 144, or
(e) the Securities are sold pursuant to Regulation S under the 1933 Act
(or a successor
rule) ("Regulation S"), and
the Buyer shall
have delivered to the
Company, at the cost of the
Buyer, an opinion of counsel that shall be in
form, substance
and scope customary for
opinions of counsel in corporate transactions,
which opinion shall
be accepted by
the Company; (ii)
any sale of such Securities made in reliance on Rule 144 may be
made only in accordance with the terms of said Rule and
further, if said
Rule is not applicable, any re-sale
of such Securities under circumstances in which the
seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may
require compliance with some
other exemption under the
1933 Act or the rules and regulations of the SEC
thereunder; and (iii)
neither the Company nor
any other person is under any obligation to register
such Securities under the 1933 Act or any state
securities laws
or to comply with the terms and conditions
of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else
contained herein to the
contrary, the Securities
may be pledged as collateral in
connection with a
bona fide margin account or other lending arrangement.
g. Legends.
The Buyer understands that
the Note and,
until such time as
the Conversion Shares have been
registered under the 1933 Act may be sold pursuant
to Rule 144 or Regulation S
without any restriction as to the
number of securities as of
a particular date that can then
be immediately sold, the Conversion Shares may bear a restrictive
legend in substantially the following form (and a stop-transfer order
may be placed against transfer of the certificates for
such Securities):
"NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES
REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE
OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH
COUNSEL SHALL
BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
The legend set forth
above shall be removed and the Company shall issue a
certificate without such
legend to the holder of any Security
upon which it is stamped, if,
unless otherwise required by applicable state securities laws, (a)
such Security is
registered for sale under an effective
registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule
144 or Regulation S without any restriction
as to the number of securities as of a
particular date that can then be immediately sold, or
(b) such holder provides the Company with
an opinion of
counsel, in
form, substance
and scope customary
for opinions of counsel in
comparable transactions, to the effect that a
public sale or transfer of such Security
may be made without registration under the 1933 Act, which
opinion shall
be accepted by
the Company so that the sale or
transfer is effected.
The Buyer agrees to
sell all Securities, including those represented by a certificate(s)
from which the legend
has been removed, in compliance with
applicable prospectus delivery requirements, if any. In the event
that the Company
does not accept the
opinion of counsel provided by the Buyer with respect to the
transfer of Securities pursuant to an exemption
from registration,
such as Rule
144 or Regulation S,
within 2 business days, it will
be considered an Event of Default under the Note.
h. Authorization;
Enforcement. This
Agreement has been duly and validly authorized.
This Agreement has been duly executed and delivered on behalf of
the Buyer, and this Agreement constitutes a
valid and binding
agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of
the jurisdiction
set forth immediately
below the Buyer's name
on the signature pages hereto.
3. Representations
and Warranties of the Company. The
Company represents and warrants
to the Buyer
that:
a. Organization
and Qualification. The Company and each
of its subsidiaries,
if any,
is a corporation duly organized, validly
existing and
in good standing
under the laws
of the jurisdiction in which it is
incorporated,
with full power and
authority (corporate and
other) to own,
lease, use
and operate its properties
and to carry on
its business as and where now
owned, leased,
used, operated and
conducted.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and authority
to enter into
and perform this Agreement, the Note and to
consummate the transactions contemplated hereby and thereby and to
issue the Securities, in accordance with the terms hereof and
thereof, (ii)
the execution and delivery of
this Agreement,
the Note by
the Company and the consummation by it of the
transactions contemplated hereby and thereby
(including without limitation, the issuance
of the Note and the issuance and reservation for issuance of
the Conversion Shares
issuable upon conversion or exercise
thereof) have been duly authorized by
the Company's Board of
Directors and
no further consent or authorization of the Company, its Board of
Directors, or its
shareholders is required, (iii)
this Agreement has
been duly executed and delivered by the Company by
its authorized representative, and such authorized representative is the true and
official representative with authority to sign this
Agreement and the other documents executed in connection herewith and bind the Company
accordingly, and (iv) this Agreement
constitutes,
and upon execution and
delivery by the Company
of the Note, each of
such instruments
will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in
accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and,
upon conversion of the Note in
accordance with its respective terms, will be validly issued,
fully paid and non-assessable,
and free from
all taxes, liens,
claims and encumbrances
with respect to the issue thereof
and shall not be subject to
preemptive rights or other similar rights of shareholders of the Company and will not impose personal
liability upon the holder thereof.
d. Acknowledgment
of Dilution. The Company
understands and acknowledges the
potentially dilutive effect to the Common Stock upon the issuance of the
Conversion Shares upon conversion of
the Note. The Company
further acknowledges that its
obligation to issue Conversion Shares
upon conversion of the Note in accordance with this
Agreement, the Note is absolute and unconditional regardless
of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the Company.
e. No
Conflicts. The execution, delivery and performance of
this Agreement, the Note by the Company and
the consummation by the Company of the
transactions contemplated hereby and thereby
(including, without limitation, the issuance
and reservation for issuance
of the Conversion
Shares) will not (i) conflict
with or result in a violation of any
provision of the Certificate of
Incorporation or By-laws, or (li)
violate or conflict with, or
result in a breach of any
provision of, or constitute a default (or an event
which with notice or lapse of
time or both could become a
default) under, or give
to others any rights
of termination, amendment, acceleration
or cancellation of,
any agreement, indenture,
patent, patent license or instrument
to which the Company or
any of its Subsidiaries is a party, or
(iii) result in
a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are
subject) applicable to the
Company or any
of its Subsidiaries or by which any property or asset of
the Company or any of its
Subsidiaries is bound
or affected (except for
such conflicts,
defaults,
terminations,
amendments, accelerations, cancellations and violations as would not, individually or in
the aggregate, have a Material Adverse Effect). All
consents, authorizations, orders,
filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have
been obtained
or effected on or
prior to the date hereof. The Company is not in violation of the listing
requirements of the OTC Markets Exchange (the "OTC MARKETS")
and does not reasonably anticipate that the Common Stock will be
delisted by the OTC
MARKETS in the foreseeable future, nor
are the Company's
securities "chilled" by
FINRA. The Company and
its Subsidiaries are unaware of any
facts or circumstances which might give rise to
any of the foregoing.
f. Absence
of Litigation. Except
as disclosed in the
Company's public filings, there is no action,
suit, claim, proceeding, inquiry or investigation before
or by any court,
public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its subsidiaries,
threatened against or
affecting the Company or any
of its subsidiaries,
or their officers or directors in their capacity as such,
that could have a material
adverse effect. Schedule 3(f) contains a complete
list and summary description of any
pending or, to the knowledge of the
Company, threatened
proceeding against or affecting the Company or any
of its subsidiaries, without regard to whether it would
have a material adverse effect. The
Company and its subsidiaries are unaware of any facts or
circumstances which might give
rise to any of the
foregoing.
g. Acknowledgment
Regarding Buyer' Purchase of Securities. The Company acknowledges and agrees
that the Buyer is acting solely in the capacity of ann's length
purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company
further acknowledges that the Buyer is not acting
as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement
and the transactions contemplated hereby
and any statement made
by the Buyer or any of its respective
representatives or agents
in connection with this Agreement and
the transactions contemplated hereby is not advice
or a recommendation
and is merely
incidental to the Buyer' purchase of the Securities. The
Company further represents to the Buyer that the Company's
decision to enter
into this
Agreement has been
based solely
on the independent evaluation of the
Company and its
representatives.
h. No
Integrated Offering.
Neither the Company, nor any of
its affiliates, nor any
person acting on its
or their behalf,
has directly or
indirectly made any offers or
sales
in any security or solicited any
offers to buy any security under circumstances that would
require registration under the
1933 Act of the issuance
of the Securities to the Buyer.
The issuance of the
Securities to the Buyer will not be integrated with any
other issuance
of the Company's securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the
Company or its
securities.
i. Title
to Property. The Company
and its subsidiaries have good
and marketable title in fee simple to
all real property and
good and marketable title to all personal property owned
by them which
is material to the business ofthe Company and
its subsidiaries,
in each case free and clear of all
liens, encumbrances
and defects except such
as are described in Schedule 3(i)
or such as would
not have a material adverse effect. Any
real property and facilities held under
lease by the Company and
its subsidiaries are
held by them under valid, subsisting
and enforceable leases
with such exceptions
as would not have a material
adverse effect.
j. Bad
Actor. No officer or director
of the Company would be
disqualified under Rule
506( d) of
the Securities Act as
amended on the basis of being a
"bad actor" as that term
is
established in the
September 19, 2013 Small
Entity Compliance Guide published by the Securities and
Exchange Commission.
k. Breach
of Representations and
Warranties by the Company. If
the Company breaches any of the representations or warranties set forth in this Section 3, and
in addition to any
other remedies
available to
the Buyer pursuant to this Agreement, it
will be considered
an Event of default under the Note.
4. COVENANTS.
a. Expenses.
At the Closing, the
Company shall reimburse Buyer for
expenses incurred by them in connection with the
negotiation, preparation, execution, delivery and performance
of this Agreement and the other
agreements to be
executed in connection
herewith ("Documents"), including,
without limitation,
reasonable
attorneys' and consultants' fees
and expenses, transfer agent
fees, fees for
stock quotation services, fees
relating to any
amendments or modifications of the Documents or any
consents or waivers of provisions in the Documents, fees for the
preparation of opinions of
counsel, escrow fees,
and costs of restructuring the transactions
contemplated by the Documents. When
possible, the Company
must pay these fees directly,
otherwise the Company must
make immediate
payment for reimbursement to the
Buyer for
all fees and expenses immediately upon written notice by the
Buyer or the submission of
an invoice by the
Buyer.
b. Listing.
The Company shall promptly secure the
listing of the Conversion
Shares upon each
national securities exchange
or automated
quotation system, if
any, upon which
shares of Common Stock are then
listed (subject
to official notice of issuance) and,
so long as the Buyer owns any of the Securities, shall
maintain, so long
as any other
shares of Common Stock shall be so
listed, such listing of all
Conversion Shares from
time to time
issuable upon conversion
of the Note. The Company will obtain
and, so long as the Buyer owns
any of the Securities, maintain the
listing and trading of its
Common Stock
on the OTC MARKETS or
any equivalent replacement exchange, the Nasdaq
National Market ("Nasdaq"),
the Nasdaq Small Cap Market ("Nasdaq Small Cap") or
the New York Stock Exchange ("NYSE"), and
will comply in all respects
with the Company's
reporting, filing
and other obligations under the bylaws or
rules of the Financial Industry Regulatory Authority ("FINRA") and such
exchanges, as applicable. The Company shall promptly provide to the
Buyer copies of any
notices it receives from
the OTC MARKETS and
any other exchanges or quotation systems on which the Common
Stock is then listed
regarding the continued eligibility of the
Common Stock for listing on
such exchanges and
quotation systems.
c. Corporate
Existence. So long as
the Buyer beneficially owns any Note, the Company
shall maintain its corporate existence and shall not sell
all or substantially all of the
Company's assets, except in
the event of a
merger or consolidation or sale of all or
substantially all of the Company's
assets, where
the surviving
or successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the
agreements and instruments entered
into in connection herewith and (ii) is a publicly traded
corporation whose Common
Stock is listed for trading
on the OTC MARKETS, Nasdaq, Nasdaq SmallCap or
NYSE.
d. No
Integration. The Company shall not make any otters or sales of
any security (other
than the Securities) under circumstances that would require
registration of the Securities being offered or sold hereunder
under the 1933 Act or cause the offering of the
Securities to be integrated with any
other offering of securities by the Company for the purpose of any
stockholder approval provision
applicable to
the Company or its
securities.
e. Breach
of Covenants. If
the Company breaches any of
the covenants set forth in this Section 4,
and in addition to any other remedies available to the
Buyer pursuant to this Agreement,
it will be considered an event of
default under the Note.
5. Governing
Law;
Miscellaneous.
a. Governing
Law. This Agreement shall
be governed by and construed in accordance with the
laws of the State of Nevada without regard to principles of
conflicts of laws.
Any action brought by either party
against the other concerning the transactions contemplated by this
Agreement shall be brought only
in the state courts of New York or in the federal courts
located in the state and county of New York. The
parties to this Agreement hereby irrevocably waive any
objection to jurisdiction and venue of any action
instituted hereunder
and shall not assert any defense based
on lack of jurisdiction or venue or based upon forum non conveniens.
The Company and Buyer
waive trial by jury.
The prevailing party shall be entitled
to recover from the other party its reasonable attorney's fees and
costs. In the
event that any provision of this
Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under
any applicable statute
or rule of law,
then such provision shall be deemed
inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule
of law. Any such
provision which may prove invalid or unenforceable under any law shall not affect the validity or
enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and
consents to process being served in any suit,
action or proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via
registered or
certified mail or overnight delivery (with
evidence of delivery) to such party at
the address in effect for notices to
it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in
any other manner permitted by law.
b. shall
be deemed to limit in any way any right to serve
process in any other manner permitted by law.
c. Counterparts;
Signatures by Facsimile. This Agreement may be
executed in one or more counterparts, each of which
shall be deemed an original but all of which shall
constitute one and the same agreement and shall become effective
when counterparts have been
signed by each
party and delivered to the other
party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a
copy of this Agreement bearing the
signature of the party so delivering this
Agreement.
d. Headings.
The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the
interpretation of, this
Agreement.
e. Severability.
In the event that any
provision of this Agreement is
invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may
conflict therewith
and shall be deemed modified to
conform with such statute or rule of law. Any provision
hereof which may prove invalid
or unenforceable
under any law shall not affect the
validity or enforceability of any other provision
hereof.
f. Entire
Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding
of the parties
with respect to the
matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor
the Buyer makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument
in writing signed by the majority in interest of the
Buyer.
g. Notices.
All notices, demands, requests, consents,
approvals, and other communications required or
permitted hereunder shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the
mail, registered
or certified, return
receipt requested, postage prepaid, (iii) delivered
by reputable
air courier service with charges
prepaid, (iv) via electronic mail or (v) transmitted by hand
delivery, telegram, or facsimile, addressed as set forth below or
to such other address as such party shall have specified
most recently
by written notice. Any notice or other
communication required
or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting
facsimile machine, at the address or number designated below (if delivered on a business day
during normal business hours where such notice is to
be received) or delivery via electronic mail,
or the first business day
following such delivery (if delivered
other than on a business day during normal business hours where
such notice is
to be received) or (b) on the second
business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses
for such communications shall be:
If
to the Company, to:
Guided Therapeutics, Inc.
5835 Peachtree Corners East,
Suite B
Norcross, GA 30092
Attn:
Gene S. Cartwright, CEO
If
to the Buyer:
ADARALEF,
LLC
38
Olympia Lane,
Monsey,
NY 10952
Attn: Aryeh Goldstein, Manager
Each party shall provide notice to the
other party of any change in
address.
h. Successors
and Assigns.
This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and
assigns. Neither
the Company nor
the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent
of the other. Notwithstanding the foregoing, the
Buyer may assign its rights hereunder to any person that purchases
Securities in a
private transaction from the
Buyer or to any of its "affiliates," as that term is
defined under the
1934 Act, without
the consent of
the Company.
i. Third
Party Beneficiaries. This
Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other
person.
j. Survival.
The representations and
warranties of the Company and
the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer.
The Company agrees to indemnify and hold harmless the
Buyer and all their officers, directors, employees and
agents for loss or
damage arising as a result of
or related to
any breach or alleged breach by
the Company of any of its representations, warranties and
covenants set
forth in this Agreement or
any of its covenants and obligations under this
Agreement, including advancement of expenses as they are
incurred.
k. Further
Assurances. Each party
shall do and perform, or cause to be done and
performed, all
such further acts and
things, and shall execute
and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order
to carry out
the intent and accomplish the
purposes of this Agreement and the consummation of the
transactions contemplated hereby.
1. No
Strict Construction.
The language used in this Agreement
will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of
strict construction will be applied against any party.
m. Remedies.
The Company acknowledges that a breach
by it of its obligations hereunder will cause
irreparable harm to the Buyer by vitiating the intent and
purpose of the transaction contemplated hereby.
Accordingly, the Company
acknowledges that
the remedy at law for a breach of its
obligations under this Agreement will
be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this
Agreement, that the Buyer shall
be entitled, in addition to all other
available remedies
at law or in equity,
and in addition to the
penalties assessable herein, to an injunction
or injunctions restraining, preventing or
curing any breach of this Agreement and to enforce specifically
the terms and
provisions hereof,
without the necessity of showing economic loss and without any bond
or other security being required.
[signature page to follow]
IN WITNESS WHEREOF, the
undersigned Buyer and the
Company have caused
this Agreement to be
duly executed as of the
date first above
written.
GUIDED THERAPEUTICS, INC.
By: /s/ Gene S.
Cartwright
Gene S. Cartwright,
CEO
ADAR ALEF, LLC
By: /s/ Aryeh
Golstein
Name:
Aryeh Golstein Title: Manager
AGGREGATE
SUBSCRIPTION AMOUNT:
|
Aggregate Principal
Amount of the
Notes:
|
$57,750
|
Aggregate Purchase Price:
Note 1:
$57,750 less $2,500.00
in legal fees, less
$5,000 in brokerage fees to
Moody Capital Solutions
and less $5,250
in OID.
EXHIBIT
A
NOTE
1-$57,750
Exhibit 10.35
UNSECURED
PROMISSORY NOTE (the "Note")
FROM:
Guided Therapeutics, Inc. (the "Issuer")
TO:
REV ROYALTY INCOME AND GROWTH TRUST (the "Holder")
AMOUNT:
65,500 CAD $ (the " Principal')
LOAN
ORIGINATION FEE: 8% of Above Total DATE: 1 July, 2019
1. Indebtedness.
For value received, the Issuer promises to pay to, or to the order of, the Holder
an amount equal to the Principal in lawfu l money of Canada in
immediately available funds at the Holder's Address (or as the
Holder may otherwise designate in writing from time to time) in the
manner provided in this Note, together with interest and other
monies that the Issuer may owe from time to time under this
Note.
2. Interest.
The Issuer shall pay the Holder interest ("Interest") on the amount
of the Principal outstanding from time to time from the Issue Date
at the rate of 16% per annum, calculated and paid monthly in
arrears on the last business day of each successive month starting
with the first payment of interest on the last business day of the
calendar month following the date hereof (the "First Interest
Payment Date"), with interest on overdue Interest at the same rate.
The first Interest payment will consist of accrued interest from
the Issue Date until the end of the calendar month in which the
Issue Date occurs. Following maturity, demand, default, or judgment
and until actual payment in full, Interest shall be paid at the
rate of 19% per annum, calculated and payable on the first day of
each calendar month.
3. Term.
The initial term of this Note,will terminate on September 1 1,2019
(the "Term").
4. Prepayment.
The Issuer may prepay the Principal and any accrued and unpaid
Interest thereon in whole at one time or in part from time to time
and prior to the Maturity Date, with the penalty payment of
three-months of Interest.
5. Application
of Payments. The Holder shall apply any amount paid in satisfaction
of any indebtedness under this Note first against any accrued and
unpaid Interest and second against the outstanding
Principal.
6. Definitions.
In addition to the terms defined throughout the Note, the following
definitions apply "Business Day" means a day other than a Saturday,
a Sunday, or any other day on which the principal chartered banks
located in Toronto, Ontario are not open for business.
"Notice" means any
notice, request, direction, or other document that a party can or
must make or give under this Note.
"Person" includes
any individual, and any corporation, company, partnership,
governmental body, joint venture, association, trust, or any other
entity.
7.
Waiver -Specific Items. The Issuer waives presentment for payment,
demand, protest, Notice of any kind, and statutory days of grace in
connection with this Note. The Issuer agrees that it is not
necessary for the Holder to first bring legal action in order to
enforce payment of this Note.
8.
Representations and Warranties. The Issuer represents and warrants
to the Holder, acknowledging that the Holder is relying on these
representations and warranties, that:
(a) Existence. The Issuer is a corporation incorporated under and
existing under the laws of the State of Delaware, USA
..
(b) Power and Capacity.
The Issuer has the corporate power and
capacity, and holds all permits and other authorizations necessary,
to own, lease, and operate its properties, to incur the obligations
owing hereunder and to conduct its business, including the business
of the Issuer, as now carried on by it, and to enter into, deliver,
and perform its obligations under this Note.
(c) Due Authorization.
All necessary corporate action by the
Issuer have been taken to authorize the execution, delivery and
performance by the Issuer of this Note.
(d) Binding Obligations.
This Note constitutes a binding
obligation of the Issuer, enforceable against the Issuer in
accordance with its terms.
(e) No Breach.
None of the signature and delivery of
this Note, or the payment, observance, or performance of the
obligations owing hereunder, do or will:
(i)
conflict with or result in a breach or violation of any of the
terms of, or constitute a default under:
A any
statute or other law that applies to it;
B. the
Issuer's articles, by-laws, or unanimous shareholders
agreement;
C. any
agreement to which it is a party or by which it is bound; or
[
D. any
judgment or other order that binds it or its assets;
(ii)
result in the creation of, or require the Issuer to create, any
Encumbrance in favour of any person other than as explicitly
contemplated herein; or
(iii)
result in or permit the acceleration of the maturity of any
indebtedness or other obligation of the Issuer.
(I) Negative Pledge.
The Issuer will not enter into any
issuance of other debt without the consent of the Holder and will
only enter into the issuance of the common shares and convertible
debentures in the amounts and prices set forth in Annex A
hereto.
(g) Use of Proceeds.
The Issuer will use the proceeds of
the Note strictly in the amounts for the purposes set forth in
Annex B hereto.
(i) Reporting. The Issuer will provide written confirmation
of
(h)
Bankruptcy, Etc. No
proceedings have been taken or authorized by the Issuer or,
to
its
knowledge, by any other Person relating to the bankruptcy,
insolvency, liquidation,
dissolution, or
winding up of the Issuer.
9.
Warrants. As additional consideration, the Holder will receive
warrants to purchase one common share of the Issuer for each
warrant held in the aggregate amount of 215,000 warrants at an
exercise price of $0.25 per warrant, or alternatively, the same
price as for warrants granted to investors as part of a financing
of the Company. subject to adjustment and exercisable within 3
years from issuance (the "Initial Warrants"). In the event that the
common shares of the Issuer are not listed on the TSX Venture
Exchange pursuant to the "Transaction" on or prior to September 1 ,
2019, an additional 100,000 warrants will be issued at an exercise
price equal to the lesser of $0.25 or the price of the next
issuance of common shares of the Issuer (the "Revised Exercise
Price"). Further, the exercise price of the Initial Warrants will
adjust to the Revised Exercise Price has stated
herein.
10.
Security. The obligations of the Issuer hereunder are
unsecured.
11 .
Event of Default. Except as
expressly permitted hereunder, the occurrence of anyone or more of
the following events, after all applicable grace periods have
expired (any such event being an "Event of Default") shall
constitute a default hereunder:
(a)
If the Issuer defaults in payment of the Principal due under this
Note when due and payable;
(b)
if the Issuer defaults in payment of the interest due under this
Note when due and payable and such default continues for a period
of ten (10) Business Days;
(c)
any representation or warranty made by the Issuer in this Note or
in the Agreement shall prove to have been incorrect when made , in
any material respect;
(d)
if the Issuer ceases to carry on business;
(e)
if, without the prior written consent of the Holder, the Issuer
undergoes a change of control;
(f)
if a decree or order of a court of competent jurisdiction is
entered adjudging the Issuer a bankrupt or insolvent or approving
as properly filed a petition seeking the winding-up,
reorganization, reconstruction or arrangement of Issuer under
the
Companies' Creditors Arrangement Act
(Canada), the Bankruptcy and
Insolvency Act
(Canada), the
Winding-Up Act (Canada) or
any other bankruptcy, insolvency or analogous laws or ordering the
winding up or liquidation of its affairs, or appointing a trustee,
receiver, receiver and manager, interim receiver, custodian,
liquidator or other person with similar powers of the Issuer or any
substantial part of its assets or interest;
(g) if
the Issuer makes any assignment in bankruptcy or makes any other
assignment for the benefit of creditors, makes any proposal under
the Bankruptcy and Insolvency
Act (Canada) or any comparable law, seeks relief under the
Companies' Creditors Arrangement
Act (Canada), the Winding-Up Act (Canada) or any other
bankruptcy, insolvency or analogous law, is adjudged bankrupt,
files a petition or proposal to take advantage of any act of
insolvency, consents to or acquiesces in the appointment of a
trustee, receiver, receiver and manager, interim receiver,
custodian, sequestrate or other person with similar powers of
itself or of all or any substantial portion of its assets, or files
a petition or otherwise commences any proceeding seeking any
reorganization, arrangement, composition or readjustment under any
applicable bankruptcy, insolvency, moratorium, reorganization or
other similar law affecting creditors' rights or consents to, or
acquiesces in, the filing of such a petition; or
(h) if
proceedings are commenced for the dissolution, liquidation or
winding-up of the Issuer or for the suspension of the operations of
the Issuer unless such proceeds are being actively and diligently
contested in good faith.
12.
Acceleration. When an Event of Default occurs and is continuing,
the full unpaid balance of the Principal and all accrued and unpaid
Interest will, at the Holder's option, become immediately due and
payable upon demand.
13.
Expenses. At the Holder's request, the Issuer shall pay all
reasonable and necessary expenses that the Holder incurs (including
the Holder's reasonable legal expenses and other direct
out-of-pocket expenses) in connection with the issuance, protection
and enforcement of the Holder's rights under this Note, together
with Interest after demand in accordance with section 2 above.
Notwithstanding the foregoing, the Holder agrees that the Issuer
shall not pay any expenses incurred by the Holder in the
negotiation by the Holder or its advisers in the Note or the
subscription agreement with respect to the Note.
14.
Assignment. This Note may not be assigned by the Issuer or the
Holder without the prior written consent of the other
party.
15.
Waiver -General. No waiver of satisfaction of a condition or
non-performance of an obligation under this Note is effective
unless it is in writing and signed by the Holder. No waiver under
this section affects the exercise of any other rights under this
Note.
16.
Governing Law. The laws of Ontario and the laws of Canada
applicable in Ontario, excluding any rule or principle of conflicts
of law that may provide otherwise, govern this Note.
17.
Jurisdiction. The parties irrevocably attorn to the jurisdiction of
the courts of Ontario, which will have non-exclusive jurisdiction
over any matter arising out of this Note.
18.
Notice. To be effective, a notice (the "Notice') must be in writing
and delivered (a) personally, either to the individual designated
below for that party or to an individual having apparent authority
to accept deliveries on behalf of that individual at its address
set out below, (b) by registered mail, or (c) by electronic mail,
to, in the case of the Issuer, the address or electronic mail
address set out below, in the case of the Holder, to the Holder's
Address, or, in either case, to any other address or electronic
mail address for a party as that party from time to time designates
to the other parties in the same manner.
In the
case of the Issuer to:
Attention: Mark L.
Faupel
Chief Operating Officer
Guided
Therapeutics, Inc.
In the
case of the Holder to:
Dan
Pembleton
Accilent Capital
REV ROYALTY INCOME AND GROWTH TRUST
Any
Notice is effective (i) if personally delivered, as described
above, on the day of delivery if that day is a Business Day and it
was delivered before 5:00 p.m. local time in the place of receipt
and otherwise on the next Business Day, (ii) if sent by registered
mail, on the fourth Business Day following the day on which it is
mailed, except that if at any time between the date of mailing and
the fourth Business Day thereafter there is a disruption of postal
service then Notice must be given by means other than mail, or
(iii) if sent by electronic mail, on the Business Day following the
day of transmission.
19. Severability. The invalidity or
unenforceability of any particular provision of this Note will
not affect or limit the validity or enforceability of the
remaining provisions
20.
Further Assurances. The Issuer, at its expense and at the Holder's
request, shall sign (or cause to be signed) all further documents
or do (or cause to be done) all further acts and provide all
reasonable assurances as may reasonably be necessary or desirable
to give effect to this Note. [J
21.
Binding Effect. This Note ensures to the benefit of and binds the
parties' respective heirs, executors, administrators, and other
legal representatives, successors, and permitted
assigns.
22.
Amendment. This Note may only be amended by a written document
signed by each of the parties.
The
Issuer has executed this Note on the above-written
date.
/s/Mark
Faupel, COO
Mark
L. Faupel
COO
AGREEMENT BETWEEN SHANDONG YAOBUA MEDICAL INSTRUMENT CORPORATION
AND GUIDED THERAPEUTICS, INC.
CONFIDENTIAL,
FINAL
24 JULY 2019
This
Agreement supersedes. any and all statements, representations or
agreements other than existing Purchase Orders between Guided
Therapeutics, Inc, a Georgia, United States of American corporation
("GTI') located at 5835 Peachtree Comers East, Suite D, Norcross,
Georgia 30092 and Shan.dong Yaohua Medical Instrument Corporation,
located at No. 5 Zhuijian Street, High-Tech Development Zone, Laiwu
Shandong, Peoples Republic of China ("SMI). This agreement is dated
24 July 2019
WHEREAS
GTI had previously asserted that they had developed a platform
technology for the early detection of disease that leads to
cancer;
WHEREAS
GTI had previously asserted that their first non-invasive cancer
detection product is the LuViva® Advanced Cervical Scan device
(the "Device") and the related disposable cervical guides (the
"Disposables" and, with the Device. "LuViva"). Luviva is designed
to: GTI – LuViva (Device).
A. Determine
the true likelihood of treatable cervical disease that may lead to
cancer in women aged 16 years and over who have been screened for
cervical cancer and have an abnormal result
B. Be
used as a screening tool both in the developed and developing world
where Papanicolau test and/or the Human Papilloma Virus tests are
not widely available
WHEREAS
LuViva is currently in use in Canada, Latin America, Europe,
Turkey, Asia
and
Africa.
WHEREAS
GTI had previously asserted that they own the worldwide
manufacturing, distribution and intellectual property ("IP") rights
to Lu Viva, and
WHEREAS
GTI asserts that they have the rights to license the global
manufacturing rights, excepting the Disposable Cervical Guides in
the Republic of Turkey and final assembly rights of the Device in
Hungary, and the rights to license the distribution and sales
rights for LuViva in the People's Republic of China, Macau, Hong
Kong and Taiwan (herein after collectively referred to as the
"Jurisdictions"
WHEREAS
SMI is a medical device company in China with an established
distribution and sales capability and bas indicated a capability
and willingness to manufacture for the global market, and
distribute and sell LuViva in the Jurisdictions,
WHEREAS
SMI, in order to obtain license to the license for global
manufacturing rights and exclusive distribution and sales, of
LuViva within the Jurisdictions, previous agreed to:
A.
Make
payments in the sum of $1,000,000 to GTI in exchange for GTI
stock
B.
Establish
a schedule for the initial purchase of the LuViva product,
and
C.
Establish
a schedule for minimum sales of the product
D.
Establish
a manufacturing capability for the manufacture of LuViva and the
Disposables with the technical assistance of GTI.
E.
Apply
for and receive Chinese Food and Drug Administration (CFDA)
approval
for LuViva.
WHEREAS
BOTH PARTIES have acted in good faith, there have nonetheless been
circumstances that necessitate revisions and additions to the
original agreement.
To
date, SMI has
A.
Made
payments of $1,000,000 in which GTI has received $885,144.34 after
the payment of Chinese taxes
B.
In
2017, ordered five (5) LuViva devices and associated
Disposables.
C.
In
2018, SMI ordered parts for five additional LuViva devices for
final assembly at SMI. GTI has received a partial payment for these
parts and pursuant to the Purchase Order, will ship the parts once
all payments are received.
D.
Established
an SMI capability to manufacture the Lu Viva device, except for
assembly of the handheld and base units, and is in process of
establishing the capability to manufacture the
Disposables
E.
Apply
for and receive Chinese Food and Drug Administration (CFDA)
approval
for LuViva.
SMI
has paid in full for five devices and associated
disposables.
To
date, GTI has
A.
Delivered five (5) LuViva Devices and associated Disposables
disposables
B.
Provided all documents and data, including manufacturing transfer
plan, product production, guidance documents, product quality
standards, relevant patent certificates, fixed costs of products,
personnel data, etc. as reasonably required.
C.
Provided
technical advice and completed approximately 95% of the
Sinicization of the LuViva device
D.
Paid
for the first samples of Disposables and made specific
recommendations to SMI in order for the Disposable specifications
to be met
IT
IS HEREBY AGREED AS FOLLOWS between SMI and GTI that SMI is granted
(1) exclusive manufacturing rights, excepting the Disposable
Cervical Guides for the
Republic
of Turkey, and the final assembly rights for Hungary, and (2)
exclusive distribution and sales rights for LuViva in the
Jurisdictions, subject to the following terms and
conditions:
1. Payments by SMI for Outstanding Purchase Order:
A. SMI
shall complete the payment for the parts, per the existing Purchase
Order, for the five additional LuViva devices.
2 GTI transfer of
stock:
A. In
consideration for the $885,144.34 that GTI received, GTI shall
issue 12,147
shares
of GTI stock to SMI
B. SMI
shall provide the necessary information for the issuance of the
stock to GTI within two weeks after the signing of this
Agreement
3. 2019-2020
Orders:
2019-2020
A. SMI shall honor all existing purchase orders it has
executed to date with GTI in order to maintain Jurisdiction sales
and distribution rights_
B. If
SMI needs to order single use Cervical Guides or other parts,
assemblies or supplies directly from GTI instead of manufacturing
them in China, the prices shall be at cost, inclusive of labor,
plus ten percent (10%) markup.
C For
clinical trials, GTI agrees to supply 200 Cervical Guides at no
cost
4. Minimum
Sales:
People’s
Republic of China (Beginning first full calendar year following
CFDA approval).
Both Parties will make best efforts to help SMI achieve the targets in
the Table of
Minimum
Sales and Orders for Cervical Guide Chip Purchases. If a shortfall
in minimum Cervical Guide Chip Purchase Orders occurs, the Parties
agree to compensate by altering the royalty on chips and the markup
on Cervical Guides or other parts, assemblies or supplies ordered
from GTI.
The
second year sale includes the first year sale, the third year sale
includes the first Year
and the second year sales, the fourth year sale includes the first
year the second year and the third year sales.
Full
year following CFDA
Approval
|
Number
of Devices placed or sold per year
|
Number
of tests per day per Device
|
|
|
Resulting
Minimum Cervical Guide Chip Purchase Orders
|
|
1
|
200
|
20
|
5
|
48
|
$1824000
|
|
2
|
500
|
30
|
5
|
48
|
$8664000
|
|
3
|
1000
|
30
|
5
|
48
|
$22344000
|
|
4
|
1250
|
30
|
5
|
48
|
$39444000
|
Cost of CFDA
Approval:
SMI
shall underwrite the entire cost of securing approval of LuViva
with Chinese
FDA.
A. SMI,
shall arrange, at its sole cost, for a manufacturer in China to
build tooling to support manufacture.
B. The
price payable by GTI for each Device and each Packet of Disposable
supplied by the manufacturer for resale by GTI outside the
Territories will be no higher than the then current internal cost
to GTI for manufacturing the Device and the then current price by
GTI to its current supplier of Disposable
C. In
the event that this not possible, the Parties agree to discuss the
following options:
D. SMI
retains the right to manufacture for China, Hong Kong, Macau and
Taiwan, where SMI has distribution and sales rights.
1) SMI
elects to manufacture just the Cervical Guides which is anticipated
to be able to be at a lower price in China
a. SMI
buys the devices and Cervical Guides, or just the devices from
GTI.
d.
Other options that may be identified and available to find a
mutually satisfactory solution
E. If
SMI fails to achieve manufacturing capabilities for the Devices,
except for assembly of the hand.held and base units, and
Disposables in accordance with ISO 13485 for medical devices by 12
months after the completion of Sinicization of the product by GTI,
SMI shall no longer have any rights to manufacture, distribute or
sell LuViva
Technical Assistance for Manufacturing and Sales:
A. Both
GTI and SMI recognize the need for technical assistance (1) to set
up
Manufacturing,
(2) to establish sales protocols and marketing materials and
to
develop,
and (3) to install a Chinese language interface on the LuViva
product. To that end, both parties pledge cooperation in helping to
establish the manufacturing and sales in China.
B. GTI
will ensure that the inventor is kept knowledgeable about the GTI
and SMI cooperation. Where practicable, GTI will facilitate the
availability of the inventor for consultation and promotion of the
LuViva product within the Jurisdiction
C. SMI
shall send over its manufacturing expert to GTI at SMI's expense to
learn the manufacturing process. GTI will be responsible for all
in-country (US) expenses.
D. GTI
shall send over its technical expert within 30 days of a request or
as soon as reasonably possible from SM1 to SMI at GTI's expense to
assist with the establishment of the manufacturing and sales
protocols in China. SMI will be responsible for all in-country
(China) expenses.
E. GTI
shall provide technical support and training for product upgrades
consistent with the technical support provided to other
international distributors of LuViva.
F. GTI
shall provide the Sinicized service with regards to the LuViva
product and software. In the event of a delay in delivery of
Sinicized service, the
schedules for commercialization of the product will be adjusted
through mutual agreement of GTI and SMI, and both
parties agree to use efforts to mitigate the schedule and
commercial
impact of any delays.
G. GTI
shall ensure that the LuViva hardware and software work compatibly
with the Cervical Guide RFID chip.
l)
If the Cervical Guide chip provided by GTI is defective, GTI will
provide SMI with a replacement at no cost to SM1.
2)
lf there is a configuration change to the LuViva hardware and
software, GTI will ensure that the Cervical Guide RFID chips
delivered to SMI are compatible with the new configuration
baseline.
Protection
of the IP:
GTI
agrees to protect its sole ownership of the LuViva IP, so as to
ensure that the global manufacturing rights for Lu Viva, and the
distribution rights and sales rights for LuViva within the
Jurisdictions that GTI assigns to SMI remain legally defensible as
exclusive. GTI will coordinate its IP protection with SMI and keep
SMI apprised of any actions for IP protection within the
Jurisdictions.
A. SMI
agrees to protect GTI IP and trade secrets, so as to prevent
unauthorized disclosure or advantage going to a competitor or
competitive technology.
9. Trademark
within the Jurisdiction:
GTI agrees with the use of the Trademark of
Zhenguang (in Chinese",'') instead of LuViva with the above Jurisdictions
during the period of manufacturing, distribution and
sale.
A. For
each single-use Cervical Guide chip sold by SMI in the
Ju1isdictions, SMI shall transfer funds to the Escrow Agent at a
rate of $1.90 per chip in the amount equaling the number of chips
sold. Funds shall he transferred monthly. SMI shall be responsible
for paying any taxes and tariffs associated with the transfer of
the funds.
B .
The Parties agree to reassess these royalty amounts at the end of
the second year of commercial sales in the Jurisdictions to
determine if an adjustment to the royalty amounts, up or down, is
warranted. Any adjustments to the royalty amounts must be mutually
agreeable.
11. Commercialization:
If
within 18 months of this License's Effective Date, SMI fails to
achieve commercialization of LuViva (as defined below) in China.
SMI shall no longer have any rights to manufacture, distribute or
sell LuViva.
Commercialization
of LuViva is defined as SMI achieving all of the
following:
A. Filing
an application with the CFDA for approval of LuViva
B. Any
assembly or manufacture of the Device or Disposables that begins in
China
C. Purchase
of at least 10 Devices and associated Disposables for clinical
evaluations and regulatory use and or sales in the Jurisdictions,
according to the schedule described in Section 3
above.
12. Rights
Maintenance and Ongoing Business Operation
Coordination
The
Rights described herein must be maintained by diligent development
and commercial efforts. Both Parties agree to use their best
efforts to maximize the success of the business within the
Jurisdictions contemplated herein. Both parties agree to hold
quarterly reviews to discuss the business operations within the
Jurisdictions, address areas for improved operations and agree on
forecasts for orders.
In
order for SMI to maintain the licensing rights for the
commercialization of the LuViva technology within the Jurisdictions
beyond the third year of commercialization, the third quarter
review of each year, following year two of commercialization, shall
be used to establish commercially reasonable, and mutually agreed
to sales commitment and royalty adjustment for the following
year.
13. Breach
or Failure to Perform:
A. Under
the following circumstances, SMI shall forfeit this License and
shall no longer have any rights to manufacture, distribute or sell
LuViva in the Jurisdictions if SMI is unable to cure in a timely
manner:
1) A
material breach of any of SMI's obligations set forth in this
section
2) Failure
to achieve CFDA approval within 18 months after completion of
Sinicination of the Device by GTL To complete the CFDA approval
within 18 months, GTI is required to assist SMI in the whole
process of registration
B. In
the event of Breach or Failure to Perform
1) GTI
shall provide written notification of the breach or failure to
perform. GTI
2) SMI
shall be given a 45 days period in which. to cure the breach or
failure to perform.
3) If
the breach or failure to perform is not cured, SMI shall return to
GTI, at SMI's cost, all samples, data, hardware, software,
regulatory documents, bench and clinical test results and all other
information pertaining to LuViva in the Jurisdictions
14. Termination:
A. Termination
for Breach. If either party breaches a material provision of this
Agreement and does not cure the breach within 45 days after written
notice from the other party, the non-breaching party shall have the
right to: (i) suspend performance or payment until the breach is
cured; (ii) terminate this Agreement; or (iii) seek such other
remedies as are available at law or equity except as limited by the
terms of this Agreement.
B. Termination
for Insolvency. In the event either party (i) makes an assignment
for the benefit of creditors; (ii) files or bas filed against it a
petition in bankruptcy or seeking reorganization; (iii) has a
receiver appointed; or (iv) institutes any proceedings for
liquidation or winding up, then the other party may, in addition to
other rights and remedies it may have, terminate this Agreement
immediately by written notice.
1) In
the case of insolvency by GTL GTI shall endeavor to ensure that SMI
is able to maintain its rights for global manufacture. and for sale
and distribution within the Jurisdiction, and have access to the IP
either through purchase or license.
2) In
the case of insolvency by SMI, SMI shall endeavor that all
trademark, regulatory and customer account information is
transferred to GTI.
C. Effect of Termination. Upon termination of this
Agreement, the rights and obligations of the parties shall cease
except as expressly set forth in this Agreement.
15. Notices
and Communications:
All
notices and other communications required by this Agreement will be
effective upon deposit in the mail, postage prepaid and addressed
to the parties at their respective addresses set forth below until
such notice that a different person or address shall have been
designated:
If
to SMI
No.
5 Zhuijian Street, High-Tech Development Zone, Laiwu Shandong,
People's Republic of China
If
to GTI:
5835
Peachtree Comers East, Suite D,
Norcross,
GA 30092, USA
16. Relationship
of Parties:
The
Parties to this Agreement are and shall remain independent
contractors and nothing herein shall be construed to create a
partnership, agency or joint venture between the parties. Each
party shall be responsible for wages, hours and conditions of
employment of its personnel during the term of, and under this
Agreement
17. Dispute
Resolution:
In
the event a dispute arises out of or in connection with this
Agreement, the parties will attempt to resolve the dispute through
friendly consultation. If the dispute is not resolved within a
reasonable period then any or all outstanding issues may be
submitted to mediation in acc-0rdance within any statutory rules of
mediation. If mediation is not successful in resolving the entire
dispute or is unavailable, any outstanding issues will be submitted
to final and binding arbitration in the State of Georgia in
accordance with the laws of the State of Georgia, United States of
America. The arbitrator’s award will be final, and judgment
may be entered upon it by any Court having jurisdiction within the
State of Georgia, United States of America. Each party shall choose
one (1) arbitrator and the two (2) chosen arbitrators shall select
a third arbitrator, who shall be the Chairman of the Arbitration
Panel. As soon as the mediation process has been unsuccessful,
either party may select an arbitrator by sending the name of the
arbitrator, in writing, to the other party. The party receiving the
name of the said arbitrator shall, within fifteen (15) days of
receipt, select their arbitrator and shall send their selection, in
writing, to the other party. Should that party fail to select their
arbitrator within fifteen (15) days of receipt of the name of the
first party's arbitrator, the initial party may seek Court
appointment of the receiving party's arbitrator and the latter
shall be responsible for the initial party's reasonable attorney's
fees and costs in connection with the Court appointment. If the two
(2) appointed arbitrators fail to select the third arbitrator
within thirty (30) days from the appointment of the second
arbitrator, either party, or the parties jointly, may seek Court
appointment of the third arbitrator.
18. Applicable
Law:
All
questions concerning the validity, operation, interpretation and
construction of this Agreement will be governed by and determined
in accordance with the laws of the State of Georgia, United States
of America.
19. Waivers
of Breach:
No
waiver by either Party of any breach of any provision shall
constitute a waiver of any other breach of that provision or any
other provision hereof
20. Warrants
and Representations:
Each
Party represents and warrants that the terms of this Agreement are
not inconsistent with any other contractual or legal obligations it
may have or with the
policies
of any institution or company with which such Party is
associated.
21. Interpretation:
The
Parties have participated jointly in the negotiation and drafting
of this Agreement. In the event of an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any Party by
virtue
of
the authorship of any the provisions of this
agreement.
22. Assignment:
SMI
may not assign this Agreement in whole or in part, other than
manufacturing, without GTI's consent, that shall not be
unreasonably be withheld SMI may outsource all or parts of the
manufacturing at their discretion, provided that SMI is able to
maintain and verify that the quality of the manufacturing maintains
CFDA, TSO 14485 and other regulatory standards that GTI may rely
upon in sourcing LuViva.
23. Effective
Agreement:
This
Agreement may be signed by the parties via facsimile or electronic
signatures.
This
Agreement will constitute an effective Agreement when signed by
both Parties.
24. Entire
Agreement:
This
Agreement, sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges all
prior discussions between them; and neither party shall be bound by
any conditions, definitions, warranties, understandings or
representations with respect to such subject matter other than as
expressly provided herein. This Agreement may not be modified or
altered except in writing by an instrument duly executed by
authorized officers of both -parties.
IN WITNESS WHEREOF,
the parties here to have caused this
Agreement to be duly executed by their duly authorized officers as
of the 24th day of July 2019.
GTI
/s/ Gene Cartwright
Gene Cartwright
Chief Executive Officer, Guided Therapeutics Inc.
SMI
/s/Li Yaohua
Chairman, Shandong Yaohua Medical Instrument
Corporation
ADDENDUM TO EXCHANGE AGREEMENT
An
Agreement was made by and between GUIDED THERAPEUTICS, INC. (the
"Company") and the undersigned creditor of the Company (the
"Creditor") on the 241h day
of July, 2018 (hereinafter referred to as "original stated
contract") set forth below.
WHEREAS, the
parties wish to modify the terms of the original stated contract as
set forth herein.
NOW
THEREFORE, in consideration of the mutual promises herein, the
parties, intending to be legally bound, hereby agree that the
following constitutes additional terms and conditions of the stated
contract.
Modification Item
I: The Creditor agrees to accept cash payment in the amount of
$207, I 10.86 in the form of an unsecured note, with the
Company, bearing 6% annual interest and commencing on the day of
the original Agreement. The note shall be due in full on the third
anniversary of that agreement.
The
parties reaffirm no other terms or conditions of the above
mentioned original contract not hereby otherwise modified or
amended shall be negated or changed as a result of this here stated
addendum.
Dated:
July 26, 2019
Company:
GUIDED THERAPEUTICS, INC.
Creditor:
/s/
Mark Faupel
Mark
L. Faupel,
COO
Exhibit 10.38
ADDENDUM TO EXCHANGE
AGREEMENT
An Agreement was made by and between GUIDED
THERAPEUTICS, [NC. (the "Company") and the undersigned creditor of
the Company (the "Creditor") on the 241h
day of July, 2018
(hereinafter referred to as "original
stated contract") set forth below.
WHEREAS,
the parties wish to modify the terms of the original stated
contract as set forth herein.
NOW
THEREFORE, in consideration of the mutual promises herein, the
parties. intending to be legally bound, hereby agree that the
following constitutes additional terms and conditions of the stated
contract.
Modification
Item I : The Creditor agrees to accept cash payment in the amount
of $319204.30 in the form of an unsecured note, with the Company,
bearing 6% annual interest and commencing on the day of the
original Agreement. The note shall due in full on the third
anniversary of that agreement.
The
parties reaffirm no other terms or conditions of the above
mentioned original contract not hereby otherwise modified or
amended shall be negated or changed as a result of this here stated
addendum.
Dated:
July 26, 2019
Company:
GUIDED THERAPEUTICS, INC.
/s/ Mark L.
Faupel, COO
Creditor:
By:
/s/ Gene S. Cartwright.
Gene
S. Cartwright, President
Exhibit
10.39
NOTE
EXCHANGE AGREEMENT
|
Original Issuance
Date: February 8, 2019
|
Principal Amount:
$ 145,543.99
|
THIS
PROMISSORY NOTE is duly authorized and validly Note of Guided
Therapeutics, Inc., a Delaware corporation, (the "Company"), having
its principal place of business at 5835 Peachtree Corners East,
Suite B, Norcross, Georgia 30092.
THIS
PROMISSORY NOTE is issued in exchange for three notes currently
held by the creditor with a Principal Value of $107,500 and
interest of $ 38,043.99 for a total of $145,543.99. These three
notes were amended at a reduced interest rate on December 31 2016,
but in return for this note exchange agreement, the Company will
recognize the original interest rates in calculating the balance
for the exchange. The three referenced notes and their amendments
are attached to this Agreement as Exhibits 1-6.
FOR V
ALOE RECEIVED in the form of the exchange for three previous notes
described above and attached hereto, the undersigned promises to
pay to FGP Protective Opportunity Master fund SPC abo FGP
Protective Opportunity Master fund, SP ("Holder") the principal sum
of One Hundred Forty Five Thousand Five Hundred Forty Three DOLLARS
AND ninety nine CENTS ($145,543.99) and no fee or interest, for the
total of One Hundred Forty five thousand Five Hundred Forty Three
DOLLARS AND ninety nine CENTS ($ 145,543.99), in lawful money of
the United States of America, at such place as Holder may designate
in writing.
At the
discretion of the Company, rather than paying the Holder in cash,
this note can be exchanged for equity in a financing of at least
$1,000,000 as follows:
a)
If the Holder
elects to invest, at a minimum, the same amount as the balance of
the note (including interest) into the new financing, the exchange
will be into Series C3 Preferred Shares on a pro rata
basis.
b)
If the Holder does
not elect to invest in the new financing, each dollar of the
balance of the note outstanding will be exchanged for two common
shares and a warrant to purchase two common shares at market price.
The warrants will expire in three years, will be subject to a
vesting and buy back provisions the same as other warrant holders
in the financing and will not have a cashless exercise
option
Should
the Company elect to pay the balance in cash, the note shall pay 6%
annual interest and mature on the second anniversary of its
execution.
All
parties to this Note, including maker and any sureties, endorsers,
or guarantors, hereby waive protest, presentment, notice of
dishonor, and notice of acceleration of maturity and agree to
continue to remain bound for the payment of principal, interest and
all other sums due under this Note, notwithstanding any change or
changes by way of release, surrender, exchange, modification or
substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and
interest, if any; and all such parties waive all and every kind of
notice of such change or changes and agree that the same may be
made without notice or consent of any of them.
THIS PROMISSORY NOTE
may be transferred to another party only upon written consent of
Guided Therapeutics.
This
Note shall be governed by, and construed in accordance with, the
laws of the State of Georgia, regardless of laws that might
otherwise govern under applicable principles of conflicts of
law.
IN
WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed the day and year first above written.
GUIDED
THERAPEUTICS, INC.
By: /s/
Gene S. Cartwright
________________________
Gene
S. Cartwright, CEO
Creditor:
By: /s/ Gregory Pepin
Gregory
Pepin, General Manager
Exhibit
10.40
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
December 17, 2019, by and between GUIDED THERAPEUTICS, INC., a
Delaware corporation, with headquarters located at 5835 Peachtree
Comers East, Suite D, Norcross, Georgia 30092 (the "Company"), and
AUCTUS FUND, LLC, a Delaware limited liability company, with its
address at 545 Boylston Street, 2nd Floor, Boston, MA 02116 (the
"Buyer").
WHEREAS:
A.
The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities
registration afforded by the rules and regulations as promulgated
by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "1933
Act");
B.
Buyer desires to purchase and the Company desires to issue. and
sell, upon the terms and conditions set forth in this Agreement the
10% senior secured convertible note of the Company, in the form
attached hereto as Exhibit A, in the aggregate principal amount of
US$700,000.00 (together with any note(s) issued in replacement
thereof or as a dividend thereon or otherwise with respect thereto
in accordance with the terms thereof, the "Note"), convertible into
shares of common stock, $0.001 par value per share, of the Company
(the "Common Stock"), upon the terms and subject to the limitations
and conditions set forth in such Note.
C.
The Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto;
and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly)
hereby agree as follows:
1.
PURCHASE AND SALE OF NOTE.
a.
Purchase of Note. On the Closing Date (as defined below), the
Company shall issue and sell to the Buyer and the Buyer agrees to
purchase from the Company such principal amount of Note as is set
forth immediately below the Buyer's name on the signature pages
hereto. In connection with the issuance of the Note, the Company
shall issue a common stock purchase warrant to Buyer to purchase
7,500,000 shares of the Company's common stock (the "Warrant") as a
commitment fee upon the terms and subject to the limitations and
conditions set forth in such Warrant.
b.
Form of Payment. On the Closing Date (as defined below), (i) the
Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the "Purchase Price")
by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against
delivery of the Note in the principal amount equal to the Purchase
Price as is set forth immediately below the Buyer's name on the
signature pages hereto, and (ii) the Company shall deliver such
duly executed Note and Warrant on behalf of the Company, to the
Buyer, against delivery of such Purchase Price.
c.
Closing Date. Subject to the satisfaction (or written waiver) of
the conditions thereto set forth in Section 7 and Section 8 below,
the date and time of the issuance and sale of the Note pursuant to
this Agreement (the "Closing Date") shall be 12:00 noon, Eastern
Standard Time on or about December 17, 2019, or such other mutually
agreed upon time. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on the Closing Date at
such location as may be agreed to by the parties.
2.
REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Company that:
a.
Investment Purpose. As of the date hereof, the Buyer is purchasing
the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note (including, without limitation,
such additional shares of Common Stock, if any, as are issuable (i)
on account of interest on the Note (ii) as a result of the events
described in Sections
1.3
and 1.4(g) of the Note or (iii) in payment of the Standard
Liquidated Damages Amount (as defined in Section 2(f) below)
pursuant to this Agreement, such shares of Common Stock being
collectively referred to herein as the "Conversion Shares" and,
collectively with the Note, Warrant, and the shares of Common Stock
issuable upon exercise of the Warrant, the "Securities") for its
own account and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however,
that by making the representations herein, the Buyer does not agree
to hold any of the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or
an exemption under the 1933 Act.
b.
Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D (an
"Accredited Investor").
c.
Reliance on Exemptions. The Buyer understands that the Securities
are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d.
Information. The Buyer and its advisors, if any, have been, and for
so long as the Note remains outstanding will continue to be,
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by the Buyer or
its advisors. The Buyer and its advisors, if any, have been, and
for so long as the Note remains outstanding will continue to be,
afforded the opportunity to ask questions of the Company.
Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic information and will not disclose such
information unless such information is disclosed to the public
prior to or promptly following such disclosure to the Buyer.
Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The
Buyer understands that its investment in the Securities involves a
significant degree of risk. The Buyer is not aware of any facts
that may constitute a breach of any of the Company's
representations and warranties made herein.
e.
Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of
the Securities.
f
Transfer or Re-sale. The Buyer understands that (i) the sale or
re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are
sold pursuant to an effective registration statement under the 1933
Act, (b) the Buyer shall have delivered to the Company, at the cost
of the Company, an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the
Company, (c) the Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 promulgated under the 1933 Act
(or a successor rule) ("Rule 144")) of the Buyer who agrees to sell
or otherwise transfer the Securities only in accordance with this
Section 2(t) and who is an Accredited Investor, (d) the Securities
are sold pursuant to Rule 144, or (e) the Securities are sold
pursuant to Regulation S under the 1933 Act (or a successor rule)
("Regulation S"), and the Buyer shall have delivered to the
Company, at the cost of the Company, an opinion of counsel that
shall be in form, substance and scope customary for opinions of
counsel in corporate transactions, which opinion shall be accepted
by the Company; (ii) any sale of such Securities made in reliance
on Rule 144 may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any re-sale of
such Securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder
(in each case). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other
lending arrangement. In the event that the Company does not accept
the opinion of counsel provided by the Buyer with respect to the
transfer of Securities pursuant to an exemption from registration,
such as Rule 144 or Regulation S, within three (3) business days of
delivery of the opinion to the Company, the Company shall pay to
the Buyer liquidated damages of five percent (5%) of the
outstanding amount of the Note per day plus accrued and unpaid
interest on the Note, prorated for partial months, in cash or
shares at the option of the Buyer ("Standard Liquidated Damages
Amount"). If the Buyer elects to be pay the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be
issued at the Conversion Price (as defined in the Note) at the time
of payment.
g.
Legends. The Buyer understands that the Note and, until such time
as the Conversion Shares have been registered under the 1933 Act
may be sold pursuant to Rule 144 or Regulation S without any
restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):
"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY TIDS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I)
IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, at
the Deadline, it will be considered an Event of Default pursuant to
Section 3.2 of the Note.
h.
Authorization: Enforcement. This Agreement has been duly and
validly authorized. This Agreement has been duly executed and
delivered on behalf of the Buyer, and this Agreement constitutes a
valid and binding agreement of the Buyer enforceable in accordance
with its terms.
1.
Residency. The Buyer is a resident of the jurisdiction set forth in
the preamble.
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer that:
a.
Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect. "Material Adverse Effect" means any
material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. "Subsidiaries" means any
corporation or other organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly,
any equity or other ownership interest.
b.
Authorization: Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this
Agreement, the Note and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Note by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including
without limitation, the issuance of the Note and the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion or exercise thereof) have been duly authorized by the
Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.
c.
Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of: (i) 3,000,000,000 shares of Common
Stock, of which approximately 3,319,486 shares are issued and
outstanding; (ii) 9,000 shares of Series C preferred stock, of
which 300,000 are issued and outstanding, (iii) 20,300 shares of
Series Cl preferred stock, of which 1,000 are issued and
outstanding, and (iv) 5,000,000 shares of C2 preferred stock, of
which 3,300 are issued and outstanding. Except as disclosed in the
SEC Documents, no shares are reserved for issuance pursuant to the
Company's stock option plans, no shares are reserved for issuance
pursuant to securities (other than the Note and any other
convertible promissory note issued to the Buyer) exercisable for,
or convertible into or exchangeable for shares of Common Stock and
58,187,863 shares are reserved for issuance upon conversion of the
Note. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the
shareholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as
disclosed in the SEC Documents, as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Note or the Conversion Shares. The
Company has filed in its SEC Documents true and correct copies of
the Company's Certificate of Incorporation as in effect on the date
hereof ("Certificate of Incorporation"), the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect
thereto. The Company shall provide the Buyer with a written update
of this representation signed by the Company's Chief Executive on
behalf of the Company as of the Closing Date.
d.
Issuance of Shares. The issuance of the Note is duly authorized
and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and free from
all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. The Conversion
Shares are duly authorized and reserved for issuance and, upon
conversion of the Note in accordance with its respective terms,
will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances with respect to the
issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company and will not
impose personal liability upon the holder thereof.
e.
Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of the
Note. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Note in accordance with
this Agreement, the Note is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
f.
No Conflicts. The execution, delivery and performance of this
Agreement and the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor
any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under,
and neither the Company nor any of its Subsidiaries has taken any
action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any
of its Subsidiaries is a party or by which any property or assets
of the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Note in accordance with the
terms hereof or thereof or to issue and sell the Note in accordance
with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company is not in violation of
the listing requirements of the OTC Pink (the "OTC Pink"), the
OTCQB or any similar quotation system, and does not reasonably
anticipate that the Common Stock will be delisted by the OTC Pink,
the OTCQB or any similar quotation system, in the foreseeable
future nor are the Company's securities "chilled" by DTC. The
Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.
g.
SEC Documents; Financial Statements. On or before February 10,
2020, the Company will have filed all reports, schedules, forms,
statements and other documents required to be filed by it with the
SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included
therein and fmancial statements and schedules thereto and documents
(other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC
Documents"). The Company has delivered to the Buyer true and
complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the statements
made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements
as have been amended or updated in subsequent filings prior the
date hereof). As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved and
fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except
as set forth in the financial statements of the Company included in
the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to March 31, 2019, and (ii)
obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company. The Company is subject to the reporting requirements of
the 1934 Act. For the avoidance of doubt, filing of the documents
required in this Section 3(g) via the SEC's Electronic Data
Gathering, Analysis, and Retrieval system ("EDGAR") shall satisfy
all delivery requirements of this Section 3(g).
h.
Absence of Certain Changes. Since March 31, 2019, there has been no
material adverse change and no material adverse development in the
assets, liabilities, business, properties, operations, financial
condition, results of operations, prospects or 1934 Act reporting
status ofthe Company or any of its Subsidiaries.
i.
Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect. Schedule 3(i)
contains a complete list and summary description of any pending or,
to the knowledge of the Company, threatened proceeding against or
affecting the Company or any of its Subsidiaries, without regard to
whether it would have a Material Adverse Effect. The Company and
its Subsidiaries are unaware. of any facts or circumstances which
might give rise to any of the foregoing.
j.
Patents, Copyrights, etc. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights ("Intellectual Property")
necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future).
Except as disclosed in the SEC Documents, there is no claim or
action by any person pertaining to, or proceeding pending, or to
the Company's knowledge threatened, which challenges the right of
the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now
operated (and, as presently contemplated to be operated in the
future); to the best of the Company's knowledge, the Company's or
its Subsidiaries' current and intended products, services and
processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts
or circumstances which might give rise to any of the foregoing. The
Company and each of its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
k.
No Materially Adverse Contracts, Etc. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or
is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse
Effect.
I.
Tax Status. The Company and each of its Subsidiaries has made or
filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company
and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim. The Company has not executed a waiver with respect
to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the
Company's tax returns is presently being audited by any taxing
authority.
m.
Certain Transactions. Except for arm's length transactions pursuant
to which the Company or any of its Subsidiaries makes payments in
the ordinary course of business upon terms no less favorable than
the Company or any of its Subsidiaries could obtain from third
parties and other than the grant of stock options disclosed on
Schedule 3( c), none of the officers, directors, or employees of
the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or
partner.
n.
Disclosure. All information relating to or concerning the Company
or any of its Subsidiaries set forth in this Agreement and provided
to the Buyer pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has
occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by
the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports
filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933
Act).
o.
Acknowledgment Regarding Buyer' Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the
capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further
acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any
statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer' purchase of the Securities.
The Company further represents to the Buyer that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its
representatives.
p.
No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its
securities.
q.
No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, transaction
fees or similar payments relating to this Agreement or the
transactions contemplated hereby.
r.
Permits; Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), and there is no
action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict
with, or, in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Since March 31, 2019, neither
the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to
possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse
Effect.
s.
Environmental Matters.
(i) There are, to the Company's knowledge, with
respect to the Company or any of its Subsidiaries or any
predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may
give rise to any common law environmental liability or any
liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws and neither the Company nor any of its
Subsidiaries has received any notice with respect to any of the
foregoing, nor is any action pending or, to the Company's
knowledge, threatened in connection with any of the foregoing. The
term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or
the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals,
pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder. (ii) Other
than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company's or any of its Subsidiaries' business. (iii)
There are no underground storage tanks on or under any real
property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable
law.
t.
Title to Property. Except as disclosed in the SEC Documents the
Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all
personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects or such as would not have a
Material Adverse Effect. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
u.
Internal Accounting Controls. Except as disclosed in the SEC
Documents the Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment
of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any
differences.
v.
Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in
the course of his actions for, or on behalf of, the Company, used
any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
w.
Solvency. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (i.e., its assets have a
fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute
and matured) and currently the Company has no information that
would lead it to reasonably conclude that the Company would not,
after giving effect to the transaction contemplated by this
Agreement, have the ability to, nor does it intend to take any
action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with
respect to its most recent fiscal year end and, after giving effect
to the transactions contemplated by this Agreement, does not
anticipate or know of any basis upon which its auditors might issue
a qualified opinion in respect of its current fiscal year. For the
avoidance of doubt any disclosure of the Borrower's ability to
continue as a "going concern" shall not, by itself, be a violation
of this Section 3(w).
x.
No Investment Company. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will
not be an "investment company" required to be registered under the
Investment Company Act of 1940 (an "Investment Company"). The
Company is not controlled by an Investment Company.
y.
Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have
a Material Adverse Effect. Upon written request the Company will
provide to the Buyer true and correct copies of all policies
relating to directors' and officers' liability coverage, errors and
omissions coverage, and commercial general liability
coverage.
z.
Bad Actor. No officer or director of the Company would be
disqualified under Rule 506( d) of the Securities Act as amended on
the basis of being a "bad actor" as that term is established in the
September 19, 2013 Small Entity Compliance Guide published by the
SEC.
aa.
Shell Status. The Company represents that it is not a "shell"
issuer and has never been a "shell" issuer, or that if it
previously has been a "shell" issuer, that at least twelve (12)
months have passed since the Company has reported Form 10 type
information indicating that it is no longer a "shell" issuer.
Further, the Company will instruct its counsel to either (i) write
a 144-3(a)(9) opinion to allow for salability of the Conversion
Shares or (ii) accept such opinion from Holder's
counsel.
bb.
No-Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of
its Subsidiaries and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Company in its 1934
Act filings and is not so disclosed or that otherwise could be
reasonably likely to have a Material Adverse Effect.
cc.
Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has: (i) taken, directly or indirectly,
any action designed to cause or to result, or that could reasonably
be expected to cause or result, in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase
any other securities of the Company.
dd.
Sarbanes-Oxley Act. The Company and each Subsidiary is in material
compliance with all applicable requirements of the Sarbanes-Oxley
Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.
ee.
Employee Relations. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any
member of a union. The Company believes that its and its
Subsidiaries' relations with their respective employees are good.
No executive officer (as defined in Rule 501(f) promulgated under
the 1933 Act) or other key employee of the Company or any of its
Subsidiaries has notified the Company or any such Subsidiary that
such officer intends to leave the Company or any such Subsidiary or
otherwise terminate such officer's employment with the Company or
any such Subsidiary. To the knowledge of the Company, no executive
officer or other key employee of the Company or any of its
Subsidiaries is, or is now expected to be, in violation of any
material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition
agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive
officer or other key employee (as the case may be) does not subject
the Company or any of its Subsidiaries to any liability with
respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. ff.
Breach of Representations and Warranties by the Company. The
Company agrees that if the Company breaches any of the
representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement and it being considered an Event of Default under
Section 3.5 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Company, until such breach is cured. If
the Company elects to pay the Standard Liquidated Damages Amounts
in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.
4.
COVENANTS.
a.
Best Efforts. The parties shall use their commercially reasonable
best efforts to satisfy timely each of the conditions described in
Section 7 and 8 of this Agreement.
b.
Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the
Securities for sale to the Buyer at the applicable closing pursuant
to this Agreement under applicable securities or "blue sky" laws of
the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action
so taken to the Buyer on or prior to the Closing Date.
c.
Use of Proceeds. The Company shall use the proceeds from the sale
of the Note for working capital and other general corporate
purposes and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with
its currently existing direct or indirect
Subsidiaries).
d.
Right of First Refusal Unless it shall have first delivered to the
Buyer, at least seventy two (72) hours prior to the closing of such
Future Offering (as defined herein), written notice describing the
proposed Future Offering, including the terms and conditions
thereof, and providing the Buyer an option during the seventy two
(72) hour period following delivery of such notice to purchase the
securities being offered in the Future Offering on the same terms
as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively
referred to as the "Right of First Refusal") (and subject to .the
exceptions described below), the Company will not conduct any
equity financing (including debt with an equity component) ("Future
Offerings") during the period beginning on the Closing Date and
ending twelve (12) months following the Closing Date. In the event
the terms and conditions of a proposed Future Offering are amended
in any respect after delivery of the notice to the Buyer concerning
the proposed Future Offering, the Company shall deliver a new
notice to the Buyer describing the amended terms and conditions of
the proposed Future Offering and the Buyer thereafter shall have an
option during the seventy two (72) hour period following delivery
of such new notice to purchase its pro rata share of the securities
being offered on the same terms as contemplated by such proposed
Future Offering, as amended. The foregoing sentence shall apply to
successive amendments to the terms and conditions of any proposed
Future Offering. The Right of First Refusal shall not apply to any
transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous
offering pursuant to Rule 415 under the 1933 Act), (ii) issuances
to employees, officers, directors, contractors, consultants or
other advisors approved by the Board, (iii) issuances to strategic
partners or other parties in connection with a commercial
relationship, or providing the Company with equipment leases, real
property leases or similar transactions approved by the Board (iv)
issuances of securities as consideration for a merger,
consolidation or purchase of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of
which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the
Company. The Right of First Refusal also shall not apply to the
issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of
the date hereof or to the grant of additional options or warrants,
or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by the shareholders of the
Company.
e.
Expenses. The Company shall reimburse Buyer for any and all
expenses incurred by them in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith
("Documents"), including, without limitation, reasonable attorneys'
and consultants' fees and expenses, transfer agent fees, fees for
stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions
of counsel, escrow fees, and costs of restructuring the
transactions contemplated by the Documents. When possible, the
Company must pay these fees directly, including, but not limited
to, any and all wire fees, otherwise the Company must make
immediate payment for reimbursement to the Buyer for all fees and
expenses immediately upon written notice by the Buyer or the
submission of an invoice by the Buyer. At Closing, the Company's
initial obligation with respect to this transaction is to reimburse
Buyer's legal expenses shall be $10,000.00 plus the cost of wire
fees.
f.
Financial Information. The Company agrees to send or make available
the following reports to the Buyer until the Buyer transfers,
assigns, or sells all of the Securities:
(i)
within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form l0-K its Quarterly Reports on Form l0-Q and
any Current Reports on Form 8-K; (ii) within one (I) day after
release, copies of all press releases issued by the Company or any
of its Subsidiaries; and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of
any notices or other information the Company makes available or
gives to such shareholders. For the avoidance of doubt, filing the
documents required in (i) above via EDGAR or releasing any
documents set forth in (ii) above via a recognized wire service
shall satisfy the delivery requirements of this Section
4(f).
g.
Listing. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and,
so long as the Buyer owns any of the Securities, shall maintain, so
long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable upon
conversion of the Note. The Company will obtain and, so long as the
Buyer owns any of the Securities, maintain the listing and trading
of its Common Stock on the OTC Pink, OTCQB or any equivalent
replacement exchange, the Nasdaq National Market ("Nasdaq"), the
Nasdaq SmallCap Market ("Nasdaq SmallCap"), the New York Stock
Exchange ("NYSE"), or the NYSE American and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Financial Industry Regulatory
Authority ("FINRA") and such exchanges, as applicable. The Company
shall promptly provide to the Buyer copies of any material notices
it receives from the OTC Pink, OTCQB and any other exchanges or
quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing
on such exchanges and quotation systems. The Company shall pay any
and all fees and expenses in connection with satisfying its
obligation under this Section 4(g).
h.
Corporate Existence. So long as the Buyer beneficially owns any
Note, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except
in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTC
Pink, OTCQB, Nasdaq, NasdaqSmallCap, NYSE or AMEX.
i.
No Integration. The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
j.
Failure to Comply with the 1934 Act. So long as the Buyer
beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall
continue to be subject to the reporting requirements of the 1934
Act.
k.
[Intentionally Omitted].
L
Restriction on Activities. Commencing as of the date first above
written, and until the payment of the Note in full or full
conversion of the Note, the Company shall not, directly or
indirectly, without the Buyer's prior written consent, which
consent shall not be unreasonably withheld: (a) change the nature
of its business; (b) sell, divest, acquire, change the structure of
any material assets other than in the ordinary course of business;
or (c) solicit any offers for, respond to any unsolicited offers
for, or conduct any negotiations with any other person or entity in
respect of any variable rate debt transactions (except with respect
to the Notes (as defined below» (i.e., transactions were the
conversion or exercise price of the security issued by the Company
varies based on the market price of the Common Stock), whether a
transaction similar to the one contemplated hereby or any other
investment (unless the proceeds are sufficient to repay the Notes
in the entirety pursuant to the provisions of the Notes and the
Company repays the Notes in the entirety within one (1) business
day of the closing of the variable rate debt transaction); or (d)
file any registration statements with the SEC (except with respect
to the Equity Raise (as defined in this Agreement) and as provided
in the RRA (as defined in this Agreement».
m.
Legal Counsel Opinions. Upon the request of the Buyer from to time
to time, the Company shall be responsible (at its cost) for
promptly supplying to the Company's transfer agent and the Buyer a
customary legal opinion letter of its counsel (the "Legal Counsel
Opinion") to the effect that the sale of Conversion Shares by the
Buyer or its affiliates, successors and assigns is exempt from the
registration requirements of the 1933 Act pursuant to Rule 144
(provided the requirements of Rule 144 are satisfied and provided
the Conversion Shares are not then registered under the 1933 Act
for resale pursuant to an effective registration statement). Should
the Company's legal counsel fail for any reason to issue the Legal
Counsel Opinion, the Buyer may (at the Company's cost) secure
another legal counsel to issue the Legal Counsel Opinion, and the
Company will instruct its transfer agent to accept such
opinion.
n.
Par Value. If the closing bid price at any time the Note is
outstanding falls below $0.001, the Company shall cause the par
value of its Common Stock to be reduced to $0.00001 or
less.
o.
Breach of Covenants. The Company agrees that if the Company
breaches any of the covenants set forth in this Section 4,and in
addition to any other remedies available to the Buyer pursuant to
this Agreement, it will be considered an Event of Default under
Section 3.4 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Buyer, until such breach is cured, or
with respect to Section 4( d) above, the Company shall pay to the
Buyer the Standard Liquidated Damages Amount in cash or shares of
Common Stock:, at the option of the Buyer, upon each violation of
such provision. If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock:, such shares
shall be issued at the Conversion Price at the time of
payment.
1.
Transaction
Expense Amount. Upon Closing, the Company shall pay Fifty Five
Thousand and 00/100 United States Dollars (US$55,000.00) to Auctus
Fund Management, LLC ("Auctus Management") to cover the Holder's
due diligence, monitoring, and other transaction costs incurred for
services rendered in connection herewith (the "Transaction Expense
Amount"). The Transaction Expense Amount shall be offset against
the proceeds of the Note and shall be paid to Auctus Management
upon the execution hereof.
2.
Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the
Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance
with the terms thereof (the "Irrevocable Transfer Agent
Instructions"). In the event that the Borrower proposes to replace
its transfer agent, the Borrower shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to
the provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower
and the Borrower. Prior to registration of the Conversion Shares
under the 1933 Act or the date on which the Conversion Shares may
be sold pursuant to Rule 144 without any restriction as to the
number of Securities as of a particular date that can then be
immediately sold, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company
warrants that: (i) no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section, and stop
transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act or the date on which the
Conversion Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date
that can then be immediately sold), will be given by the Company to
its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Note; (ii) it will
not direct its transfer agent not to transfer or delay, impair,
and/or hinder its transfer agent in transferring (or issuing)(
electronically or in certificated form) any certificate for
Conversion Shares to be issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note and
this Agreement; and (iii) it will not fail to remove (or directs
its transfer agent not to remove or impairs, delays, and/or hinders
its transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any Conversion Shares issued to the Buyer upon
conversion of or otherwise pursuant to the Note as and when
required by the Note and this Agreement. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Buyer provides the Company, at the cost of the
Company, with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the
effect that a public sale or transfer of such Securities may be
made without registration under the 1933 Act and such sale or
transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144,
the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates, free from restrictive legend, in such
name and in such denominations as specified by the Buyer. The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section may be inadequate and
agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyer shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond
or other security being required.
7.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS TO SELL. The
obligation of the Company hereunder to issue and sell the Note to
the Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole
discretion:
a.
The Buyer shall have executed this Agreement and delivered the same
to the Company.
b.
The Buyer shall have delivered the Purchase Price in accordance
with Section 1 (b) above.
c.
The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
d.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
8.
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO PURCHASE. The
obligation of the Buyer hereunder to purchase the Note at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these
conditions are for the Buyer's sole benefit and may be waived by
the Buyer at any time in its sole discretion:
a.
The Company shall have executed this Agreement and delivered the
same to the Buyer.
b.
The Company shall have delivered to the Buyer the duly executed
Note (in such denominations as the Buyer shall request) and in
accordance with Section 1 (b) above as well as the duly executed
Warrant.
c.
The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the Company's
Transfer Agent.
d.
The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or·
complied with by the Company at or prior to the Closing Date. The
Buyer shall have received a certificate or certificates, executed
by the chief executive officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters
as may be reasonably requested by the Buyer including, but not
limited to certificates with respect to the Company's Certificate
of Incorporation, By-laws and Board of Directors' resolutions
relating to the transactions contemplated hereby.
e.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f.
No event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g.
The Conversion Shares shall have been authorized for quotation on
the OTC Pink, OTCQB or any similar quotation system and trading in
the Common Stock on the OTC Pink, OTCQB or any similar quotation
system shall not have been suspended by the SEC or the OTC Pink,
OTCQB or any similar quotation system.
h.
The Buyer shall have received an officer's certificate described in
Section 3(c) above, dated as of the Closing Date.
9.
GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Nevada
without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the
transactions contemplated by this Agreement, the Note or any other
agreement, certificate, instrument or document contemplated hereby
shall be brought only in the state courts located in the
Commonwealth of Massachusetts or in the federal courts located in
the Commonwealth of Massachusetts. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon
forum non
conveniens. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR UNDER ANY OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR
ARISING OUT OF TIDS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. The prevailing
party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any
provision of this Agreement or any other agreement delivered in
connection herewith is invalid or unenforceable under any
applicable statute or rule of law, then such provision shall be
deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of
any other provision of any agreement. Each party hereby irrevocably
waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this
Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by
law.
b.
Counterparts; Signatures by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This
Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this
Agreement.
c.
Construction; Headings. This Agreement shall be deemed to be
jointly drafted by the Company and the Buyer and shall not be
construed against any person as the drafter hereof. The headings of
this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this
Agreement.
d.
Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision
hereof.
e.
Entire Agreement; Amendments. This Agreement, the Note and the
instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither
the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by an
instrument in writing signed by the majority in interest of the
Buyer.
f
Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, email, or facsimile,
addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by
email or facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If
to the Company, to:
Guided
Therapeutics, Inc.
5835
Peachtree Comers East, Suite D
Norcross,
Georgia 30092
Attn:
Gene Cartwright
E-mail:
info@guidedinc.com
If
to the Buyer:
Auctus
Fund, LLC
545
Boylston Street, 2nd Floor
Boston,
MA 02116
Attn:
Lou Posner
Facsimile:
(617) 532-6420
With
a copy to (which copy shall not constitute notice):
Chad
Friend, Esq., LL.M.
Anthony
L.G., PLLC
625
N. Flagler Drive, Suite 600
West
Palm Beach, FL 33401
E-mail:
CFriend@AnthonyPLLC.com
Each
party shall provide notice to the other party of any change in
address.
g.
Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and
assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing,
subject to Section 2(f), the Buyer may assign its rights hereunder
to any person that purchases Securities in a private transaction
from the Buyer or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of the
Company.
h.
Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i.
Survival. The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder not withstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
j.
Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
k.
No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
l.
Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the
Buyer shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security
being required.
m.
Publicity. The Company, and the Buyer shall have the right to
review a reasonable period of time before issuance of any press
releases, SEC, OTCQB or FINRA filings, or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the
prior approval of the Buyer, to make any press release or SEC,
OTCQB (or other applicable trading market) or FINRA filings with
respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company
in connection with any such press release prior to its release and
shall be provided with a copy thereof and be given an opportunity
to comment thereon).
n.
Indemnification. In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Securities hereunder,
and in addition to all of the Company's other obligations under
this Agreement or the Note, the Company shall defend, protect,
indemnify and hold harmless the Buyer and its stockholders,
partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or
other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a
result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made
by the Company in this Agreement or the Note or any other
agreement, certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement or the Note or any other
agreement, certificate, instrument or document contemplated hereby
or thereby or (c) any cause of action, suit or claim brought or
made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from (i) the execution, delivery,
performance or enforcement of this Agreement or the Note or any
other agreement, certificate, instrument or document contemplated
hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, or (iii) the status of the Buyer or
holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by this Agreement. To the extent that
the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
that is permissible under applicable law.
o.
Additional Funding.
(i)
Tranche II Funding (Second Note). So long as the Company has not
breached the material terms of this Agreement, the Company's Common
Stock is trading on the OTCQB as of the Filing Date (as defined
below), the Company has consummated a capital raise of at least
$\,000,000.00 from the sale of equity securities (which does not
include any debt component) of the Company during the period
beginning on the date of this Agreement and ending on the Filing
Date (the "Equity Raise"), an Event of Default (as defined in the
Note) has not occurred under the Note or any convertible promissory
note issued by the Company to the Buyer, the Company files the
Registration Statement (as defined in the Note) (the "Registration
Statement") pursuant to the terms of the Note and registration
rights agreement entered into between the Company and Buyer on the
date of this Agreement (the "RRA"), the Registration Statement
contains all of the material information required by such form, the
Registration Statement is filed with the SEC pursuant to the terms
of the Note and RRA, the average closing price for the Company's
common stock during the ten (10) trading day period prior to the
date that the Registration Statement is filed with the SEC (the
"Filing Date") is greater than $0.15, and the Average Daily Trading
Value (as defined below) for the Company's common stock during the
twenty (20) trading day period prior to the Filing Date is greater
than $5,000.00, then the Buyer shall fund within three (3) business
days after the Filing Date an additional senior secured convertible
promissory note in the face amount of . $400,000.00 (the "Second
Note") to be issued by the Company on the same terms and conditions
as the Note and transaction documents entered into in connection
with the Note (except as provided in Section 9(0)(v) of this
Agreement) (subject to the Buyer's receipt of all of the
transaction documentation signed by the Company and the Company's
transfer agent as applicable).
(ii)
Tranche ill Funding (Third Note). So long as the Company has not
breached the material terms of this Agreement, the Company's Common
Stock is trading on the OTCQB as of the Filing Date and the
Post-Effective Date (as defined below), the Company has consummated
the Equity Raise, an Event of Default (as defined in the Note) has
not occurred under the Note or any convertible promissory note
issued by the
Company
to the Buyer, the Company files the Registration Statement pursuant
to the terms of the Note and the RRA, the Registration Statement
contains all of the material information required by such form, the
Registration Statement is declared effective by the SEC pursuant to
the terms of the Note and RRA, the average closing price for the
Company's common stock during the ten (10) trading day period prior
to the date that is sixty (60) calendar days after the date that
the Registration Statement is declared effective by the SEC (the
"Post-Effective Date") is greater than $0.30, the Buyer and GPB
Debt Holdings II LLC (the "Existing Senior Creditor") shall have
entered into an inter creditor agreement granting the Buyer senior
priority over the Existing Senior Creditor with respect to the
assets of the Company, and the Average Daily Trading Value (as
defined below) for the Company's common stock during the twenty
(20) trading day period prior to the Post-Effective Date is greater
than $15,000.00, then the Buyer shall fund within five (5) business
days after the Post-Effective Date an additional senior secured
convertible promissory note in the face amount of $1,300,000.00
(the "Third Note") to be issued by the Company on the same terms
and conditions as the Note and transaction documents entered into
in connection with the Note (except as provided in Section 9(0
)(vi) of this Agreement) (subject to the Buyer's receipt of all of
the transaction documentation signed by the Company and the
Company's transfer agent as applicable).
(iii)
The Note, Second Note, and Third Note shall be collectively
referred to in this Agreement as the "Notes".
(iv)
The "Average Daily Trading Value" shall mean the average trading
volume of the Company's Common Stock during the applicable
measurement period multiplied by the lowest closing price of the
Company's Common Stock during the applicable measurement
period.
(v)
The Transaction Expense Amount with respect to the Second Note
shall be $73,333.33. Section 9(0) of this Agreement shall not be
included in the securities purchase agreement with respect to the
Second Note. The definition of "Variable Conversion Price" in the
Second Note shall mean the 75% of the average of the five (5) day
volume weighted average price of the Common Stock immediately prior
to the Issue Date (as defined in the Second Note) of the Second
Note (provided, however, that if the Common Stock is trading on a
public market at a price greater than $0.50 per share on the Issue
Date (as defined in the Second Note) of the Second Note, then 75%
shall be replaced with 80%).
(vi)
The Transaction Expense Amount with respect to the Third Note shall
be $78,928.00. Section 9(0) of this Agreement shall not be included
in the securities purchase agreement with respect to the Third
Note. The definition of "Variable Conversion Price" in the Third
Note shall mean the 75% of the average of the five (5) day volume
weighted average price of the Common Stock immediately prior to the
Issue Date (as defined in the Third Note) of the Third Note
(provided, however, that if the Common Stock is trading on a public
market at a price greater than $0.50 per share on the Issue Date
(as defined in the Third Note) of the Third Note, then 75% shall be
replaced with 80%). In connection with the issuance of the Third
Note, the Company shall issue a common stock purchase warrant to
Buyer to purchase 4,000,000 shares of the Company's common stock in
the same form as the Warrant (the "Second Warrant"), with an
initial exercise price of $0.25 per share, as a commitment fee upon
the terms and subject to the limitations and conditions set forth
in such Second Warrant.
[signature
page follows]
IN
WITNESS THEREOF, the undersigned Buyer and the Company have caused
this agreement to be duly executed as of date first above
written.
GUIDED THERAPEUTICS, INC.
/s/
Gene S. Cartwright
Gene
S. Cartwright
Chef
Executive Officer
AUCTUS FUND, LLC
/s/
Lou Posner
Lou
Posner
Managing
Director
Exhibit 10.41
SECURlTY
AGREEMENT
THIS
SECURlTY AGREEMENT (this "Agreement"), is entered into as of
December 17, 2019, by and between GUIDED THERAPEUTICS, INC., a
Delaware corporation (the "Borrower"), and Auctus Fund, LLC, a
Delaware limited liability company (the "Secured ~" or "Secured
Parties"). All capitalized terms not otherwise defined herein shall
the meanings ascribed to them in that certain Securities Purchase
Agreement and Note (as defined below) by and between Borrower and
the Secured Party of even date (the "Securities Purchase
Agreement").
RECITALS
WHEREAS,
the Secured Parties have loaned monies to Borrower, as more
particularly described in the Securities Purchase Agreement and as
evidenced by the 10% senior secured convertible promissory note in
the principal amount of $700,000.00 (the "Note") issued by Borrower
to the Secured Party on December 17, 2019;
WHEREAS,
the term "Secured Party" as used in this Agreement shall mean,
collectively, all holders of the Note, including those persons who
become holders of Note subsequent to the date hereof;
and
WHEREAS,
this Agreement is being executed and delivered by Borrower to
secure the Note.
NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each of the parties
hereto hereby agrees as follows:
1.
Obligations Secured. This Agreement secures, in part, the prompt
payment and performance of all obligations of Borrower under the
Note, and all renewals, extensions, modifications, amendments,
and/or supplements thereto (collectively, the "Secured
Obligations").
2.
Grant of Security.
a.
Collateral. Borrower hereby grants, pledges, and assigns for the
benefit of the Secured Parties, and there is hereby created in
favor of each of the Secured Parties, a security interest in and to
all of Borrower's right, title, and interest in, to, and under all
of the collateral set forth on Exhibit A hereto (collectively,
"Collateral").
b.
Effective Date. This grant of security shall be effective as of the
date hereof.
c.
Subordination. The Note and the Secured Obligations shall not be
subordinated, or junior in interest, to any other obligations of
Borrower, except with respect to the Borrower's obligations to GPB
Debt Holdings II LLC as of the date ofthis Agreement.
d.
Filings to Perfect Security. The Company shall (and is hereby
authorized to) file with the applicable filing office(s) such
financing statements, amendments, addenda, continuations,
terminations, assignments and other records (whether or not
executed by Borrower) to perfect and to maintain perfected security
interests in the Collateral by the Secured Parties, including but
not limited to (a) promptly upon the execution of this Agreement, a
Financing Statement on Form UCC-l (the "Financing Statement") shall
be filed with the Delaware Secretary of State and in all other
applicable jurisdictions on behalf of the Secured Parties with
respect to the Collateral; The Financing Statement shall designate
each of the Secured Parties as a Secured Party and Borrower as the
debtor, shall identify the security interest in the Collateral, and
contain any other items required by law. The Financing Statement
shall contain a description of collateral consistent with the
description set forth herein.
3.
Transfers and Other Liens. Except as set forth herein or in the
Note, Borrower shall not, without the prior written consent of all
of the Secured Parties, at their sole and absolute
discretion:
a.
Sell, transfer, assign, or dispose of (by operation of law or
otherwise), any of the Collateral outside of the ordinary course of
business;
b.
Create or suffer to exist any lien, security interest, or other
charge or encumbrance upon or with respect to any of the
Collateral, except the security interests created hereby;
or
c.
Permit any of the Collateral to be levied upon under any legal
process.
4.
Representatio1L~ and Warranties. Borrower hereby represents and
warrants to the Secured Parties as follows: (a) to Borrower' s
knowledge, Borrower is the owner of the Collateral (or, in the case
of after-acquired Collateral, at the time Borrower acquires rights
in the Collateral, will be the owner thereat) and that, except as
expressly provided herein, no other person has (or, in the case of
after-acquired Collateral, at the time Borrower acquires rights
therein, will have) any right, title, claim or interest (by way of
Lien or otherwise) in, against or to the Collateral; (b) to
Borrower's knowledge, except as expressly provided herein, upon the
filing of a Financing Statement with the Delaware Secretary of
State, the Secured Parties (or in the case of after-acquired
Collateral, at the time Borrower acquires rights therein, will
have) will have a perfected security interest in the Collateral to
the extent that a security interest in the Collateral can be
perfected by such filing; (c) all Accounts Receivable (as defined
in Exhibit A) are genuine and enforceable against the party
obligated to pay the same; (d) Borrower has full power and
authority to enter into the transactions provided for in this
Agreement and the Note; (e) this Agreement and the Note, when
executed and delivered by Borrower, will constitute the legal,
valid and binding obligations of Borrower enforceable in accordance
with their terms; (t) the execution and delivery by Borrower of
this Agreement and the Note and the performance and consummation of
the transactions contemplated hereby and thereby do not and will
not violate Borrower's Certificate of Incorporation or Bylaws or
any material judgment, order, writ, decree, statute, rule or
regulation applicable to Borrower (g) there does not exist any
default or violation by Borrower of or under any of the terms,
conditions or obligations of (i) any indenture, mortgage, deed of
trust, franchise, permit, contract, agreement, or other instrument
to which Borrower is a party or by which Borrower is bound, or (ii)
any law, ordinance, regulation, ruling, order, injunction, decree,
condition or other requirement applicable to or imposed upon
Borrower by any law, the action of any court or any governmental
authority or agency; and the execution, delivery and performance of
this Agreement will not result in any such default or violation;
(h) there is no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand pending or, to the knowledge of
Borrower, threatened which adversely affects Borrower' s business
or financial condition and there is no basis known to Borrower for
any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand which could result in the same; and (i)
this Agreement and the Note do not contain any untrue statement of
material fact or omit to state a material fact necessary in order
to make the statements contained in this Agreement and the Note not
misleading.
5.
Events of Default. For purposes of this Agreement, the term "Event
of Default" shall mean and refer to any of the
following:
a.
Failure of Borrower to perform or observe any covenant set forth in
this Agreement, or to perform or observe any other term, condition,
covenant, warranty, agreement or other provision contained in this
Agreement, where such failure continues for fifteen (15) days after
receipt of written notice from Lender specifying such
failure;
b.
Any representation or warranty made or furnished by Borrower in
writing in connection with this Agreement and the Note or any
statement or representation made in any certificate, report or
opinion delivered pursuant to this Agreement or in connection with
this Agreement is false, incorrect or incomplete in any material
respect at the time it is furnished; or
c.
Occurrence of any other Event of Default as defined in the
Note.
6.
Remedies. Upon the occurrence and during the continuance of an
Event of Default (subject to the notice and cure provisions
provided for herein, if any), each Secured Party shall have the
rights of a secured creditor under the Uniform Commercial Code of
the applicable jurisdiction, all rights granted by the Note, this
Security Agreement and by law, including the right to require
Borrower to assemble the Collateral and make it available to the
Secured Parties at a place to be designated by Borrower. The rights
and remedies provided in this Agreement and the Note are cumulative
and may be exercised independently or concurrently, and are not
exclusive of any other right or remedy provided at law or in
equity. No failure to exercise or delay by the Secured Parties in
exercising any right or remedy under this Agreement or the Note
shall impair or prohibit the exercise of any such rights or
remedies in the future or be deemed to constitute a waiver or
limitation of any such right or remedy or acquiescence therein.
Every right and remedy granted to the Secured Parties under this
Agreement and the Note or by law or in equity may be exercised by
any Secured Party at any time and from time to time.
7.
Further Assurances. Borrower agrees that, from time to time, at its
own expense, it will:
a.
Protect and defend the Collateral against all claims and demands of
all persons at any time claiming the same or any interest therein,
and preserve and protect Secured Party's security interest in the
Collateral.
b.
Promptly execute and deliver to Secured Parties all instruments and
documents, and take all further action necessary or desirable, as
any Secured Party may reasonably request to (i) continue, perfect,
or protect any security interest granted or purported to be granted
hereby, and (ii) enable a Secured Party to exercise and enforce any
of Secured Party's rights and remedies hereunder with respect to
any Collateral.
c.
Permit a Secured Party's representatives to inspect and make copies
of all books and records relating to the Collateral, wherever such
books and records are located, and to conduct an audit relating to
the Collateral at any reasonable time or times.
8.
Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal
delivery to the party to be notified, (b) when sent by confirmed
telex, e-mail or facsimile if sent during normal business hours of
the recipient, if not, then on the next business day, (c) five (5)
days after having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (d) one (I) day after
deposit with a nationally recognized overnight courier, specifying
next day delivery, with written verification of receipt. All
communications shall be sent as follows:
If
to the Borrower, to:
GUIDED
THERAPEUTICS, INC. 5835 Peachtree Comers East, Suite D Norcross, GA
30092
Attn:
Gene Cartwright
E-mail:
info@guidedinc.com
If
to the Secured Party:
Auctus
Fund, LLC
545
Boylston Street, 2nd Floor
Boston,
MA 02116
Attn:
Lou Posner
Facsimile:
(617) 532-6420
or
to such other address or telecopy number as the party to whom
notice is to be given may have furnished to the other party in
writing in accordance herewith.
10. Amendments and Waivers. No modification,
amendment or waiver of any provision of, or consent required by,
this Agreement, nor any consent to any departure here from, shall
be effective unless it is in writing and signed by each of the
parties hereto. Such modification, amendment, waiver
or consent shall be effective only in the specific instance
and for the purpose for which
given.
II.
Exclusivity and Waiver of Rights. No failure to exercise and no
delay in exercising on the part of any party, any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege
preclude any other right, power or privilege. The rights and
remedies herein provided are cumulative and are not exclusive of
any other rights or remedies provided by law.
12.
Invalidity. Any term or provision of this Agreement shall be
ineffective to the extent It IS declared invalid or unenforceable,
without rendering invalid or enforceable the remaining terms and
provisions of this Agreement.
13.
Headings. Headings used in this Agreement are inserted for
convenience only and shall not affect the meaning of any term or
provision of this Agreement.
14.
Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original instrument,
but all of which collectively shall constitute one and the same
agreement.
15.
Assignment. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by the any of the parties
without the prior written consent of all Secured Parties, at their
sole and absolute discretion.
16.
Survival. Unless otherwise expressly provided herein, all
representations warranties, agreements and covenants contained in
this Agreement shall survive the execution hereof and shall remain
in full force and effect until the earliest to occur of (a) the
payment in full of the Note, and (b) the conversion of the
principal and accrued and unpaid interest and all other amounts
owing under the Note into common stock of Borrower.
17.
Miscellaneous. This Agreement shall inure to the benefit of each of
the parties hereto and all their respective successors and
permitted assigns. Nothing in this Agreement is intended or shall
be construed to give to any other person, firm or corporation any
legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained.
18.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA (WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
19.
CONSENT TO JURlSDICTION. ANY ACTION BROUGHT BY EITHER PARTY AGAINST
THE OTHER ARISING OUT OF OR RELATED TO THIS AGREEMENT SHALL BE
COMMENCED ONLY IN THE STATE OR FEDERAL COURTS OF GENERAL
JURISDICTION LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS, EXCEPT
THAT ALL SUCH DISPUTES BETWEEN THE PARTIES SHALL BE SUBJECT TO
ALTERNATIVE DISPUTE RESOLUTION THROUGH BINDING ARBITRATION AT THE
HOLDER'S SOLE DISCRETION AND ELECTION (REGARDLESS OF WHICH PARTY
INITIATES THE LEGAL PROCEEDINGS).
20.
WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THISAGREEMENT. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEKTO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND EACH OF THE OTHER PARTIES
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
20.
21.
Attorneys' Fees. In the event that any suit or action is instituted
to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all
fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Agreement, including without
limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
22.
Entire Agreement. This Agreement contains the entire agreement
among the parties with respect to the transactions contemplated by
this Agreement and supersedes all prior agreements or
understandings among the parties with respect to the subject matter
hereof.
[SIGNATURE
PAGE(S) FOLLOW]
IN
WITNESS THEREOF, the undersigned Buyer and the Company have caused
this agreement to be duly executed as of date first above
written.
GUIDED THERAPEUTICS, INC.
/s/
Gene S. Cartwright
Gene
S. Cartwright
Chef
Executive Officer
AUCTUS FUND, LLC
/s/
Lou Posner
Lou
Posner
Managing
Director
EXHIBIT
A
COLLATERAL
Borrower
hereby grants, pledges, and assigns for the benefit of each Secured
Party, and there is hereby created in favor of the Secured Parties,
a security interest in and to all of Borrower's right, title, and
interest in, to, and under all assets and all personal property of
Borrower and the Borrower's subsidiaries (including but not limited
to Interscan, Inc.), whether now or hereafter existing, or now
owned or hereafter acquired, including but not limited to the
following (collectively, "Collateral "):
1.
All
accounts, chattel paper, contracts, contract rights, accounts
receivable, tax refunds, Note receivable, documents, other choses
in action and general intangibles, including, but not limited to,
proceeds of inventory and returned goods and proceeds from the sale
of goods and services, and all rights, liens, securities,
guaranties, remedies and privileges related thereto, including the
right of stoppage in transit and rights and property of any kind
forming the subject matter of any of the foregoing ("Accounts
Receivable");
2.
All
time, savings, demand, certificate of deposit or other accounts in
the name of Borrower or in which Borrower has any right, title or
interest, including but not limited to all sums now or at any time
hereafter on deposit, and any renewals, extensions or replacements
of and all other property which may from time to time be acquired
directly or indirectly using the proceeds of any of the
foregoing;
3.
All
inventory and equipment of every type or description wherever
located, including, but not limited to all raw materials, parts,
containers, work in process, finished goods, goods in transit,
wares, merchandise furniture, fixtures, hardware, machinery, tools,
parts, supplies, automobiles, trucks, other intangible property of
whatever kind and wherever located associated with the Borrower's
business, tools and goods returned for credit, repossessed,
reclaimed or otherwise reacquired by Borrower;
4.
All
documents of title and other property from time to time received,
receivable or otherwise distributed in respect of, exchange or
substitution for or addition to any of the foregoing including, but
not limited to, any documents of title;
5.
All
know-how, information, permits, patents, copyrights, goodwill,
trademarks, trade names, licenses and approvals held by Borrower,
including all other intangible property of Borrower;
6.
All
assets of any type or description that may at any time be assigned
or delivered to or come into possession of Borrower for any purpose
for the account of Borrower or as to which Borrower may have any
right, title, interest or power, and property in the possession or
custody of or in transit to anyone for the account of Borrower, as
well as all proceeds and products thereof and accessions and
annexations thereto; and
7.
All
proceeds (including but not limited to insurance proceeds) and
products of and accessions and annexations to any of the
foregoing.
Exhibit 10.42
REGISTRATION RIGHTS
AGREEMENT
REGISTRATION
RIGHTS AGREEMENT (this
"Agreement"), dated as of December 17, 2019, by and between
GUIDED
THERAPEUTICS, INC., a Delaware
corporation (the "Company"), and AUCTUS FUND,
LLC, a Delaware limited
liability company (together with it permitted assigns, the
"Buyer"). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the
securities purchase agreement by and between the parties hereto,
dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Purchase
Agreement").
WHEREAS:
The
Company has agreed, upon the terms and subject to the conditions of
the Purchase Agreement, to sell to the Buyer that certain senior
secured convertible promissory note in the principal amount of
$700,000.00 (the "Note") and Warrant (as defined in the Purchase
Agreement) (the "Warrant") dated December 17, 2019, and to induce
the Buyer to enter into the Purchase Agreement, the Company has
agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder,
or any similar successor statute (collectively, the "Securities
Act"), and applicable state securities laws.
NOW,
THEREFORE, in consideration of
the promises and the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Buyer hereby
agree as follows:
1.
DEFINITlONS
As
used in this Agreement, the following terms shall have the
following meanings:
a.
"Investor" means the Buyer, any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement in accordance
with Section 9 and who agrees to become bound by the provisions of
this Agreement, and any transferee or assignee thereof to whom a
transferee or assignee assigns its rights under this Agreement in
accordance with Section 9 and who agrees to become bound by the
provisions of this Agreement.
b. "Person"
means any individual or entity including but not limited to
any corporation, a limited
liability company, an association, a partnership, an organization,
a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
c. "Register," "registered," and "registration" refer to a
registration effected by
preparing
and filing one or more registration statements of the Company in
compliance with the Securities Act and/or pursuant to Rule 415
under the Securities Act or any successor rule providing for
offering securities on a continuous basis ("Rule 415"), and the
declaration or ordering of effectiveness of such registration
statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d.
"Registrable Securities" means all of the shares of Common Stock
into which the Note is convertible into and the Warrant is
exercisable into, which have been, or which may, from time to time
be issued, including without limitation all of the shares of common
stock which have been issued or will be issued to the Investor
under the Purchase Agreement (without regard to any limitation or
restriction on purchases), shares of common stock issued to the
Investor as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without
regard to any limitation on purchases under the Purchase
Agreement.
e.
"Registration Statement" means one or more registration statements
of the Company covering only the sale of the Registrable
Securities.
2.
REGISTRATION.
a.
Mandatory Registration. The Company shall, within ninety (90)
calendar days from the date hereof, file with the SEC an initial
Registration Statement covering the maximum number of Registrable
Securities (in any event equal to at least the Reserved Amount (as
defined in the Note)) as shall be permitted to be included thereon
in accordance with applicable SEC rules, regulations and
interpretations so as to permit the resale of such Registrable
Securities by the Investor, including but not limited to under Rule
415 under the Securities Act at then prevailing market prices (and
not fixed prices), as mutually determined by both the Company and
the Investor in consultation with their respective legal counsel,
subject to the aggregate number of authorized shares of the
Company' s Common Stock then available for issuance in its
Certificate of Incorporation. The initial Registration Statement
shall register only the Registrable Securities unless signed
written consent from the Investor is obtained by the Company. The
Investor and its counsel shall have a reasonable opportunity to
review and comment upon such Registration Statement and any
amendment or supplement to such Registration Statement and any
related prospectus prior to its filing with the SEC, and the
Company shall give due consideration to all reasonable comments.
The Investor shall furnish all information reasonably requested by
the Company for inclusion therein. The Company shall have the
Registration Statement and any amendment declared effective by the
SEC at the earliest possible date (in any event within one hundred
fifty (150) calendar days from the date hereof). The Company shall
keep the Registration Statement effective, including but not
limited to pursuant to Rule 415 promulgated under the Securities
Act and available for the resale by the Investor of all of the
Registrable Securities covered thereby at all times until the
earlier of (i) the date as of which the Investor may sell all of
the Registrable Securities without restriction pursuant to Rule 144
promulgated under the Securities and (ii) the date on which the
Investor shall have sold all the Registrable Securities covered
thereby (the "Registration Period"). The Registration Statement
(including any amendments or supplements thereto and prospectuses
contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading.
b.
Rule 424 Prospectus. The Company shall, as required by applicable
securities regulations, from time to time file with the SEC,
pursuant to Rule 424 promulgated under the Securities Act, the
prospectus and prospectus supplements, if any, to be used in
connection with sales of the Registrable Securities under the
Registration Statement. The Investor and its counsel shall have a
reasonable opportunity to review and comment upon such prospectus
prior to its filing with the SEC, and the Company shall give due
consideration to all such comments. The Investor shall use its
reasonable best efforts to comment upon such prospectus within one
(I) Business Day from the date the Investor receives the final
pre-filing version of such prospectus.
c.
Sufficient Number of Shares Registered. In the event the number of
shares available under the Registration Statement is insufficient
to cover all of the Registrable Securities, the Company shall amend
the Registration Statement or file a new Registration Statement (a
"New Registration Statement"), so as to cover all of such
Registrable Securities (subject to the limitations set forth in
Section 2(a)) as soon as practicable, but in any event not later
than ten (10) Business Days after the necessity therefor arises,
subject to any limits that may be imposed by the SEC pursuant to
Rule 415 under the Securities Act (with the understanding that this
process shall be repeated until the Note is satisfied in full and
the Warrant is exercised in full). The Company shall use it
reasonable best efforts to cause such amendment and/or New
Registration Statement to become effective as soon as practicable
following the filing thereof. In the event that any of the
Registrable Securities are not included in the Registration
Statement, or have not been included in any New Registration
Statement and the Company files any other registration statement
under the Securities Act (other than on Form S-4, Form S-8, or with
respect to other employee related plans or rights offerings)
("Other Registration Statement") then the Company shall include
such remaining Registrable Securities in such Other Registration
Statement.
d. Offering. If the staff of the SEC (the "Staff") or the SEC
seeks to characterize any offering pursuant to a Registration
Statement filed pursuant to this Agreement as constituting an
offering of securities that does not permit such Registration
Statement to become effective and be used for resales by the
Investor under Rule 415 at then prevailing market prices (and not
fixed prices), or if after the filing of the initial Registration
Statement with the SEC pursuant to Section 2(a), the Company is
otherwise required by the Staff or the SEC to reduce the number of
Registrable Securities included in such initial Registration
Statement, then the Company shall reduce the number of Registrable
Securities to be included in such initial Registration Statement
(with the prior consent, which shall not be unreasonably withheld,
of the Investor and its legal counsel as to the specific
Registrable Securities to be removed therefrom) until such time as
the Staff and the SEC shall so permit such Registration Statement
to become effective and be used as aforesaid. In the event of any
reduction in Registrable Securities pursuant to this paragraph, the
Company shall file one or more New Registration Statements in
accordance with Section 2(c) until such time as all Registrable
Securities have been included in Registration Statements that have
been declared effective and the prospectus contained therein is
available for use by the Investor. Notwithstanding any provision
herein or in the Purchase Agreement to the contrary, the Company's
obligations to register Registrable Securities (and any related
conditions to the Investor's obligations) shall be qualified as
necessary to comport with any requirement of the SEC or the Staff
as addressed in this Section 2(d).
3.
RELATED OBLIGATIONS.
With
respect to the Registration Statement and whenever any Registrable
Securities are to be registered pursuant to Section 2 including on
any New Registration Statement, the Company shall use its
reasonable best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have
the following obligations:
a.The
Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to any
registration statement and the prospectus used in connection with
such registration statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the Securities Act, as may
be necessary to keep the Registration Statement or any New
Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of
all Registrable Securities of the Company covered by the
Registration Statement or any New Registration Statement until such
time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the
seller or sellers thereof as set forth in such registration
statement.
b.
The Company shall permit the Investor to review and comment upon
the Registration Statement or any New Registration Statement and
all amendments and supplements thereto at least two (2) Business
Days prior to their filing with the SEC, and not file any document
in a form to which Investor reasonably objects. The Investor shall
use its reasonable best efforts to comment upon the Registration
Statement or any New Registration Statement and any amendments or
supplements thereto within two (2) Business Days from the date the
Investor receives the final version thereof. The Company shall
furnish to the Investor, without charge any correspondence from the
SEC or the staff of the SEC to the Company or its representatives
relating to the Registration Statement or any New Registration
Statement.
c.
Upon request of the Investor, the Company shall furnish to the
Investor, (i) promptly after the same is prepared and filed with
the SEC, at least one copy of such registration statement and any
amendment(s) thereto, including financial statements and schedules,
all documents incorporated therein by reference and all exhibits,
(ii) upon the effectiveness of any registration statement, a copy
of the prospectus included in such registration statement and all
amendments and supplements thereto (or such other number of copies
as the Investor may reasonably request) and (iii) such other
documents, including copies of any preliminary or final prospectus,
as the Investor may reasonably request from time to time in order
to facilitate the disposition of the Registrable Securities owned
by the Investor. For the avoidance of doubt, any filing available
to the Investor via the SEC's live EDGAR system shall be deemed
"furnished to the Investor" hereunder.
d.
The Company shall use reasonable best efforts to (i) register and
qualify the Registrable Securities covered by a registration
statement under such other securities or "blue sky" laws of such
jurisdictions in the United States as the Investor reasonably
requests, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to
such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period,
(iii) take such other actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for
sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section
3(d), (y) subject itself to general taxation in any such
jurisdiction, or (z) file a general consent to service of process
in any such jurisdiction. The Company shall promptly notify the
Investor who holds Registrable Securities of the receipt by the
Company of any notification with respect to the suspension of the
registration or qualification of any of the Registrable Securities
for sale under the securities or "blue sky" laws of any
jurisdiction in the United States or its receipt of actual notice
of the initiation or threatening of any proceeding for such
purpose.
e.
As promptly as practicable after becoming aware of such event or
facts, the Company shall notify the Investor in writing of the
happening of any event or existence of such facts as a result of
which the prospectus included in any registration statement, as
then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and
promptly prepare a supplement or amendment to such registration
statement to correct such untrue statement or omission, and deliver
a copy of such supplement or amendment to the Investor (or such
other number of copies as the Investor may reasonably request). The
Company shall also promptly notify the Investor in writing (i) when
a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a registration statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to the Investor by email or
facsimile on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements
to any registration statement or related prospectus or related
information, and (iii) of the Company's reasonable determination
that a post-effective amendment to a registration statement would
be appropriate.
f. The Company shall use its reasonable best efforts
to prevent the issuance of any stop order or other suspension of
effectiveness of any registration statement, or the suspension of
the qualification of any Registrable Securities for sale in any
jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest
possible moment and to notify the Investor of the issuance of such
order and the resolution thereof or its receipt of actual notice of
the initiation or threat of any proceeding for such
purpose.
g.
The Company shall (i) cause all the Registrable Securities to be
listed on each securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if
the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) secure designation and
quotation of all the Registrable Securities on the Principal
Market. The Company shall pay all fees and expenses in connection
with satisfying its obligation under this Section.
h.
The Company shall cooperate with the Investor to facilitate the
timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to he
offered pursuant to any registration statement and enable such
certificates to be in such denominations or amounts as the Investor
may reasonably request and registered in such names as the Investor
may request.
i.
The Company shall at all times provide a transfer agent and
registrar with respect to its Common Stock.
j. If reasonably
requested by the Investor, the Company shall (i) immediately
incorporate in a prospectus supplement or post-effective amendment
such information as the Investor believes should be included
therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect
to the number of Registrable Securities being sold, the purchase
price being paid therefor and any other terms of the offering of
the Registrable Securities;
(ii)
make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable upon notification
of the matters to be incorporated in such prospectus supplement or
post effective amendment; and (iii) supplement or make amendments
to any registration statement.
k.
The Company shall use its reasonable best efforts to cause the
Registrable Securities covered by any registration statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to consummate the disposition of
such Registrable Securities.
I.
Within one (I) Business Day after any registration statement which
includes the Registrable Securities is ordered effective by the
SEC, the Company shall deliver, and shall cause legal counsel for
the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Investor) confirmation that such
registration statement has been declared effective by the SEC in
the form attached hereto as Exhibit A. Thereafter, if requested by
the Buyer at any time, the Company shall require its counsel to
deliver to the Buyer a written confirmation whether or not the
effectiveness of such registration statement has lapsed at any time
for any reason (including, without limitation, the issuance of a
stop order) and whether or not the registration statement is
current and available to the Buyer for sale of all of the
Registrable Securities.
m.
The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of Registrable
Securities pursuant to any registration statement.
4.
OBLIGATIONS OF THE INVESTOR.
a.
The Company shall notify the Investor in writing of the information
the Company reasonably requires from the Investor in connection
with any registration statement hereunder. The Investor shall
furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be
reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.
b.
The Investor agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and
filing of any registration statement hereunder.
c.
The Investor agrees that, upon receipt of any notice from the
Company of the happening of any event or existence of facts of the
kind described in Section 3(t) or the first sentence of 3(e), the
Investor will immediately discontinue disposition of Registrable
Securities pursuant to any registration statement(s) covering such
Registrable Securities until the Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section
3(t) or the first sentence of 3(e). Notwithstanding anything to the
contrary, the Company shall cause its transfer agent to promptly
deliver shares of Common Stock without any restrictive legend in
accordance with the terms of the Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an
Investor has entered into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of
any event oftbe kind described in Section 3(t) or the first
sentence of Section 3(e) and for which the Investor has not yet
settled.
5.
EXPENSES OF REGISTRATION.
All
reasonable expenses, other than sales or brokerage commissions,
incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees,
printers and accounting fees, and fees and disbursements of counsel
for the Company, shall be paid by the Company.
6.
INDEMNIFICATION.
a.
To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend the Investor, each
Person, if any, who controls the Investor, the members, the
directors, officers, partners, employees, agents, representatives
of the Investor and each Person, if any, who controls the Investor
within the meaning of the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (each, an "Indemnified
Person"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees,
amounts paid in settlement or expenses, joint or several,
(collectively, "Claims") incurred in investigating, preparing or
defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an
indemnified party is or may be a party thereto ("Indemnified
Damages"), to which any of them may become subject insofar as such
Claims (or actions or proceedings, whether commenced or threatened,
in respect thereat) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in the
Registration Statement, any New Registration Statement or any
post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which
Registrable Securities are offered ("Blue Sky Filing"), or the
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged
omission to state therein any material fact necessary to make the
statements made therein, in light of the circumstances under which
the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the Securities
Act, the Exchange Act, any other law, including, without
limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable
Securities pursuant to the Registration Statement or any New
Registration Statement or (iv) any material violation by the
Company of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, "Violations"). The Company shall
reimburse each Indemnified Person promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything
to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim by
an Indemnified Person arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information
about the Investor furnished in writing to the Company by such
Indemnified Person expressly for use in connection with the
preparation of the Registration Statement, any New Registration
Statement or any such amendment thereof or supplement thereto, if
such prospectus was timely made available by the Company pursuant
to Section 3(c) or Section 3(e); (ii) with respect to any
superseded prospectus, shall not inure to the benefit of any such
person from whom the person asserting any such Claim purchased the
Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue
statement or omission of material fact contained in the superseded
prospectus was corrected in the revised prospectus, as then amended
or supplemented, if such revised prospectus was timely made
available by the Company pursuant to Section 3( c) or Section 3(
e), and the Indemnified Person was promptly advised in writing not
to use the incorrect prospectus prior to the use giving rise to a
violation and such Indemnified Person, notwithstanding such advice,
used it; (iii) shall not be available to the extent such Claim is
based on a failure of the Investor to deliver or to cause to be
delivered the prospectus made available by the Company, if such
prospectus was timely made available by the Company pursuant to
Section 3(c) or Section 3(e); and (iv) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent
shall not be unreasonably withheld. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on
behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investor pursuant to Section
9.
b. Promptly after receipt by an
Indemnified Person or Indemnified Party under this Section 6 of
notice of the commencement of any action or proceeding (including
any governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under
this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the
Indemnified Person or the Indemnified Party, as the case may be;
provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and
expenses to he paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the indemnifying party,
the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding. The Indemnified
Party or Indemnified Person shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of
any such action or claim by the indemnifying party and shall
furnish to the indemnifying party all information reasonably
available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep
the indemnified Party or Indemnified Person fully apprised at all
times as to the status of the defense or any settlement
negotiations with respect thereto. No indemnifying party
shall be liable for any settlement of
any action, claim or proceeding effectuated without its written
consent, provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such claim or litigation.
Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third
parties, firms or corporations relating to the matter for which
indemnification has been made. The failure to deliver written
notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying
party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such
action.
c.
The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or
Indemnified Damages are incurred.
d.
The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and
(ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
7.
CONTRIBUTION.
To
the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make
the maximum contribution with respect to any amounts for which it
would otherwise be liable under Section 6 to the fullest extent
permitted by law; provided, however, that: (i) no seller of
Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section ll(f) of the Securities Act) shall
be entitled to contribution from any seller of Registrable
Securities who was not guilty of fraudulent misrepresentation; and
(ii) contribution by any seller of Registrable Securities shall be
limited in amount to the net amount of proceeds received by such
seller from the sale of such Registrable Securities.
8.
REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.
With
a view to making available to the Investor the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or
regulation of the SEC that may at any time permit the Investor to
sell securities of the Company to the public without registration
("Rule 144"), the Company agrees, at the Company's sole expense,
to:
a.
make and keep public information available, as those terms are
understood and defined in Rule 144;
b.
file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act so long as the Company remains subject to such
requirements and the filing of such reports and other documents is
required for the applicable provisions of Rule 144;
c. furnish to the Investor so
long as the Investor owns Registrable Securities, promptly upon
request, (i) a written statement by the Company that it has
complied with the reporting and or disclosure provisions of Rule
144, the Securities Act and the Exchange Act, (ii) a copy of the
most recent annual or quarterly
report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may he
reasonably requested to permit the Investor to sell such securities
pursuant to Rule 144 without registration; and
d.
take such additional action as is requested by the Investor to
enable the Investor to sell the Registrable Securities pursuant to
Rule 144, including, without limitation, delivering all such legal
opinions, consents, certificates, resolutions and instructions to
the Company's Transfer Agent as may be requested from time to time
by the Investor and otherwise fully cooperate with Investor and
Investor's broker to effect such sale of securities pursuant to
Rule 144.
The
Company agrees that damages may be an inadequate remedy for any
breach of the terms and provisions of this Section 8 and that
Investor shall, whether or not it is pursuing any remedies at law,
be entitled to equitable relief in the form of a preliminary or
permanent injunctions, without having to post any bond or other
security, upon any breach or threatened breach of any such terms or
provisions.
9.
ASSIGNMENT OF REGISTRATION RIGHTS.
The
Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
Investor.
10.
AMENDMENT OF REGISTRATION RIGHTS.
No
provision of this Agreement may be amended or waived by the parties
from and after the date that is one Business Day immediately
preceding the initial filing of the Registration Statement with the
SEC. Subject to the immediately preceding sentence, no provision of
this Agreement may be (i) amended other than by a written
instrument signed by both parties hereto or (ii) waived other than
in a written instrument signed by the party against whom
enforcement of such waiver is sought. Failure of any party to
exercise any right or remedy under this Agreement or otherwise, or
delay by a party in exercising such right or remedy, shall not
operate as a waiver thereof.
11.
MISCELLANEOUS.
a.
A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such
Registrable Securities. If the Company receives conflicting
instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from
the registered owner of such Registrable Securities.
b.
Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered:
(i)
upon receipt, when delivered personally; (ii) upon receipt, when
sent by facsimile or email; or (iii) one
(1)
Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to
receive the same. The addresses for such communications shall
be:
If
to the Company, to:
GUIDED THERAPEUTICS,
INC.
5835
Peachtree Comers East, Suite D
Norcross,
GA 30092
Attn: Gene Cartwright
E-mail:
info@guidedinc.com
If
to the Investor:
AUCTUS FUND, LLC
545
Boylston Street, 2nd Floor Boston,
MA
02116
Attn:
Lou Posner
Facsimile:
(617) 532-6420
or
at such other address and/or facsimile number and/or to the
attention of such other person as the recipient party bas specified
by written notice given to each other party three (3) Business Days
prior to the effectiveness of such change. Written confirmation of
receipt (A) given by the recipient of such notice, consent, waiver
or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine or email account
containing the time, date, recipient facsimile number or email
address, as applicable, and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight
delivery service, shall be rebuttable evidence of personal service,
receipt by facsimile or receipt from a nationally recognized
overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.
c. The corporate laws of the
State of Nevada shall govern all issues concerning this Agreement.
All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed
by the internal laws of the State of Nevada, without giving effect
to any choice of law or conflict of law provision or rule (whether
of the State of Nevada or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the
State of Nevada. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state courts located in the
Commonwealth of Massachusetts and federal courts located in the
Commonwealth of Massachusetts, 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. Each party hereby irrevocably waives
personal service of process and consents to process being served in
any such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of
this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.
d.
This Agreement and the Purchase Agreement constitute the entire
agreement among the parties hereto with respect to the subject
matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred
to herein and therein. This Agreement and the Purchase Agreement
supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and
thereof.
e.
Subject to the requirements of Section 9, this Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties hereto.
f.
The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
g.
This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a
party, may be delivered to the other party hereto by facsimile
transmission or by email in a ".pdf' format data file of a copy of
this Agreement bearing the signature of the party so delivering
this Agreement.
h.
Each party shall do and perform, or cause to be done and performed,
all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
i.
The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and
no rules of strict construction will be applied against any
party.
j.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns, and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of day and year first above written.
THE COMPANY:
GUIDED
THERAPEUTICS INC.
By:
/s/ Gene S. Cartwright
Name:
GENE S. CARTWRIGHT
Title:
CHIEF EXECUTIVE OFFICER
THE INVESTOR:
AUCTUS
FUND, LLC
By:
/s/ Lou
Posner
Name:
LOU POSNER
Title:
MANAGING DIRECTOR
Exhibit 10.43
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "Agreement")
is made and entered into effective
as of the ___ day of
December, 2019,
by and between
GUIDED THERAPEUTICS,
INC., a Delaware corporation (the "Company")
and the undersigned creditor of the Company
(the "Creditor").
WITNESSETH:
WHEREAS, the
Creditor is the payee of certain obligations owed to the Creditor
by the Company as set
forth on Exhibit
A
hereto (the "Obligations");
WHEREAS, in
satisfaction in full
of the Obligations, the
Creditor is willing to accept certain securities of the Company
as set forth on
Exhibit B
hereto (the
"Securities" and such
transaction, the "Exchange");
WHEREAS, the Exchange is
being made in reliance upon the exemption from registration
provided by Section 4(a)(2) of the Securities
Act; and
WHEREAS, the
Company and the Creditor desire to enter into
this Agreement to evidence and
set forth the terms of
the exchange of
the Securities for and in
satisfaction of the Obligations;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained,
and intending to be legally
bound hereby, the parties hereto, being duly sworn, do covenant,
agree and certify
as follows:
1. Recitals.
The parties hereto acknowledge and agree that the
foregoing recitals are true and
accurate and
constitute part of
this Agreement to the
same extent as if
contained in the body
hereof.
2. Definitions.
In addition to the terms
defined elsewhere
in this Agreement: (a) capitalized
terms that are not otherwise defined herein have the meanings given
to
such terms in the
Obligations (as defined herein), and
(b) the following terms have the
meanings set
forth in this Section I .
I:
"Affiliate"
means any Creditor that,
directly or indirectly
through one or
more intermediaries, controls or
is controlled by or is under common control
with a
Creditor, as such
terms are used in and construed
under Rule 405 under the Securities Act.
"Board
of
Directors"
means the board of directors of the
Company.
"Common
Stock" means
the common stock of
the Company, par value
$0.001 per share, and
any other class of
securities into which
such securities may hereafter be reclassified
or changed.
"Exchange
Act"
means the Securities
Exchange Act of
1934, as
amended, and
the rules and regulations promulgated thereunder.
“Liens" means
a lien, charge,
pledge, security interest,
encumbrance, right
of first
refusal, preemptive right or other
restriction.
"Creditor" means
an individual or
corporation,
partnership, trust,
incorporated or unincorporated
association, joint
venture, limited liability
company, joint stock
company, government (or an agency or
subdivision thereof) or
other entity of
any kind.
"Securities" has
the meaning set forth in the
Preamble of this Agreement.
"Securities
Act" means
the Securities Act of
1933,
as amended, and
the rules and regulations promulgated
thereunder.
3. Exchange
and
Satisfaction. The
Obligations are
hereby surrendered by
the Creditor and exchanged
for the Securities and
other considerations according to the following
terms and
conditions.
a.
As of December
____, 2019, the Creditor
currently holds unsecured notes
with Company
in the amount of ________________, including
both principal and
interest, Both the Company and Creditor wish
to continue their relationship under mutually
agreeable
terms.
b.
In lieu of
agreeing to dismiss the
entire amount of what
the Creditor is currently
owed by the
Company, the Creditor
agrees to accept in exchange ___________ shares of the Company's Stock
and warrants to purchase
the Company's common
shares, pursuant
to a separate
warrant agreement to be
executed once the Company has successfully
completed a new
financing as
defined in Section 3c.
below. The schedule of warrants to purchase common shares of Guided Therapeutics is listed
below:
(i)
Warrants to purchase ___________ shares at $0.20 (twenty
cents) each.
(ii)
Warrants to purchase __________
shares at $0.25 (twenty-five cents)
each.
(iii)
Warrants to purchase __________
shares at $0.75
(seventy-five cents) each.
All warrants will be exercisable immediately upon
issuance and
will expire after three years. Warrants will
not have a cashless
exercise provision unless
they are not registered
within six (6) months of
issuance.
c.
Both parties agree
that the exchange of debt for equity
contemplated by
this Agreement shall occur once the Company has
successfully raised a minimum of
one million dollars ($1,000,000)
in a new
financing.
d.
A 10%
blocker shall
be effected such that the Creditor agrees to restrict its
holdings of the Company's Common
Shares to
less
than 10% of the total number of the
Company’s outstanding common shares at one
point in time.
4.
Representations
and Warranties of the Company. The Company hereby makes the following
representations and warranties to Creditor:
(a)
Authorization;
Enforcement. The Company has
the requisite corporate power and authority to enter into and to
consummate the transactions, contemplated
by this Agreement and otherwise to carry out its obligations
hereunder The execution and delivery of this Agreement by the
Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company's stockholders in connection he11 with or
therewith. This Agreement have been (or upon delivery will have
been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligations of the Company enforceable again t
the Company in accordance with their terms,
except: {i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
there laws of general application affecting enforcement of
creditors' rights generally, ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and
contribution pro
may
be limited by applicable law.
(b)
Issuance of the
Securities. The
Securities are duly authorized and, hence issued and paid for in
accordance with this Agreement, will be duly and validly issued,
fully paid and non-assessable, free and clear of all Liens imposed
by the Company.
The shares of Common Stock underlying
the Securities (if any), when issued in accordance with
the.terms of the Securities, will be validly
issued, fully paid and non-assessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer required by law.
5. Representations and
Warranties of the Creditor. Creditor hereby represents and warrants
as of the date hereof and as of the Closing Date to the Company as
follows (unless as of a specific date therein):
(a) Own
Account. Creditor understands that the Securities are "restricted
securities":
and have not been registered under the
Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or
any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing and such Securities in violation of the Securities Act
or any applicable state securities law and as no direct or indirect
arrangement or understandings with any other Creditors to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Creditor's right to sell the
Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). The
Creditor is acquiring the Securities hereunder in the ordinary
course of its business.
(b) Creditor's
Status. At the time the Creditor was offered the Securities, it was
and as of the date hereof it is, an "accredited investor'' as
defined in Rule 501 (a) under the Securities Act.
(c) Experience
of Creditor. Creditor, either alone or together representatives,
has such knowledge, sophistication and experience in business and
fin matters so as to be capable of evaluating the merits and risks
of the prospective invest in the Securities, and has so evaluated
the merits and risks of such investment. Creditor is
able to bear the economic risk of an investment in the Securities
and, present time,
is able to afford a complete loss of
such investment.
6. Release.
The Creditor acknowledges and agrees
that it shall have no her rights or interest in, and shall
not receive any further consideration, payment or distribution of
any kind with respect to, the Obligations. In such regard, the
Creditor hereby waives, relinquishes, remises and releases all
rights, claims, interests or liabilities, known and own, of any
nature whatsoever in law or equity which the Creditor may
previously have had o may now or hereafter have as against or to
receive from the Company arising out of, resulting from or relating
to the Obligations or any rights or interest of the Creditor with
respect thereto.
7. Transfer
Restrictions. The Securities
may only be disposed of in compliance with state and federal
securities laws.
In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144 under the Securities Act, o the Company or to
an Affiliate of a Creditor, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by
the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration o such 1 transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement. The Creditors agree to the imprinting of a
legend on any of the Securities in the following
form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO
WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE)] HAS [NOT] BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (“THE
"SECURITIES ACT"), AND
ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A. TRANSACTION
NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
8. Further
Assurances. The Creditor shall hereafter, without further
consideration execute and deliver promptly to the Company such
further consents,
waivers,
assignments,
endorsements and other documents and
instruments, and to take all such further
actions, as the Company
may from time to time reasonably request with respect to the
exchange and satisfaction of the Obligations Interest and the
consummation in full thereof.
9. Successors
and Assigns. This Agreement is
binding upon,
and shall inure t
the
benefit of, the parties hereto and their
respective successors and assigns.
10. Counterparts.
This Agreement may be executed in
multiple counterparts,
each of which shall be deemed
an original and all of which, when taken
together, shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties
hereto have affixed their hands and seal by signing this Agreement
as of the day and year first above written.
[Signatures on Following Page]
Company:
Guided
Therapeutics, Inc.
By:
__________________________
Name:
Gene Cartwright
Title:
CEO
Creditor:
By:
__________________________
Name:
________________________
For:
________________________
Address:
_____________________
Exhibit 10.44
SECURITY
AGREEMENT
This SECURITY AGREEMENT, dated as of December 30,
2019 (this “Agreement”),
is among Guided Therapeutics, Inc., a Delaware corporation (the
“Company”),
all of the Subsidiaries of the Company (such subsidiaries, the
“Guarantors” and together with the Company, the
“Debtors”)
and the holders (including their endorsees, transferees and assigns
collectively, the “Secured
Parties”) signatory to
that certain Securities Purchase Agreement, dated as of December
30, 2019 (“Purchase
Agreement”) for the
issuance of the of shares of Series D Convertible Preferred Stock
(“Preferred
Stock”) which are
exchangeable into the Company’s 12% Senior Secured
Convertible Debentures due three (3) years following their
issuance, in the original aggregate principal amount of $738,000.00
(collectively, the “Debentures”).
W I T N E S S E T H:
WHEREAS, in order to induce the Secured Parties to
purchase the shares of Series D Convertible Preferred Stock and
extend the loans evidenced by the Debentures, each Debtor has
agreed to execute and deliver to the Secured Parties this Agreement
and to grant the Secured Parties, pari passu
with each other Secured Party and
through the Agent (as defined in Section 18 hereof), a security
interest in certain property of such Debtor to secure the prompt
payment, performance and discharge in full of all of the
Company’s obligations under the Debentures and Series D
Convertible Preferred Stock.
NOW,
THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. Certain
Definitions. As used in this
Agreement, the following terms shall have the meanings set forth in
this Section 1. Terms used but not otherwise defined in this
Agreement that are defined in Article 9 of the UCC (such as
“account”, “chattel paper”,
“commercial tort claim”, “deposit account”,
“document”, “equipment”,
“fixtures”, “general intangibles”,
“goods”, “instruments”,
“inventory”, “investment property”,
“letter-of-credit rights”, “proceeds” and
“supporting obligations”) shall have the respective
meanings given such terms in Article 9 of the
UCC.
(a) “Collateral”
means the collateral in which the Secured Parties are granted a
security interest by this Agreement and which shall include the
following personal property of the Debtors, whether presently owned
or existing or hereafter acquired or coming into existence,
wherever situated, and all additions and accessions thereto and all
substitutions and replacements thereof, and all proceeds, products
and accounts thereof, including, without limitation, all proceeds
from the sale or transfer of the Collateral and of insurance
covering the same and of any tort claims in connection therewith,
and all dividends, interest, cash, notes, securities, equity
interest or other property at any time and from time to time
acquired, receivable or otherwise distributed in respect of, or in
exchange for, any or all of the Pledged Securities (as defined
below):
(i)
All goods, including, without limitation, (A) all machinery,
equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test
and quality control devices and other equipment of every kind and
nature and wherever situated, together with all documents of title
and documents representing the same, all additions and accessions
thereto, replacements therefor, all parts therefor, and all
substitutes for any of the foregoing and all other items used and
useful in connection with any
Debtor’s
businesses and all improvements thereto; and (B) all
inventory;
(ii)
All contract rights and other general intangibles, including,
without limitation, all partnership interests, membership
interests, stock or other securities, rights under any of the
Organizational Documents, agreements related to the Pledged
Securities, licenses, distribution and other agreements, computer
software (whether “off-the-shelf”, licensed from any
third party or developed by any Debtor), computer software
development rights, leases, franchises, customer lists, quality
control procedures, grants and rights, goodwill, Intellectual
Property and income tax refunds;
(iii)
All accounts, together with all instruments, all documents of title
representing any of the foregoing, all rights in any merchandising,
goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with
respect to each account, including any right of stoppage in
transit;
(iv)
All documents, letter-of-credit rights, instruments and chattel
paper;
(v)
All commercial tort claims;
(vi)
All deposit accounts and all cash (whether or not deposited in such
deposit accounts);
(vii)
All investment property;
(viii)
All supporting obligations;
(ix)
All files, records, books of account, business papers, and computer
programs; and
(x)
The products and proceeds of all of the foregoing Collateral set
forth in clauses (i)-(ix) above.
Without limiting the generality of the foregoing,
the “Collateral”
shall include all investment property and general intangibles
respecting ownership and/or other equity interests in each
Guarantor, including, without limitation, the shares of capital
stock and the other equity interests listed on Schedule H
hereto (as the same may be modified
from time to time pursuant to the terms hereof), and any other
shares of capital stock and/or other equity interests of any other
direct or indirect subsidiary of any Debtor obtained in the future,
and, in each case, all certificates representing such shares and/or
equity interests and, in each case, all rights, options, warrants,
stock, other securities and/or equity interests that may hereafter
be received, receivable or distributed in respect of, or exchanged
for, any of the foregoing and all rights arising under or in
connection with the Pledged Securities, including, but not limited
to, all dividends, interest and cash.
Notwithstanding the foregoing, nothing herein
shall be deemed to constitute an assignment of any asset which, in
the event of an assignment, becomes void by operation of applicable
law or the assignment of which is otherwise prohibited by
applicable law (in each case to the extent that such applicable law
is not overridden by Sections 9-406, 9-407 and/or 9-408 of the UCC
or other similar applicable law);provided,
however,
that to the extent permitted by applicable law, this Agreement
shall create a valid security interest in such asset and, to the
extent permitted by applicable law, this Agreement shall create a
valid security interest in the proceeds of such
asset.
(b) “Intellectual
Property” means the
collective reference to all rights, priorities and privileges
relating to intellectual property, whether arising under United
States, multinational or foreign laws or otherwise, including,
without limitation, (i) all copyrights arising under the laws of
the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published
or unpublished, all registrations and recordings thereof, and all
applications in connection therewith, including, without
limitation, all registrations, recordings and applications in the
United States Copyright Office, (ii) all letters patent of the
United States, any other country or any political subdivision
thereof, all reissues and extensions thereof, and all applications
for letters patent of the United States or any other country and
all divisions, continuations and continuations-in-part thereof,
(iii) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade dress, service
marks, logos, domain names and other source or business
identifiers, and all goodwill associated therewith, now existing or
hereafter adopted or acquired, all registrations and recordings
thereof, and all applications in connection therewith, whether in
the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any
other country or any political subdivision thereof, or otherwise,
and all common law rights related thereto, (iv) all trade secrets
arising under the laws of the United States, any other country or
any political subdivision thereof, (v) all rights to obtain any
reissues, renewals or extensions of the foregoing, (vi) all
licenses for any of the foregoing, and (vii) all causes of action
for infringement of the foregoing.
(c) “Majority in
Interest” means, at any
time of determination, the majority in interest (based on
then-outstanding principal amounts of Debentures at the time of
such determination) of the Secured Parties.
(d) “Necessary
Endorsement” means
undated stock powers endorsed in blank or other proper instruments
of assignment duly executed and such other instruments or documents
as the Agent (as that term is defined below) may reasonably
request.
(e) “Obligations”
means all of the liabilities and obligations (primary, secondary,
direct, contingent, sole, joint or several) due or to become due,
or that are now or may be hereafter contracted or acquired, or
owing to, of any Debtor to the Secured Parties, including, without
limitation, all obligations under this Agreement, the Debentures
and the Series D Convertible Preferred Stock, and any other
instruments, agreements or other documents executed and/or
delivered in connection herewith or therewith, in each case,
whether now or hereafter existing, voluntary or involuntary, direct
or indirect, absolute or contingent, liquidated or unliquidated,
whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such
payment is avoided or recovered directly or indirectly from any of
the Secured Parties as a preference, fraudulent transfer or
otherwise as such obligations may be amended, supplemented,
converted, extended or modified from time to time. Without limiting
the generality of the foregoing, the term “Obligations”
shall include, without limitation: (i) principal of, and interest
on the Debentures (or dividends on the Series D Preferred Stock)
and the loans extended pursuant thereto; (ii) any and all other
fees, indemnities, costs, obligations and liabilities of the
Debtors from time to time under or in connection with this
Agreement, the Debentures, the Certificate of Designation for the
Series D Convertible Preferred Stock, and any other instruments,
agreements or other documents executed and/or delivered in
connection herewith or therewith; and (iii) all amounts (including
but not limited to post-petition interest) in respect of the
foregoing that would be payable but for the fact that the
obligations to pay such amounts are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar
proceeding involving any Debtor.
(f) “Organizational
Documents” means with
respect to any Debtor, the documents by which such Debtor was
organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including,
without limitation, any certificates of designation for preferred
stock or other forms of preferred equity) and which relate to the
internal governance of such Debtor (such as bylaws, a partnership
agreement or an operating, limited liability or members
agreement).
(g) “Pledged
Interests” shall have the
meaning ascribed to such term in Section 4(j).
(h) “Pledged
Securities” shall have
the meaning ascribed to such term in Section
4(i).
(i) “UCC” means the Uniform Commercial Code of the
State of New York and or any other applicable law of any state or
states which has jurisdiction with respect to all, or any portion
of, the Collateral or this Agreement, from time to time. It is the
intent of the parties that defined terms in the UCC should be
construed in their broadest sense so that the term
“Collateral” will be construed in its broadest sense.
Accordingly if there are, from time to time, changes to defined
terms in the UCC that broaden the definitions, they are
incorporated herein and if existing definitions in the UCC are
broader than the amended definitions, the existing ones shall be
controlling.
2. Grant of Security Interest in
Collateral. As an inducement
for the Secured Parties to purchase the Series D Convertible
Preferred Stock and extend the loans as evidenced by the Debentures
and to secure the complete and timely payment, performance and
discharge in full, as the case may be, of all of the Obligations,
each Debtor hereby unconditionally and irrevocably pledges, grants
and hypothecates to the Secured Parties a security interest in and
to, a lien upon and a right of set-off against all of their
respective right, title and interest of whatsoever kind and nature
in and to, the Collateral (a “Security
Interest” and,
collectively, the “Security
Interests”).
3. Delivery of Certain
Collateral. Contemporaneously
or prior to the execution of this Agreement, each Debtor shall
deliver or cause to be delivered to the Agent (a) any and all
certificates and other instruments representing or evidencing the
Pledged Securities, and (b) any and all certificates and other
instruments or documents representing any of the other Collateral,
in each case, together with all Necessary Endorsements. The Debtors
are, contemporaneously with the execution hereof, delivering to
Agent, or have previously delivered to Agent, a true and correct
copy of each Organizational Document governing any of the Pledged
Securities.
4. Representations, Warranties,
Covenants and Agreements of the Debtors. Except as set forth under the corresponding
section of the disclosure schedules delivered to the Secured
Parties concurrently herewith (the “Disclosure
Schedules”), which
Disclosure Schedules shall be deemed a part hereof, each Debtor
represents and warrants to, and covenants and agrees with, the
Secured Parties as follows:
(a)
Each Debtor has the requisite corporate, partnership, limited
liability company or other power and authority to enter into this
Agreement and otherwise to carry out its obligations hereunder. The
execution, delivery and performance by each Debtor of this
Agreement and the filings contemplated therein have been duly
authorized by all necessary action on the part of such Debtor and
no further action is required by such Debtor. This Agreement has
been duly executed by each Debtor. This Agreement constitutes the
legal, valid and binding obligation of each Debtor, enforceable
against each Debtor in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization and similar laws of general application relating to
or affecting the rights and remedies of creditors and by general
principles of equity.
(b) The Debtors have no place of business or
offices where their respective books of account and records are
kept (other than temporarily at the offices of its attorneys or
accountants) or places where Collateral is stored or located,
except as set forth on Schedule A
attached hereto. Except as
specifically set forth on Schedule
A, each
Debtor is the record owner of the real property
where such Collateral is located, and there exist no mortgages or
other liens on any such real property except for Permitted Liens
(as defined in the Debentures). Except as disclosed on
Schedule
A, none of such Collateral is
in the possession of any consignee, bailee, warehouseman, agent or
processor.
(c) Except for Permitted Liens (as defined in the
Debentures) and except as set forth on Schedule B
attached hereto, the Debtors are the
sole owner of the Collateral (except for non-exclusive licenses
granted by any Debtor in the ordinary course of business), free and
clear of any liens, security interests, encumbrances, rights or
claims, and are fully authorized to grant the Security Interests.
Except as set forth on Schedule C
attached hereto, there is not on file
in any governmental or regulatory authority, agency or recording
office an effective financing statement, security agreement,
license or transfer or any notice of any of the foregoing (other
than those that will be filed in favor of the Secured Parties
pursuant to this Agreement) covering or affecting any of the
Collateral. Except as set forth on Schedule C
attached hereto and except pursuant to
this Agreement, as long as this Agreement shall be in effect, the
Debtors shall not execute and shall not knowingly permit to be on
file in any such office or agency any other financing statement or
other document or instrument (except to the extent filed or
recorded in favor of the Secured Parties pursuant to the terms of
this Agreement).
(d)
No written claim has been received that any Collateral or any
Debtor's use of any Collateral violates the rights of any third
party. There has been no adverse decision to any Debtor's claim of
ownership rights in or exclusive rights to use the Collateral in
any jurisdiction or to any Debtor's right to keep and maintain such
Collateral in full force and effect, and there is no proceeding
involving said rights pending or, to the best knowledge of any
Debtor, threatened before any court, judicial body, administrative
or regulatory agency, arbitrator or other governmental
authority.
(e) Each Debtor shall at all times maintain its
books of account and records relating to the Collateral at its
principal place of business and its Collateral at the locations set
forth on Schedule A
attached hereto and may not relocate
such books of account and records or tangible Collateral unless it
delivers to the Secured Parties at least 30 days prior to such
relocation (i) written notice of such relocation and the new
location thereof (which must be within the United States) and (ii)
evidence that appropriate financing statements under the UCC and
other necessary documents have been filed and recorded and other
steps have been taken to perfect the Security Interests to create
in favor of the Secured Parties a valid, perfected and continuing
perfected first priority lien in the
Collateral.
(f)
This Agreement creates in favor of the Secured Parties a valid
security interest in the Collateral, subject only to Permitted
Liens (as defined in the Debentures) securing the payment and
performance of the Obligations. Upon making the filings described
in the immediately following paragraph, all security interests
created hereunder in any Collateral which may be perfected by
filing Uniform Commercial Code financing statements shall have been
duly perfected. Except for the filing of the Uniform Commercial
Code financing statements referred to in the immediately
following
paragraph,
the recordation of the Intellectual Property Security Agreement (as
defined in Section 4(p) hereof) with respect to copyrights and
copyright applications in the United States Copyright Office
referred to in paragraph (m), the execution and delivery of deposit
account control agreements satisfying the requirements of Section
9-104(a)(2) of the UCC with respect to each deposit account of the
Debtors, and the delivery of the certificates and other instruments
provided in Section 3, no action is necessary to create, perfect or
protect the security interests created hereunder. Without limiting
the generality of the foregoing, except for the filing of said
financing statements, the recordation of said Intellectual Property
Security Agreement, and the execution and delivery of said deposit
account control agreements, no consent of any third parties and no
authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is
required for (i) the execution, delivery and performance of this
Agreement, (ii) the creation or perfection of the Security
Interests created hereunder in the Collateral or (iii) the
enforcement of the rights of the Agent and the Secured Parties
hereunder.
(g)
Each Debtor hereby authorizes the Agent to file one or more
financing statements under the UCC, with respect to the Security
Interests, with the proper filing and recording agencies in any
jurisdiction deemed proper by it.
(h)
The execution, delivery and performance of this Agreement by the
Debtors does not (i) violate any of the provisions of any
Organizational Documents of any Debtor or any judgment, decree,
order or award of any court, governmental body or arbitrator or any
applicable law, rule or regulation applicable to any Debtor or (ii)
conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument
(evidencing any Debtor's debt or otherwise) or other understanding
to which any Debtor is a party or by which any property or asset of
any Debtor is bound or affected. If any, all required consents
(including, without limitation, from stockholders or creditors of
any Debtor) necessary for any Debtor to enter into and perform its
obligations hereunder have been obtained.
(i) The capital stock and other equity interests
listed on Schedule H
hereto (the “Pledged
Securities”) represent
all of the capital stock and other equity interests of the
Guarantors, and represent all capital stock and other equity
interests owned, directly or indirectly, by the Company. All of the
Pledged Securities are validly issued, fully paid and
nonassessable, and the Company is the legal and beneficial owner of
the Pledged Securities, free and clear of any lien, security
interest or other encumbrance except for the security interests
created by this Agreement and other Permitted Liens (as defined in
the Debentures).
(j) The ownership and other equity interests in
partnerships and limited liability companies (if any) included in
the Collateral (the “Pledged
Interests”) by their
express terms do not provide that they are securities governed by
Article 8 of the UCC and are not held in a securities account or by
any financial intermediary.
(k)
Except for Permitted Liens (as defined in the Debentures), each
Debtor shall at all times maintain the liens and Security Interests
provided for hereunder as valid and perfected first priority liens
and security interests in the Collateral in favor of the Secured
Parties until this Agreement and the Security Interest hereunder
shall be terminated pursuant to Section 14 hereof. Each Debtor
hereby agrees to defend the same against the claims of any and all
persons and entities. Each Debtor shall safeguard and protect all
Collateral for the account of the Secured Parties. At the request
of the Agent, each Debtor will sign and deliver to the Agent on
behalf of the Secured Parties at any time or from time to time one
or more financing statements pursuant to the UCC in form reasonably
satisfactory to the Agent and will pay the cost of filing the same
in all public offices wherever filing is, or is deemed by the Agent
to be, necessary or desirable to effect the rights and obligations
provided for herein. Without limiting the generality of the
foregoing, each Debtor shall pay all fees, taxes and other amounts
necessary to maintain the Collateral and the Security Interests
hereunder, and each Debtor shall obtain and furnish to the Agent
from time to time, upon demand, such releases and/or subordinations
of claims and liens which may be required to maintain the priority
of the Security Interests hereunder.
(l)
No Debtor will transfer, pledge, hypothecate, encumber, license,
sell or otherwise dispose of any of the Collateral (except for
non-exclusive licenses granted by a Debtor in its ordinary course
of business and sales of inventory by a Debtor in its ordinary
course of business) without the prior written consent of a Majority
in Interest.
(m)
Each Debtor shall keep and preserve its equipment, inventory and
other tangible Collateral in good condition, repair and order and
shall not operate or locate any such Collateral (or cause to be
operated or located) in any area excluded from insurance
coverage.
(n)
Each Debtor shall maintain with financially sound and reputable
insurers, insurance with respect to the Collateral, including
Collateral hereafter acquired, against loss or damage of the kinds
and in the amounts customarily insured against by entities of
established reputation having similar properties similarly situated
and in such amounts as are customarily carried under similar
circumstances by other such entities and otherwise as is prudent
for entities engaged in similar businesses but in any event
sufficient to cover the full replacement cost thereof. Each Debtor
shall cause each insurance policy issued in connection herewith to
provide, and the insurer issuing such policy to certify to the
Agent, that (a) the Agent will be named as lender loss payee and
additional insured under each such insurance policy; (b) if such
insurance be proposed to be cancelled or materially changed for any
reason whatsoever, such insurer will promptly notify the Agent and
such cancellation or change shall not be effective as to the Agent
for at least thirty (30) days after receipt by the Agent of such
notice, unless the effect of such change is to extend or increase
coverage under the policy; and (c) the Agent will have the right
(but no obligation) at its election to remedy any default in the
payment of premiums within thirty (30) days of notice from the
insurer of such default. If no Event of Default (as defined in the
Debentures) exists and if the proceeds arising out of any claim or
series
of related claims do not exceed $100,000, loss
payments in each instance will be applied by the applicable Debtor
to the repair and/or replacement of property with respect to which
the loss was incurred to the extent reasonably feasible, and any
loss payments or the balance thereof remaining, to the extent not
so applied, shall be payable to the applicable
Debtor;provided,
however,
that payments received by any Debtor after an Event of Default
occurs and is continuing or in excess of $100,000 for any
occurrence or series of related occurrences shall be paid to the
Agent on behalf of the Secured Parties and, if received by such
Debtor, shall be held in trust for the Secured Parties and
immediately paid over to the Agent unless otherwise directed in
writing by the Agent. Copies of such policies or the related
certificates, in each case, naming the Agent as lender loss payee
and additional insured shall be delivered to the Agent at least
annually and at the time any new policy of insurance is
issued.
(o)
Each Debtor shall, within ten (10) days of obtaining knowledge
thereof, advise the Secured Parties promptly, in sufficient detail,
of any material adverse change in the Collateral, and of the
occurrence of any event which would have a material adverse effect
on the value of the Collateral or on the Secured Parties’
security interest, through the Agent, therein.
(p) Each Debtor shall promptly execute and deliver
to the Agent such further deeds, mortgages, assignments, security
agreements, financing statements or other instruments, documents,
certificates and assurances and take such further action as the
Agent may from time to time request and may in its sole discretion
deem necessary to perfect, protect or enforce the Secured
Parties’ security interest in the Collateral including,
without limitation, if applicable, the execution and delivery of a
separate security agreement with respect to each Debtor’s
Intellectual Property (“Intellectual Property
Security Agreement”) in
which the Secured Parties have been granted a security interest
hereunder, substantially in a form reasonably acceptable to the
Agent, which Intellectual Property Security Agreement, other than
as stated therein, shall be subject to all of the terms and
conditions hereof.
(q)
Each Debtor shall permit the Agent and its representatives and
agents to inspect the Collateral during normal business hours and
upon reasonable prior notice, and to make copies of records
pertaining to the Collateral as may be reasonably requested by the
Agent from time to time.
(r)
Each Debtor shall take all steps reasonably necessary to diligently
pursue and seek to preserve, enforce and collect any rights,
claims, causes of action and accounts receivable in respect of the
Collateral.
(s)
Each Debtor shall promptly notify the Secured Parties in sufficient
detail upon becoming aware of any attachment, garnishment,
execution or other legal process levied against any Collateral and
of any other information received by such Debtor that may
materially affect the value of the Collateral, the Security
Interest or the rights and remedies of the Secured Parties
hereunder.
(t)
All information heretofore, herein or hereafter supplied to the
Secured Parties by or on behalf of any Debtor with respect to the
Collateral is accurate and complete in all material respects as of
the date furnished.
(u)
The Debtors shall at all times preserve and keep in full force and
effect their respective valid existence and good standing and any
rights and franchises material to its business.
(v)
No Debtor will change its name, type of organization, jurisdiction
of organization, organizational identification number (if it has
one), legal or corporate structure, or identity, or add any new
fictitious name unless it provides at least 30 days prior written
notice to the Secured Parties of such change and, at the time of
such written notification, such Debtor provides any financing
statements or fixture filings necessary to perfect and continue the
perfection of the Security Interests granted and evidenced by this
Agreement.
(w)
Except in the ordinary course of business, no Debtor may consign
any of its inventory or sell any of its inventory on bill and hold,
sale or return, sale on approval, or other conditional terms of
sale without the consent of the Agent which shall not be
unreasonably withheld.
(x)
No Debtor may relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to the
Secured Parties and so long as, at the time of such written
notification, such Debtor provides any financing statements or
fixture filings necessary to perfect and continue the perfection of
the Security Interests granted and evidenced by this
Agreement.
(y) Each Debtor was organized and remains
organized solely under the laws of the state set forth next to such
Debtor’s name in Schedule D
attached hereto, which Schedule D sets
forth each Debtor’s organizational identification number or,
if any Debtor does not have one, states that one does not
exist.
(z) (i) The actual name of each Debtor is the name
set forth in Schedule D
attached hereto; (ii) no Debtor has
any trade names except as set forth on Schedule E
attached hereto; (iii) no Debtor has
used any name other than that stated in the preamble hereto or as
set forth on Schedule E
for the preceding five years; and (iv)
no entity has merged into any Debtor or been acquired by any Debtor
within the past five years except as set forth on Schedule
E.
(aa)
At any time and from time to time that any Collateral consists of
instruments, certificated securities or other items that require or
permit possession by the secured party to perfect the security
interest created hereby, the applicable Debtor shall deliver such
Collateral to the Agent.
(bb)
Each Debtor, in its capacity as issuer, hereby agrees to comply
with any and all orders and instructions of Agent regarding the
Pledged Interests consistent with the terms of this Agreement
without the further consent of any Debtor as contemplated by
Section 8-106 (or any successor section) of the UCC. Further, each
Debtor agrees that it shall not enter into a similar agreement (or
one that would confer “control” within the meaning of
Article 8 of the UCC) with any other person or entity.
(cc)
Each Debtor shall cause all tangible chattel paper constituting
Collateral to be delivered to the Agent, or, if such delivery is
not possible, then to cause such tangible chattel paper to contain
a legend noting that it is subject to the security interest created
by this Agreement. To the extent that any Collateral consists of
electronic chattel paper, the applicable Debtor shall cause the
underlying chattel paper to be “marked” within the
meaning of Section 9-105 of the UCC (or successor section
thereto).
(dd)
If there is any investment property or deposit account included
as
Collateral
that can be perfected by “control” through an account
control agreement, the
applicable
Debtor shall cause such an account control agreement, in form and
substance in each case satisfactory to the Agent, to be entered
into and delivered to the Agent for the benefit of the Secured
Parties.
(ee)
To the extent that any Collateral consists of letter-of-credit
rights, the applicable Debtor shall cause the issuer of each
underlying letter of credit to consent to an assignment of the
proceeds thereof to the Secured Parties.
(ff)
To the extent that any Collateral is in the possession of any third
party, the applicable Debtor shall join with the Agent in notifying
such third party of the Secured Parties’ security interest in
such Collateral and shall use its best efforts to obtain an
acknowledgement and agreement from such third party with respect to
the Collateral, in form and substance reasonably satisfactory to
the Agent.
(gg)
If any Debtor shall at any time hold or acquire a commercial tort
claim, such Debtor shall promptly notify the Secured Parties in a
writing signed by such Debtor of the particulars thereof and grant
to the Secured Parties in such writing a security interest therein
and in the proceeds thereof, all upon the terms of this Agreement,
with such writing to be in form and substance satisfactory to the
Agent.
(hh)
Each Debtor shall immediately provide written notice to the Secured
Parties of any and all accounts which arise out of contracts with
any governmental authority and, to the extent necessary to perfect
or continue the perfected status of the Security Interests in such
accounts and proceeds thereof, shall execute and deliver to the
Agent an assignment of claims for such accounts and cooperate with
the Agent in taking any other steps required, in its judgment,
under the Federal Assignment of Claims Act or any similar federal,
state or local statute or rule to perfect or continue the perfected
status of the Security Interests in such accounts and proceeds
thereof.
(ii) Each Debtor shall cause each subsidiary of
such Debtor to immediately become a party hereto (an
“Additional Debtor”), by executing and delivering an
Additional Debtor Joinder in substantially the form of
Annex
A attached hereto and comply
with the provisions hereof applicable to the Debtors. Concurrent
therewith, the Additional Debtor shall deliver replacement
schedules for, or supplements to all other Schedules to (or
referred to in) this Agreement, as applicable, which replacement
schedules shall supersede, or supplements shall modify, the
Schedules then in effect. The Additional Debtor shall also deliver
such opinions of counsel, authorizing resolutions, good standing
certificates, incumbency certificates, organizational documents,
financing statements and other information and documentation as the
Agent may reasonably request. Upon delivery of the foregoing to the
Agent, the Additional Debtor shall be and become a party to this
Agreement with the same rights and obligations as the Debtors, for
all purposes hereof as fully and to the same extent as if it were
an original signatory hereto and shall be deemed to have made the
representations, warranties and covenants set forth herein as of
the date of execution and delivery of such Additional Debtor
Joinder, and all references herein to the “Debtors”
shall be deemed to include each Additional
Debtor.
(jj)
Each Debtor shall vote the Pledged Securities to comply with the
covenants and agreements set forth herein and in the
Debentures.
(kk)
Each Debtor shall register the pledge of the applicable Pledged
Securities on the books of such Debtor. Each Debtor shall notify
each issuer of Pledged Securities to register the pledge of the
applicable Pledged Securities in the name of the Secured Parties on
the books of such issuer. Further, except with respect to
certificated securities delivered to the Agent, the applicable
Debtor shall deliver to Agent an acknowledgement of pledge (which,
where appropriate, shall comply with the requirements of the
relevant UCC with respect to perfection by registration) signed by
the issuer of the applicable Pledged Securities, which
acknowledgement shall confirm that: (a) it has registered the
pledge on its books and records; and (b) at any time directed by
Agent during the continuation of an Event of Default, such issuer
will transfer the record ownership of such Pledged Securities into
the name of any designee of Agent, will take such steps as may be
necessary to effect the transfer, and will comply with all other
instructions of Agent regarding such Pledged Securities without the
further consent of the applicable Debtor.
(ll) In the event that, upon an occurrence of an
Event of Default, Agent shall sell all or any of the Pledged
Securities to another party or parties (herein called the
“Transferee”)
or shall purchase or retain all or any of the Pledged Securities,
each Debtor shall, to the extent applicable: (i) deliver to Agent
or the Transferee, as the case may be, the articles of
incorporation, bylaws, minute books, stock certificate books,
corporate seals, deeds, leases, indentures, agreements, evidences
of indebtedness, books of account, financial records and all other
Organizational Documents and records of the Debtors and their
direct and indirect subsidiaries; (ii) use its best efforts to
obtain resignations of the persons then serving as officers and
directors of the Debtors and their direct and indirect
subsidiaries, if so requested; and (iii) use its best efforts to
obtain any approvals that are required by any governmental or
regulatory body in order to permit the sale of the Pledged
Securities to the Transferee or the purchase or retention of the
Pledged Securities by Agent and allow the Transferee or Agent to
continue the business of the Debtors and their direct and indirect
subsidiaries.
(mm)
Without limiting the generality of the other obligations of the
Debtors hereunder, each Debtor shall promptly (i) cause to be
registered at the United States Copyright Office all of its
material copyrights, (ii) cause the security interest contemplated
hereby with respect to all Intellectual Property registered at the
United States Copyright Office or United States Patent and
Trademark Office to be duly recorded at the applicable office, and
(iii) give the Agent notice whenever it acquires (whether
absolutely or by license) or creates any additional material
Intellectual Property.
(nn)
Each Debtor will from time to time, at the joint and several
expense of the Debtors, promptly execute and deliver all such
further instruments and documents, and take all such further action
as may be necessary or desirable, or as the Agent may reasonably
request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured
Parties to exercise and enforce their rights and remedies hereunder
and with respect to any Collateral or to otherwise carry out the
purposes of this Agreement.
(oo) Schedule F
attached hereto lists all of the
patents, patent applications, trademarks, trademark applications,
registered copyrights, and domain names owned by any of the Debtors
as of the date hereof. Schedule F lists all material licenses in
favor of any Debtor for the use of any patents, trademarks,
copyrights and domain names as of the date hereof. All material
patents and trademarks of the Debtors have been duly recorded at
the United States Patent and Trademark Office and all material
copyrights of the Debtors have been duly recorded at the United
States Copyright Office.
(pp) Except as set forth on Schedule G
attached hereto, none of the account
debtors or other persons or entities obligated on any of the
Collateral is a governmental authority covered by the Federal
Assignment of Claims Act or any similar federal, state or local
statute or rule in respect of such Collateral.
5. Effect of Pledge on Certain
Rights. If any of the
Collateral subject to this Agreement consists of nonvoting equity
or ownership interests (regardless of class, designation,
preference or rights) that may be converted into voting equity or
ownership interests upon the occurrence of certain events
(including, without limitation, upon the transfer of all or any of
the other stock or assets of the issuer), it is agreed that the
pledge of such equity or ownership
interests
pursuant to this Agreement or the enforcement of any of
Agent’s rights hereunder shall
not
be deemed to be the type of event which would trigger such
conversion rights notwithstanding any provisions in the
Organizational Documents or agreements to which any Debtor is
subject or to which any Debtor is party.
6. Defaults. The following events shall be
“Events of
Default”:
(a)
The occurrence of an Event of Default (as defined in the
Debentures) under the Debentures;
(b)
Any representation or warranty of any Debtor in this Agreement
shall prove to have been incorrect in any material respect when
made;
(c)
The failure by any Debtor to observe or perform any of its
obligations hereunder for five (5) days after delivery to such
Debtor of notice of such failure by or on behalf of a Secured Party
unless such default is capable of cure but cannot be cured within
such time frame and such Debtor is using best efforts to cure same
in a timely fashion; or
(d)
If any provision of this Agreement shall at any time for any reason
be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Debtor, or a proceeding shall be
commenced by any Debtor, or by any governmental authority having
jurisdiction over any Debtor, seeking to establish the invalidity
or unenforceability thereof, or any Debtor shall deny that any
Debtor has any liability or obligation purported to be created
under this Agreement.
7. Duty To Hold In
Trust.
(a)
Upon the occurrence of any Event of Default and at any time
thereafter, each Debtor shall, upon receipt of any revenue, income,
dividend, interest or other sums subject to the Security Interests,
whether payable pursuant to the Debentures or otherwise, or of any
check, draft, note, trade acceptance or other instrument evidencing
an obligation to pay any such sum, hold the same in trust for the
Secured Parties and shall forthwith endorse and transfer any such
sums or instruments, or both, to the Secured Parties, pro-rata in
proportion to their respective then-currently outstanding principal
amount of Debentures for application to the satisfaction of the
Obligations (and if any Debenture is not outstanding, pro-rata in
proportion to the initial purchases of the remaining
Debentures).
(b)
If any Debtor shall become entitled to receive or shall receive any
securities or other property (including, without limitation, shares
of Pledged Securities or instruments representing Pledged
Securities acquired after the date hereof, or any options,
warrants, rights or other similar property or certificates
representing a dividend, or any distribution in connection with any
recapitalization, reclassification or increase or reduction of
capital, or issued in connection with any reorganization of such
Debtor or any of its direct or indirect subsidiaries) in respect of
the Pledged Securities (whether as an addition to, in substitution
of, or in exchange for, such Pledged Securities or otherwise), such
Debtor agrees to (i) accept the same as the agent of the Secured
Parties;
(ii)
hold the same in trust on behalf of and for the benefit of the
Secured Parties; and (iii) to deliver any and all certificates or
instruments evidencing the same to Agent on or before the close of
business on the fifth business day following the receipt thereof by
such Debtor, in the exact form received together with the Necessary
Endorsements, to be held by Agent subject to the terms of this
Agreement as Collateral.
8. Rights and Remedies Upon
Default.
(a)
Upon the occurrence of any Event of Default and at any time
thereafter, the Secured Parties, acting through the Agent, shall
have the right to exercise all of the remedies conferred hereunder
and under the Debentures, and the Secured Parties shall have all
the rights and remedies of a secured party under the UCC. Without
limitation, the Agent, for the benefit of the Secured Parties,
shall have the following rights and powers:
(i)
The Agent shall have the right to take possession of the Collateral
and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is
or may be placed and remove the same, and each Debtor shall
assemble the Collateral and make it available to the Agent at
places which the Agent shall reasonably select, whether at such
Debtor's premises or elsewhere, and make available to the Agent,
without rent, all of such Debtor’s respective premises and
facilities for the purpose of the Agent taking possession of,
removing or putting the Collateral in saleable or disposable
form.
(ii)
Upon notice to the Debtors by Agent, all rights of each Debtor to
exercise the voting and other consensual rights which it would
otherwise be entitled to exercise and all rights of each Debtor to
receive the dividends and interest which it would otherwise be
authorized to receive and retain, shall cease. Upon such notice,
Agent shall have the right to receive, for the benefit of the
Secured Parties, any interest, cash dividends or other payments on
the Collateral and, at the option of Agent, to exercise in such
Agent’s discretion all voting rights pertaining thereto.
Without limiting the generality of the foregoing, Agent shall have
the right (but not the obligation) to exercise all rights with
respect to the Collateral as it were the sole and absolute owner
thereof, including, without limitation, to vote and/or to exchange,
at its sole discretion, any or all of the Collateral in connection
with a merger, reorganization, consolidation, recapitalization or
other readjustment concerning or involving the Collateral or any
Debtor or any of its direct or indirect subsidiaries.
(iii)
The Agent shall have the right to operate the business of each
Debtor using the Collateral and shall have the right to assign,
sell, lease or otherwise dispose of and deliver all or any part of
the Collateral, at public or private sale or otherwise, either with
or without special conditions or stipulations, for cash or on
credit or for future delivery, in such parcel or parcels and at
such time or times and at such place or places, and upon such terms
and conditions as the Agent may deem commercially reasonable, all
without (except as shall be required by applicable statute and
cannot be waived) advertisement or demand upon or notice to any
Debtor or right of redemption of a Debtor, which are hereby
expressly waived. Upon each such sale, lease, assignment or other
transfer of Collateral, the Agent, for the benefit of the Secured
Parties, may, unless prohibited by applicable law which cannot be
waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and
equities of any Debtor, which are hereby waived and
released.
(iv)
The Agent shall have the right (but not the obligation) to notify
any account debtors and any obligors under instruments or accounts
to make payments directly to the Agent, on behalf of the Secured
Parties, and to enforce the Debtors’ rights against such
account debtors and obligors.
(v)
The Agent, for the benefit of the Secured Parties, may (but is not
obligated to) direct any financial intermediary or any other person
or entity holding any investment property to transfer the same to
the Agent, on behalf of the Secured Parties, or its
designee.
(vi)
The Agent may (but is not obligated to) transfer any or all
Intellectual Property registered in the name of any Debtor at the
United States Patent and Trademark Office and/or Copyright Office
into the name of the Secured Parties or any designee or any
purchaser of any Collateral.
(b)
The Agent shall comply with any applicable law in connection with a
disposition of Collateral and such compliance will not be
considered adversely to affect the commercial reasonableness of any
sale of the Collateral. The Agent may sell the Collateral without
giving any warranties and may specifically disclaim such
warranties. If the Agent sells any of the Collateral on credit, the
Debtors will only be credited with payments actually made by the
purchaser. In addition, each Debtor waives any and all rights that
it may have to a judicial hearing in advance of the enforcement of
any of the Agent’s rights and remedies hereunder, including,
without limitation, its right following an Event of Default to take
immediate possession of the Collateral and to exercise its rights
and remedies with respect thereto.
(c)
For the purpose of enabling the Agent to further exercise rights
and remedies under this Section 8 or elsewhere provided by
agreement or applicable law, each Debtor hereby grants to the
Agent, for the benefit of the Agent and the Secured Parties, an
irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to such Debtor) to use, license or
sublicense following an Event of Default, any Intellectual Property
now owned or hereafter acquired by such Debtor, and wherever the
same may be located, and including in such license access to all
media in which any of the licensed items may be recorded or stored
and to all computer software and programs used for the compilation
or printout thereof.
9. Applications of
Proceeds. The proceeds of any
such sale, lease or other disposition of the Collateral hereunder
or from payments made on account of any insurance policy insuring
any portion of the Collateral shall be applied first, to the
expenses of retaking, holding, storing, processing and preparing
for sale, selling, and the like (including, without limitation, any
taxes, fees and other costs incurred in connection therewith) of
the Collateral, to the reasonable attorneys’ fees and
expenses incurred by the Agent in enforcing the Secured
Parties’ rights hereunder and in connection with collecting,
storing and disposing of the Collateral, and then to satisfaction
of the Obligations pro rata among the Secured Parties (based on
then-outstanding principal amounts of Debentures at the time of any
such determination), and to the payment of any other amounts
required by applicable law, after which the Secured Parties shall
pay to the applicable Debtor any surplus proceeds. If, upon the
sale, license or other disposition of the Collateral, the proceeds
thereof are insufficient to pay all amounts to which the Secured
Parties are legally entitled, the Debtors will be liable for the
deficiency, together with
interest thereon, at the rate of 18% per annum or
the lesser amount permitted by applicable law (the
“Default
Rate”), and the
reasonable fees of any attorneys employed by the Secured Parties to
collect such deficiency. To the extent permitted by applicable law,
each Debtor waives all claims, damages and demands against the
Secured Parties arising out of the repossession, removal, retention
or sale of the Collateral, unless due solely to the gross
negligence or willful misconduct of the Secured Parties as
determined by a final judgment (not subject to further appeal) of a
court of competent jurisdiction.
10. Securities Law
Provision. Each Debtor
recognizes that Agent may be limited in its ability to effect a
sale to the public of all or part of the Pledged Securities by
reason of certain prohibitions in the Securities Act of 1933, as
amended, or other federal or state securities laws (collectively,
the “Securities
Laws”), and may be
compelled to resort to one or more sales to a restricted group of
purchasers who may be required to agree to acquire the Pledged
Securities for their own account, for investment and not with a
view to the distribution or resale thereof. Each Debtor agrees that
sales so made may be at prices and on terms less favorable than if
the Pledged Securities were sold to the public, and that Agent has
no obligation to delay the sale of any Pledged Securities for the
period of time necessary to register the Pledged Securities for
sale to the public under the Securities Laws. Each Debtor shall
cooperate with Agent in its attempt to satisfy any requirements
under the Securities Laws (including, without limitation,
registration thereunder if requested by Agent) applicable to the
sale of the Pledged Securities by Agent.
11. Costs and
Expenses. Each Debtor agrees to
pay all reasonable out-of-pocket fees, costs and expenses incurred
in connection with any filing required hereunder, including without
limitation, any financing statements pursuant to the UCC,
continuation statements, partial releases and/or termination
statements related thereto or any expenses of any searches
reasonably required by the Agent. The Debtors shall also pay all
other claims and charges which in the reasonable opinion of the
Agent is reasonably likely to prejudice, imperil or otherwise
affect the Collateral or the Security Interests therein. The
Debtors will also, upon demand, pay to the Agent the amount of any
and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the
Agent, for the benefit of the Secured Parties, may incur in
connection with the creation, perfection, protection, satisfaction,
foreclosure, collection or enforcement of the Security Interest and
the preparation, administration, continuance, amendment or
enforcement of this Agreement and pay to the Agent the amount of
any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the
Agent, for the benefit of the Secured Parties, and the Secured
Parties may incur in connection with (i) the enforcement of this
Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral,
or (iii) the exercise or enforcement of any of the rights of the
Secured Parties under the Debentures. Until so paid, any fees
payable hereunder shall be added to the principal amount of the
Debentures and shall bear interest at the Default
Rate.
12. Responsibility for
Collateral. The Debtors assume
all liabilities and responsibility in connection with all
Collateral, and the Obligations shall in no way be affected or
diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason. Without
limiting the generality of the foregoing, (a) neither the Agent nor
any Secured Party (i) has any duty (either before or after an Event
of Default) to collect any amounts in respect of the Collateral or
to preserve any rights relating to the Collateral, or (ii) has any
obligation to clean-up or otherwise prepare the Collateral for
sale, and (b) each Debtor shall remain obligated and liable under
each contract or agreement included in the Collateral to be
observed or performed by such Debtor thereunder. Neither the Agent
nor any Secured Party shall have any obligation or liability under
any such contract or agreement by reason of or arising out of this
Agreement or the receipt by the Agent or any Secured Party of any
payment relating to any of the Collateral, nor shall the Agent or
any Secured Party be obligated in any manner to perform any of the
obligations of any Debtor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Agent or any Secured Party in respect of
the Collateral or as to the sufficiency of any performance by any
party under any such contract or agreement, to present or file any
claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to the
Agent or to which the Agent or any Secured Party may be entitled at
any time or times.
13. Security Interests
Absolute. All rights of the
Secured Parties and all obligations of the Debtors hereunder, shall
be absolute and unconditional, irrespective of: (a) any lack of
validity or enforceability of this Agreement, the Debentures, the
Series D Convertible Preferred Stock or any agreement entered into
in connection with the foregoing, or any portion hereof or thereof;
(b) any change in the time, manner or place of payment or
performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to
any departure from the Debentures or any other agreement entered
into in connection with the foregoing; (c) any exchange, release or
nonperfection of any of the Collateral, or any release or amendment
or waiver of or consent to departure from any other collateral for,
or any guarantee, or any other security, for all or any of the
Obligations; (d) any action by the Secured Parties to obtain,
adjust, settle and cancel in its sole discretion any insurance
claims or matters made or arising in connection with the
Collateral; or (e) any other circumstance which might otherwise
constitute any legal or equitable defense available to a Debtor, or
a discharge of all or any part of the Security Interests granted
hereby. Until the Obligations shall have been paid and performed in
full, the rights of the Secured Parties shall continue even if the
Obligations are barred for any reason, including, without
limitation, the running of the statute of limitations or
bankruptcy. Each Debtor expressly waives presentment, protest,
notice of protest, demand, notice of nonpayment and demand for
performance. In the event that at any time any transfer of any
Collateral or any payment received by the Secured Parties hereunder
shall be deemed by final order of a court of competent jurisdiction
to have been a voidable preference or fraudulent conveyance under
the bankruptcy or insolvency laws of the United States, or shall be
deemed to be otherwise due to any party other than the Secured
Parties, then, in any such event, each Debtor’s obligations
hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or
cancellation of this Agreement, but shall remain a valid and
binding obligation enforceable in accordance with the terms and
provisions hereof. Each Debtor waives all right to require the
Secured Parties to proceed against any other person or entity or to
apply any Collateral which the Secured Parties may hold at any
time, or to marshal assets, or to pursue any other remedy. Each
Debtor waives any defense arising by reason of the application of
the statute of limitations to any obligation secured
hereby.
14. Term of
Agreement. This Agreement and
the Security Interests shall terminate on the date on which all
payments under the Debentures have been indefeasibly paid in full
and all other Obligations have been paid or discharged; provided,
however, that all indemnities of the Debtors contained in this
Agreement (including, without limitation, Annex B hereto) shall
survive and remain operative and in full force and effect
regardless of the termination of this
Agreement.
15. Power of Attorney; Further
Assurances.
(a)
Each Debtor authorizes the Agent, and does hereby make, constitute
and appoint the Agent and its officers, agents, successors or
assigns with full power of substitution, as such Debtor’s
true and lawful attorney-in-fact, with power, in the name of the
Agent or such Debtor, to, after the occurrence and during the
continuance of an Event of Default, (i) endorse any note, checks,
drafts, money orders or other instruments of payment (including
payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the
Agent; (ii) to sign and endorse any financing statement pursuant to
the UCC or any invoice, freight or express bill, bill of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts, and other
documents relating to the Collateral; (iii) to pay or discharge
taxes, liens, security interests or other encumbrances at any time
levied or placed on or threatened against the Collateral; (iv) to
demand, collect, receipt for, compromise, settle and sue for monies
due in respect of the Collateral; (v) to transfer any Intellectual
Property or provide licenses respecting any Intellectual Property;
and (vi) generally, at the option of the Agent, and at the expense
of the Debtors, at any time, or from time to time, to execute and
deliver any and all documents and instruments and to do all acts
and things which the Agent deems necessary to protect, preserve and
realize upon the Collateral and the Security Interests granted
therein in order to effect the intent of this Agreement and the
Debentures all as fully and effectually as the Debtors might or
could do; and each Debtor hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue hereof. This power
of attorney is coupled with an interest and shall be irrevocable
for the term of this Agreement and thereafter as long as any of the
Obligations shall be outstanding. The designation set forth herein
shall be deemed to amend and supersede any inconsistent provision
in the Organizational Documents or other documents or agreements to
which any Debtor is subject or to which any Debtor is a party.
Without limiting the generality of the foregoing, after the
occurrence and during the continuance of an Event of Default, each
Secured Party is specifically authorized to execute and file any
applications for or instruments of transfer and assignment of any
patents, trademarks, copyrights or other Intellectual Property with
the United States Patent and Trademark Office and the United States
Copyright Office.
(b) On a continuing basis, each Debtor will make,
execute, acknowledge, deliver, file and record, as the case may be,
with the proper filing and recording agencies in any jurisdiction,
including, without limitation, the jurisdictions indicated
on Schedule C
attached hereto, all such instruments,
and take all such action as may reasonably be deemed necessary or
advisable, or as reasonably requested by the Agent, to perfect the
Security Interests granted hereunder and otherwise to carry out the
intent and purposes of this Agreement, or for assuring and
confirming to the Agent the grant or perfection of a perfected
security interest in all the Collateral under the UCC. (c) Each
Debtor hereby irrevocably appoints the Agent as such Debtor’s
attorney-in-fact, with full authority in the place and instead of
such Debtor and in the name of such Debtor, from time to time in
the Agent’s discretion, to take any action and to execute any
instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including the filing, in
its sole discretion, of one or more financing or continuation
statements and amendments thereto, relative to any of the
Collateral without the signature of such Debtor where permitted by
law, which financing statements may (but need not) describe the
Collateral as “all assets” or “all personal
property” or words of like import, and ratifies all such
actions taken by the Agent. This power of attorney is coupled with
an interest and shall be irrevocable for the term of this Agreement
and thereafter as long as any of the Obligations shall be
outstanding.
1.
Notices. All notices, requests, demands and other
communications hereunder shall be subject to the notice provision
of the Purchase Agreement (as such term is defined in the
Debentures).
2.
Other
Security. To the extent that
the Obligations are now or hereafter secured by property other than
the Collateral or by the guarantee, endorsement or property of any
other person, firm, corporation or other entity, then the Agent
shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with
respect thereto, without in any way modifying or affecting any of
the Secured Parties’ rights and remedies
hereunder.
18. Appointment of
Agent. The Secured Parties
hereby appoint Fieldhouse Capital Management Inc. to act as their
agent (“Fieldhouse”
or “Agent”)
for purposes of exercising any and all rights and remedies of the
Secured Parties hereunder. Such appointment shall continue until
revoked in writing by a Majority in Interest, at which time a
Majority in Interest shall appoint a new Agent, provided that
Fieldhouse may not be removed as Agent unless Fieldhouse shall then
hold less than $738,000 in principal amount of
Debentures;provided,
further,
that such removal may occur only if each of the other Secured
Parties shall then hold not less than an aggregate of $738,000 in
principal amount of Debentures. The Agent shall have the rights,
responsibilities and immunities set forth in Annex B
hereto.
19. Miscellaneous.
(a)
No course of dealing between the Debtors and the Secured Parties,
nor any failure to exercise, nor any delay in exercising, on the
part of the Secured Parties, any right, power or privilege
hereunder or under the Debentures shall operate as a waiver
thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power
or privilege.
(b)
All of the rights and remedies of the Secured Parties with respect
to the Collateral, whether established hereby or by the Debentures
or by any other agreements, instruments or documents or by law
shall be cumulative and may be exercised singly or
concurrently.
(c)
This Agreement, together with the exhibits and schedules hereto,
contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into this Agreement
and the exhibits and schedules hereto. No provision of this
Agreement may be waived, modified, supplemented or amended except
in a written instrument signed, in the case of an amendment, by the
Debtors and the Secured Parties holding 67% or more of the
principal amount of Debentures then outstanding, or, in the case of
a waiver, by the party against whom enforcement of any such waived
provision is sought.
(d)
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
(e)
No waiver of any default with respect to any provision, condition
or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such
right.
(f)
This Agreement shall be binding upon and inure to the benefit of
the parties and their successors and permitted assigns. The Company
and the Guarantors may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each
Secured Party (other than by merger). Any Secured Party may assign
any or all of its rights under this Agreement to any Person (as
defined in the Purchase Agreement) to whom such Secured Party
assigns or transfers any Obligations, provided such transferee
agrees in writing to be bound, with respect to the transferred
Obligations, by the provisions of this Agreement that apply to the
“Secured Parties.”
(g)
Each party shall take such further action and execute and deliver
such further documents as may be necessary or appropriate in order
to carry out the provisions and purposes of this
Agreement.
(h)
Except to the extent mandatorily governed by the jurisdiction or
situs where the Collateral is located, all questions concerning the
construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without
regard to the principles of conflicts of law thereof. Except to the
extent mandatorily governed by the jurisdiction or situs where the
Collateral is located, each Debtor agrees that all proceedings
concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and the Debentures
(whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, partners, members,
employees or agents) shall be commenced exclusively in the state
and federal courts sitting in the City of New York, Borough of
Manhattan. Except to the extent mandatorily governed by the
jurisdiction or situs where the Collateral is located, each Debtor
hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough
of Manhattan 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 proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such proceeding
is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such
proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such
party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions
contemplated hereby.
(i)
This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and,
all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.
(j)
All Debtors shall jointly and severally be liable for the
obligations of each Debtor to the Secured Parties
hereunder.
(k) Each Debtor shall indemnify, reimburse and
hold harmless the Agent and the Secured Parties and their
respective partners, members, shareholders, officers, directors,
employees and agents (and any other persons with other titles that
have similar functions) (collectively, “Indemnitees”)
from and against any and all losses, claims, liabilities, damages,
penalties, suits, costs and expenses, of any kind or nature,
(including fees relating to the cost of investigating and defending
any of the foregoing) imposed on, incurred by or asserted against
such Indemnitee in any way related to or arising from or alleged to
arise from this Agreement or the Collateral, except any such
losses, claims,
liabilities,
damages, penalties, suits, costs and expenses which result from the
gross negligence or willful misconduct of the Indemnitee as
determined by a final, nonappealable decision of a court of
competent jurisdiction. This indemnification provision is in
addition to, and not in limitation of, any other indemnification
provision in the Debentures, the Purchase Agreement (as such term
is defined in the Debentures) or any other agreement, instrument or
other document executed or delivered in connection herewith or
therewith.
(l)
Nothing in this Agreement shall be construed to subject Agent or
any Secured Party to liability as a partner in any Debtor or any if
its direct or indirect subsidiaries that is a partnership or as a
member in any Debtor or any of its direct or indirect subsidiaries
that is a limited liability company, nor shall Agent or any Secured
Party be deemed to have assumed any obligations under any
partnership agreement or limited liability company agreement, as
applicable, of any such Debtor or any of its direct or indirect
subsidiaries or otherwise, unless and until any such Secured Party
exercises its right to be substituted for such Debtor as a partner
or member, as applicable, pursuant hereto.
(m)
To the extent that the grant of the security interest in the
Collateral and the enforcement of the terms hereof require the
consent, approval or action of any partner or member, as
applicable, of any Debtor or any direct or indirect subsidiary of
any Debtor or compliance with any provisions of any of the
Organizational Documents, the Debtors hereby grant such consent and
approval and waive any such noncompliance with the terms of said
documents.
[SIGNATURE
PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto
have caused this Security
Agreement to be
duly executed on the day and year
first
above written.
GUIDED THERAPEUTICS, INC.
By: /s/ Gene S.
Cartwright
Name: Gene S.
Cartwright
Title: CEO
INTERSCAN, INC.
By: /s/ Gene S.
Cartwright
Name: Gene S.
Cartwright
Title: CEO
[SIGNATURE PAGE OF
HOLDERS FOLLOWS]
[SIGNATURE PAGE OF HOLDERS TO GTHP SA] Name of
Investing Entity: __________________________ Signature of Authorized
Signatory of Investing entity:
_________________________ Name of Authorized Signatory:
_________________________ Title of Authorized Signatory:
__________________________
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
SCHEDULE
A
Principal Place of
Business of Debtors:
Locations Where
Collateral is Located or Stored:
SCHEDULE
B
SCHEDULE
C
SCHEDULE
D
Legal
Names and Organizational Identification Numbers
SCHEDULE
E
Names;
Mergers and Acquisitions
SCHEDULE
F
Intellectual
Property
SCHEDULE
G
Account
Debtors
SCHEDULE
H
Pledged
Securities
ANNEX
A to SECURITY AGREEMENT
FORM
OF ADDITIONAL DEBTOR JOINDER
Security Agreement
dated as of December 30, 2019 made by Guided Therapeutics, Inc. and
its subsidiaries party thereto from time to time, as Debtors to and
in favor of the Secured Parties identified therein (the
“Security
Agreement”)
Reference is made
to the Security Agreement as defined above; capitalized terms used
herein and not otherwise defined herein shall have the meanings
given to such terms in, or by reference in, the Security
Agreement.
The
undersigned hereby agrees that upon delivery of this Additional
Debtor Joinder to the Secured Parties referred to above, the
undersigned shall (a) be an Additional Debtor under the Security
Agreement, (b) have all the rights and obligations of the Debtors
under the Security Agreement as fully and to the same extent as if
the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein
as of the date of execution and delivery of this Additional Debtor
Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY
INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY
AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
PROVISIONS SET FORTH THEREIN.
Attached hereto are
supplemental and/or replacement Schedules to the Security
Agreement, as applicable.
An
executed copy of this Joinder shall be delivered to the Secured
Parties, and the Secured Parties may rely on the matters set forth
herein on or after the date hereof. This Joinder shall not be
modified, amended or terminated without the prior written consent
of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed in the name and on behalf of the undersigned. [Name of
Additional Debtor
By:
Name: Title:
Address:
Dated:
ANNEX
B to SECURITY AGREEMENT
THE
AGENT
1.
Appointment. The Secured Parties (all capitalized terms used
herein and not otherwise defined shall have the respective meanings
provided in the Security Agreement to which this Annex B is
attached (the "Agreement")),
by their acceptance of the benefits of the Agreement, hereby
designate Fieldhouse Capital Management Inc.
(“Fieldhouse”
or “Agent”)
as the Agent to act as specified herein and in the Agreement. Each
Secured Party shall be deemed irrevocably to authorize the Agent to
take such action on its behalf under the provisions of the
Agreement and any other Transaction Document (as such term is
defined in the Purchase Agreement) and to exercise such powers and
to perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto.
The Agent may perform any of its duties hereunder by or through its
agents or employees.
2.
Nature of
Duties. The Agent shall have no duties or responsibilities
except those expressly set forth in the Agreement. Neither the
Agent nor any of its partners, members, shareholders, officers,
directors, employees or agents shall be liable for any action taken
or omitted by it as such under the Agreement or hereunder or in
connection herewith or therewith, be responsible for the
consequence of any oversight or error of judgment or answerable for
any loss, unless caused solely by its or their gross negligence or
willful misconduct as determined by a final judgment (not subject
to further appeal) of a court of competent jurisdiction. The duties
of the Agent shall be mechanical and administrative in nature; the
Agent shall not have by reason of the Agreement or any other
Transaction Document a fiduciary relationship in respect of any
Debtor or any Secured Party; and nothing in the Agreement or any
other Transaction Document, expressed or implied, is intended to or
shall be so construed as to impose upon the Agent any obligations
in respect of the Agreement or any other Transaction Document
except as expressly set forth herein and
therein.
3.
Lack of Reliance on the
Agent. Independently and without reliance upon the Agent,
each Secured Party, to the extent it deems appropriate, has made
and shall continue to make (i) its own independent investigation of
the financial condition and affairs of the Company and its
subsidiaries in connection with such Secured Party’s
investment in the Debtors, the creation and continuance of the
Obligations, the transactions contemplated by the Transaction
Documents, and the taking or not taking of any action in connection
therewith, and (ii) its own appraisal of the creditworthiness of
the Company and its subsidiaries, and of the value of the
Collateral from time to time, and the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to
provide any Secured Party with any credit, market or other
information with respect thereto, whether coming into its
possession before any Obligations are incurred or at any time or
times thereafter. The Agent shall not be responsible to the Debtors
or any Secured Party for any recitals, statements, information,
representations or warranties herein or in any document,
certificate or other writing delivered in connection herewith, or
for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency
of the Agreement or any other Transaction Document, or for the
financial condition of the Debtors or the value of any of the
Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or
conditions of the Agreement or any other Transaction Document, or
the financial condition of the Debtors, or the value of any of the
Collateral, or the existence or possible existence of any default
or Event of Default under the Agreement, the Debentures, the
Certificate of Designation of the Series D Convertible Preferred
Stock or any of the other Transaction Documents.
1.
Certain Rights of the
Agent. The Agent shall have the
right to take any action with respect to the Collateral, on behalf
of all of the Secured Parties. To the extent practical, the Agent
shall request instructions from the Secured Parties with respect to
any material act or action (including failure to act) in connection
with the Agreement or any other Transaction Document, and shall be
entitled to act or refrain from acting in accordance with the
instructions of a Majority in Interest; if such instructions are
not provided despite the Agent’s request therefor, the Agent
shall be entitled to refrain from such act or taking such action,
and if such action is taken, shall be entitled to appropriate
indemnification from the Secured Parties in respect of actions to
be taken by the Agent; and the Agent shall not incur liability to
any person or entity by reason of so refraining. Without limiting
the foregoing, (a) no Secured Party shall have any right of action
whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the terms of
the Agreement or any other Transaction Document, and the Debtors
shall have no right to question or challenge the authority of, or
the instructions given to, the Agent pursuant to the foregoing and
(b) the Agent shall not be required to take any action which the
Agent believes (i) could reasonably be expected to expose it to
personal liability or (ii) is contrary to this Agreement, the
Transaction Documents or applicable law.
2.
Reliance. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any writing, resolution,
notice, statement, certificate, telex, teletype or telecopier
message, cablegram, radiogram, order or other document or telephone
message signed, sent or made by the proper person or entity, and,
with respect to all legal matters pertaining to the Agreement and
the other Transaction Documents and its duties thereunder, upon
advice of counsel selected by it and upon all other matters
pertaining to this Agreement and the other Transaction Documents
and its duties thereunder, upon advice of other experts selected by
it. Anything to the contrary notwithstanding, the Agent shall have
no obligation whatsoever to any Secured Party to assure that the
Collateral exists or is owned by the Debtors or is cared for,
protected or insured or that the liens granted pursuant to the
Agreement have been properly or sufficiently or lawfully created,
perfected, or enforced or are entitled to any particular
priority.
3.
Indemnification.
To the extent that the Agent is not
reimbursed and indemnified by the Debtors, the Secured Parties will
jointly and severally reimburse and indemnify the Agent, in
proportion to their initially purchased respective principal
amounts of Debentures, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against the Agent
in performing its duties hereunder or under the Agreement or any
other Transaction Document, or in any way relating to or arising
out of the Agreement or any other Transaction Document except for
those determined by a final judgment (not subject to further
appeal) of a court of competent jurisdiction to have resulted
solely from the Agent's own gross negligence or willful misconduct.
Prior to taking any action hereunder as Agent, the Agent may
require each Secured Party to deposit with it sufficient sums as it
determines in good faith is necessary to protect the Agent for
costs and expenses associated with taking such
action.
7.
Resignation by the
Agent.
(a)
The Agent may resign from the performance of all its functions and
duties under the Agreement and the other Transaction Documents at
any time by giving 30 days' prior written notice (as provided in
the Agreement) to the Debtors and the Secured Parties. Such
resignation shall take effect upon the appointment of a successor
Agent pursuant to clauses (b) and (c) below.
(b)
Upon any such notice of resignation, the Secured Parties, acting by
a Majority in Interest, shall appoint a successor Agent
hereunder.
(c)
If a successor Agent shall not have been so appointed within said
30-day period, the Agent shall then appoint a successor Agent who
shall serve as Agent until such time, if any, as the Secured
Parties appoint a successor Agent as provided above. If a successor
Agent has not been appointed within such 30-day period, the Agent
may petition any court of competent jurisdiction or may interplead
the Debtors and the Secured Parties in a proceeding for the
appointment of a successor Agent, and all fees, including, but not
limited to, extraordinary fees associated with the filing of
interpleader and expenses associated therewith, shall be payable by
the Debtors on demand.
8.
Rights with respect to
Collateral. Each
Secured Party agrees with all other Secured Parties and the Agent
(i) that it shall not, and shall not attempt to, exercise any
rights with respect to its security interest in the Collateral,
whether pursuant to any other agreement or otherwise (other than
pursuant to this Agreement), or take or institute any action
against the Agent or any of the other Secured Parties in respect of
the Collateral or its rights hereunder (other than any such action
arising from the breach of this Agreement) and (ii) that such
Secured Party has no other rights with respect to the Collateral
other than as set forth in this Agreement and the other Transaction
Documents. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent and the retiring Agent
shall be discharged from its duties and obligations under the
Agreement. After any retiring Agent’s resignation or removal
hereunder as Agent, the provisions of the Agreement including this
Annex B shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.
Exhibit 10.46
SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”) is
dated as of December 30, 2019, between Guided Therapeutics, Inc., a
Delaware corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including
its successors and assigns, a “Purchaser” and
collectively, the “Purchasers”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(a)(2) of the Securities Act of 1933, as
amended (the “Securities Act”), and Rule 506
promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, securities of the Company as
more fully described in this Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1
Definitions.
In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Certificate of Designation (as
defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:
“Acquiring
Person” shall have the meaning ascribed to such term in
Section 4.7.
“Action”
shall have the meaning ascribed to such term in Section
3.1(j).
“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Board
Appointee” shall have the meaning ascribed to such term in
Section 4.15.
“Board
of Directors” means the board of directors of the
Company.
“Business
Day” means any day except any Saturday, any Sunday, any day
which is a federal legal holiday in the United States or any day on
which banking institutions in the State of New York are authorized
or required by law or other governmental action to
close.
“Certificate
of Designation” means the Certificate of Designation to be
filed prior to the Closing by the Company with the Secretary of
State of Delaware, in the form of Exhibit H attached
hereto.
“Closing”
means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.
“Closing
Date” means the Trading Day on which all of the Transaction
Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the
Purchasers’ obligations to pay the Subscription Amount and
(ii) the Company’s obligations to deliver the Securities, in
each case, have been satisfied or waived.
“Commission”
means the United States Securities and Exchange
Commission.
“Common
Stock” means the common stock of the Company, par value
$0.001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
“Common
Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at
any time Common Stock, including, without limitation, any debt,
preferred stock, right, option, warrant or other instrument that is
at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common
Stock.
“Company
Counsel” means Ellenoff Grossman & Schole LLP, with
offices located at 1345 Avenue of the Americas, New York, New York
10105.
“Conversion
Price” shall have the meaning ascribed to such term in the
Certificate of Designation.
“Conversion
Shares” shall have the meaning ascribed to such term in the
Certificate of Designation.
“Debentures”
means the 12% Senior Secured Debentures due, subject to the terms
therein, three (3) years from their date of issuance, issued by the
Company to the Purchasers pursuant to Section 4.15.
“Disclosure
Schedules” shall have the meaning ascribed to such term in
Section 3.1.
“Effective
Date” means the earliest of the date that (a) the initial
Registration Statement has been declared effective by the
Commission, (b) all of the Underlying Shares have been sold
pursuant to Rule 144 or may be sold pursuant to Rule 144 without
the requirement for the Company to be in compliance with the
current public information required under Rule 144 and without
volume or manner-of-sale restrictions, (c) following the one year
anniversary of the Closing Date provided that a holder of the
Underlying Shares is not an Affiliate of the Company or (d) all of
the Underlying Shares may be sold pursuant to an exemption from
registration under Section 4(1) of the Securities Act without
volume or manner-of-sale restrictions and Company Counsel has
delivered to such holders a standing written unqualified opinion
that resales may then be made by such holders of the Underlying
Shares pursuant to such exemption which opinion shall be in form
and substance reasonably acceptable to such holders.
“Evaluation
Date” shall have the meaning ascribed to such term in Section
3.1(s).
“Exchange
Act” means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
“FCPA”
means the Foreign Corrupt Practices Act of 1977, as
amended.
“FDA”
shall have the meaning ascribed to such term in Section
3.1(ll).
“FDCA”
shall have the meaning ascribed to such term in Section
3.1(ll).
“GPB”
means GPB Holdings.
“GAAP”
shall have the meaning ascribed to such term in Section
3.1(h).
“Indebtedness”
shall have the meaning ascribed to such term in Section
3.1(bb).
“Intellectual
Property Rights” shall have the meaning ascribed to such term
in Section 3.1(o).
“Legend
Removal Date” shall have the meaning ascribed to such term in
Section 4.1(c).
“Liens”
means a lien, charge, pledge, security interest, encumbrance, right
of first refusal, preemptive right or other
restriction.
“Material
Adverse Effect” shall have the meaning assigned to such term
in Section 3.1(b).
“Material
Permits” shall have the meaning ascribed to such term in
Section 3.1(m).
“Maximum
Rate” shall have the meaning ascribed to such term in Section
5.17.
“Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Pharmaceutical
Product” shall have the meaning ascribed to such term in
Section 3.1(ll).
“Preferred
Stock” means the shares of the Company’s Series D
Preferred Stock issued hereunder having the rights, preferences and
privileges set forth in the Certificate of Designation, in the form
of Exhibit H hereto.
“Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.
“Purchaser
Party” shall have the meaning ascribed to such term in
Section 4.10.
“Registration
Rights Agreement” means the Registration Rights Agreement,
dated on or about the date hereof, among the Company and the
Purchasers, in the form of Exhibit B attached hereto.
“Registration
Statement” means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and
covering the resale of the Underlying Shares by each Purchaser as
provided for in the Registration Rights Agreement.
“Required
Approvals” shall have the meaning ascribed to such term in
Section 3.1(e).
“Required
Minimum” means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in
the future pursuant to the Transaction Documents, including any
Underlying Shares issuable upon exercise in full of all Preferred
Stock and Warrants (including Underlying Shares issuable as payment
of interest on the Debentures or dividends on the Preferred Stock),
ignoring any conversion or exercise limits set forth
therein.
“Rule
144” means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such
Rule.
“Rule
424” means Rule 424 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended or interpreted from
time to time, or any similar rule or regulation hereafter adopted
by the Commission having substantially the same purpose and effect
as such Rule.
“SEC
Reports” shall have the meaning ascribed to such term in
Section 3.1(h).
“Securities”
means the Shares, Preferred Stock, the Debentures (if and when
issued), the Warrants, the Warrant Shares and the Underlying
Shares.
“Securities
Act” means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
“Security
Agreement” means the Security Agreement, dated the date
hereof, among the Company and the Purchasers, in the form of
Exhibit E attached hereto.
“Shareholder
Approval” means such approval as may be required by Delaware
General Corporation Law from the shareholders of the Company with
respect to affecting a reverse stock split.
“Shares”
means the shares of Common Stock delivered to the Purchasers at the
Closing pursuant to Section 2.1.
“Short Sales” means all “short
sales” as defined in Rule 200 of Regulation SHO under the
Exchange Act (but shall not be deemed to include locating and/or
borrowing shares of Common Stock).
“Stated
Value” means $0.25 per share of Preferred Stock.
“Subscription
Amount” means, as to each Purchaser, the aggregate amount to
be paid for Preferred Stock, Shares and Warrants purchased
hereunder as specified below such Purchaser’s name on the
signature page of this Agreement and next to the heading
“Subscription Amount,” in United States dollars and in
immediately available funds.
“Subsidiary”
means any subsidiary of the Company as set forth in the SEC Reports
and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date
hereof.
“Trading
Day” means a day on which the principal Trading Market is
open for trading.
“Trading
Market” means any of the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date
in question: the NYSE American, the Nasdaq Capital Market, the
Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange, OTCQB or OTCQX (or any successors to any of the
foregoing).
“Transaction
Documents” means this Agreement, the Certificate of
Designation, the Debentures (if and when issued), the Warrants, the
Registration Rights Agreement, the Security Agreement, all exhibits
and schedules thereto and hereto and any other documents or
agreements executed in connection with the transactions
contemplated hereunder.
“Transfer
Agent” means Computershare, the current transfer agent of the
Company, and any successor transfer agent of the
Company.
“Underlying
Shares” means the Shares, the Warrant Shares and shares of
Common Stock issued and issuable pursuant to the terms of the
Certificate of Designation, including without limitation, shares of
Common Stock that may be issued and issuable in lieu of the cash
payment of interest on the Debentures in accordance with the terms
of the Debentures and dividends on the Preferred Stock, in each
case without respect to any limitation or restriction on the
conversion of Preferred Stock or the exercise of the
Warrants.
“Warrants”
means, collectively, the Common Stock purchase warrants delivered
to the Purchasers at the Closing in accordance with the Section
2.2(a) hereof, which Warrants shall have a term of exercise equal
to three years, in the form of Exhibit C attached
hereto.
“Warrant
Shares” means the shares of Common Stock issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
On the Closing Date, upon the terms and subject to the conditions
set forth herein, substantially concurrent with the execution and
delivery of this Agreement by the parties hereto, the Company
agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $6,000,000 in Stated Value
of Preferred Stock and Shares. Each Purchaser shall deliver to the
Company, via wire transfer or a certified check, immediately
available funds equal to such Purchaser’s Subscription Amount
as set forth on the signature page hereto executed by such
Purchaser, and the Company shall deliver to each Purchaser its
respective shares of Preferred Stock, Shares and Warrant, as
determined pursuant to Section 2.2(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing. Upon satisfaction of the covenants and
conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of Company Counsel or such other location as
the parties shall mutually agree.
2.2 Deliveries.
(a) On
or prior to the Closing Date, the Company shall deliver or cause to
be delivered to each Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) for
each $1,000 of Subscription Amount (pro-rated for lesser amounts),
1 share of Preferred Stock with a Stated Value of $750 per share,
which shares shall be registered in the name of such
Purchaser;
(iii) for
each $1,000 of Subscription Amount (pro-rated for lesser amounts),
2,000 Shares, which shares shall be registered in the name of such
Purchaser
(iv) for
each $1,000 of Subscription Amount (pro-rated for lesser amounts),
a Warrant registered in the name of such Purchaser to purchase up
to 2,000 shares of Common Stock, with an exercise price equal to
$0.25,
which Warrant shall be exercisable
commencing immediately following the Closing Date and have a term
of exercise of 3-years;
(v) for
each $1,000 of Subscription Amount (pro-rated for lesser amounts),
a Warrant registered in the name of such Purchaser to purchase up
to 2,000 shares of Common Stock, with an exercise price equal to
$0.75,
which Warrant shall be exercisable
immediately following the Closing Date and have a term of exercise
of 3-years
(vi) the
Security Agreement, duly executed by the Company and each
Subsidiary;
(vii) the
Registration Rights Agreement duly executed by the Company;
and
(viii) evidence
of entry into definitive exchange agreements with the existing
debtholders of the Company for the reduction of the Company’s
outstanding indebtedness.
(b) On
or prior to the Closing Date, each Purchaser shall deliver or cause
to be delivered to the Company, the following:
(i) this
Agreement duly executed by such Purchaser;
(ii) such
Purchaser’s Subscription Amount by wire transfer to the
account specified in writing by the Company;
(iii) the
Security Agreement duly executed by such
Purchaser;
(iv) if
such Purchaser is a Canadian Purchaser, the Subscription for Units
required pursuant to Section 3.2(h); and
(v) the
Registration Rights Agreement duly executed by such Purchaser;
and
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being
met:
(i) the
accuracy in all material respects on (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) the Closing Date of the
representations and warranties of the Purchasers contained herein
(unless as of a specific date therein in which case they shall be
accurate as of such date);
(ii) all
obligations, covenants and agreements of each Purchaser required to
be performed at or prior to the Closing Date shall have been
performed; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of this Agreement.
(b) The
respective obligations of the Purchasers hereunder in connection
with the Closing are subject to the following conditions being
met:
(i) the
accuracy in all material respects (or, to the extent
representations or warranties are qualified by materiality or
Material Adverse Effect, in all respects) when made and on the
Closing Date of the representations and warranties of the Company
contained herein (unless as of a specific date therein in which
case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of
this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and
(v) from
the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission or the
Company’s principal Trading Market and, at any time prior to
the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth in the SEC
Reports or Disclosure Schedules attached hereto, which shall
qualify any representations or warranties of the Company otherwise
made herein, the Company hereby makes the following representations
and warranties to each Purchaser:
(a) Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set
forth in the SEC Reports. The Company owns, directly or indirectly,
all of the capital stock or other equity interests of each
Subsidiary free and clear of any Liens, and all of the issued and
outstanding shares of capital stock of each Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive
and similar rights to subscribe for or purchase securities. If the
Company has no subsidiaries, all other references to the
Subsidiaries or any of them in the Transaction Documents shall be
disregarded.
(b) Organization
and Qualification. The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on
its business as currently conducted. Neither the Company nor any
Subsidiary is in violation nor default of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in:
(i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect
on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke,
limit or curtail such power and authority or
qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction
Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and each
of the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with
the Required Approvals. This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will
have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(d) No
Conflicts. The execution, delivery and performance by the Company
of this Agreement and the other Transaction Documents to which it
is a party, the issuance and sale of the Securities and the
consummation by it of the transactions contemplated hereby and
thereby do not and will not: (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s
certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or
constitute a default (or an event that with notice or lapse of time
or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required
Approvals, conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset
of the Company or a Subsidiary is bound or affected; except in the
case of each of clauses (ii) and (iii), such as could not have or
reasonably be expected to result in a Material Adverse
Effect.
(e) Filings,
Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings
required pursuant to Section 4.6 of this Agreement, (ii) the filing
with the Commission pursuant to the Registration Rights Agreement,
(iii) the notice and/or application(s) to each applicable Trading
Market for the issuance and sale of the Securities and the listing
of the Conversion Shares and Warrant Shares for trading thereon in
the time and manner required thereby, (iv) the filing of Form D
with the Commission and such filings as are required to be made
under applicable state securities laws, and (v) Shareholder
Approval (collectively, the “Required
Approvals”).
(f) Issuance
of the Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction
Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer provided for in the Transaction
Documents. The Underlying Shares, when issued in accordance with
the terms of the Transaction Documents, will be validly issued,
fully paid and nonassessable, free and clear of all Liens imposed
by the Company other than restrictions on transfer provided for in
the Transaction Documents. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for
issuance of the Underlying Shares at least equal to the Required
Minimum on the date hereof.
(g) Capitalization.
The capitalization of the Company is as set forth on Schedule
3.1(g), which Schedule 3.1(g) shall also include the number of
shares of Common Stock owned beneficially, and of record, by
Affiliates of the Company as of the date hereof. The Company has
not issued any capital stock since its most recently filed periodic
report under the Exchange Act, other than pursuant to the exercise
of stock options under the Company’s stock option plans, the
issuance of shares of Common Stock to employees pursuant to the
Company’s employee stock purchase plans and pursuant to the
conversion and/or exercise of Common Stock Equivalents outstanding
as of the date of the most recently filed periodic report under the
Exchange Act. No Person has any right of first refusal, preemptive
right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
Except as a result of the purchase and sale of the Securities,
there are no outstanding options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into
or exercisable or exchangeable for, or giving any Person any right
to subscribe for or acquire any shares of Common Stock or the
capital stock of any Subsidiary, or contracts, commitments,
understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of
Common Stock or Common Stock Equivalents or capital stock of any
Subsidiary. The issuance and sale of the Securities will not
obligate the Company or any Subsidiary to issue shares of Common
Stock or other securities to any Person (other than the Purchasers)
and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under
any of such securities. There are no outstanding securities or
instruments of the Company or any Subsidiary that contain any
redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to redeem a security of the
Company or such Subsidiary. The Company does not have any stock
appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement. All of the outstanding
shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, and none of
such outstanding shares was issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities.
No further approval or authorization of any stockholder, the Board
of Directors or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s
capital stock to which the Company is a party or, to the knowledge
of the Company, between or among any of the Company’s
stockholders.
(h) SEC
Reports; Financial Statements. The Company has filed all reports,
schedules, forms, statements and other documents required to be
filed by the Company under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the
Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely
basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such
extension. As of their respective dates, the SEC Reports complied
in all material respects with the requirements of the Securities
Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. The Company has never been an issuer subject to Rule
144(i) under the Securities Act. The financial statements of the
Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at
the time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods
involved (“GAAP”), except as may be otherwise specified
in such financial statements or the notes thereto and except that
unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries
as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included within the
SEC Reports, except as set forth on Schedule 3.1(i), (i) there has
been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this
Agreement or as set forth on Schedule 3.1(i), no event, liability,
fact, circumstance, occurrence or development has occurred or
exists or is reasonably expected to occur or exist with respect to
the Company or its Subsidiaries or their respective businesses,
prospects, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least 1
Trading Day prior to the date that this representation is
made.
(j) Litigation.
There is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”) which (i) adversely affects or challenges the
legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) could, if there were an
unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary,
nor to the Company’s knowledge any director or officer
thereof, is or has been the subject of any Action involving a claim
of violation of or liability under federal or state securities laws
or a claim of breach of fiduciary duty. There has not been, and to
the knowledge of the Company, there is not pending or contemplated,
any investigation by the Commission involving the Company or any
current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.
(k) Labor
Relations. No labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the
Company, which could reasonably be expected to result in a Material
Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and
its Subsidiaries believe that their relationships with their
employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local
and foreign laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(l) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or
in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or
credit agreement or any other agreement or instrument to which it
is a party or by which it or any of its properties is bound
(whether or not such default or violation has been waived), (ii) is
in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority or (iii) is or has been
in violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.
(m) Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with
all federal, state, local and foreign laws relating to pollution or
protection of human health or the environment (including ambient
air, surface water, groundwater, land surface or subsurface
strata), including laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively,
“Hazardous Materials”) into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees,
demands, or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations,
issued, entered, promulgated or approved thereunder
(“Environmental Laws”); (ii) have received all permits
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses; and
(iii) are in compliance with all terms and conditions of any such
permit, license or approval where in each clause (i), (ii) and
(iii), the failure to so comply could be reasonably expected to
have, individually or in the aggregate, a Material Adverse
Effect.
(n) Regulatory
Permits. The Company and the Subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except
where the failure to possess such permits could not reasonably be
expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(o) Title
to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by
them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
(i) Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to
be made of such property by the Company and the Subsidiaries and
(ii) Liens for the payment of federal, state or other taxes, for
which appropriate reserves have been made therefor in accordance
with GAAP and, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and
the Subsidiaries are in compliance.
(p) Intellectual
Property. The Company and the Subsidiaries have, or have rights to
use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property
rights and similar rights necessary or required for use in
connection with their respective businesses as described in the SEC
Reports and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of, the
Intellectual Property Rights has expired, terminated or been
abandoned, or is expected to expire or terminate or be abandoned,
within two (2) years from the date of this Agreement. Neither the
Company nor any Subsidiary has received, since the date of the
latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge
that the Intellectual Property Rights violate or infringe upon the
rights of any Person, except as could not have or reasonably be
expected to not have a Material Adverse Effect. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of
the Intellectual Property Rights. The Company and its Subsidiaries
have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(q) Insurance.
The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at
least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business without a
significant increase in cost.
(r) Transactions
with Affiliates and Employees. Except as set forth on Schedule
3.1(r), to the Company’s knowledge none of the officers or
directors of the Company or any Subsidiary and, to the knowledge of
the Company, none of the employees of the Company or any Subsidiary
is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for
rental of real or personal property to or from providing for the
borrowing of money from or lending of money to, or otherwise
requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which
any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.
(s) Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are
in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date
hereof, and any and all applicable rules and regulations
promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company and the Subsidiaries have
established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the
Subsidiaries and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods specified in the Commission’s rules and forms. To the
Company’s knowledge, the Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and
procedures of the Company and the Subsidiaries as of the end of the
period covered by the most recently filed periodic report under the
Exchange Act (such date, the “Evaluation Date”). The
Company presented in its most recently filed periodic report under
the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no changes in the internal control
over financial reporting (as such term is defined in the Exchange
Act) that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of
the Company and its Subsidiaries.
(t) Certain
Fees. No brokerage or finder’s fees or commissions are or
will be payable by the Company or any Subsidiaries to any broker,
financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The
Purchasers shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction
Documents.
(u) Private
Placement. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as
contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the
Trading Market.
(v) Investment
Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as
amended.
(w) Registration
Rights. Other than each of the Purchasers, no Person has any right
to cause the Company or any Subsidiary to effect the registration
under the Securities Act of any securities of the Company or any
Subsidiaries.
(x) Listing
and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act nor has the Company
received any notification that the Commission is contemplating
terminating such registration. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing
or maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements. The Common Stock is currently eligible
for electronic transfer through the Depository Trust Company or
another established clearing corporation and the Company is current
in payment of the fees to the Depository Trust Company (or such
other established clearing corporation) in connection with such
electronic transfer.
(y) Application
of Takeover Protections. The Company and the Board of Directors
have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the
laws of its state of incorporation that is or could become
applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a
result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(z) Disclosure.
Except with respect to the material terms and conditions of the
transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf
has provided any of the Purchasers or their agents or counsel with
any information that it believes constitutes or might constitute
material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company and its
Subsidiaries, their respective businesses and the transactions
contemplated hereby, including the Disclosure Schedules to this
Agreement, is true and correct and does not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during
the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of
the circumstances under which they were made and when made, not
misleading. The Company acknowledges and agrees that no Purchaser
makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically
set forth in Section 3.2 hereof.
(aa) No
Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2, neither
the Company, nor any of its Affiliates, nor any Person acting on
its or their behalf has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for
purposes of (i) the Securities Act which would require the
registration of any such securities under the Securities Act, or
(ii) any applicable shareholder approval provisions of any Trading
Market on which any of the securities of the Company are listed or
designated.
(bb) Indebtedness.
The SEC Reports set forth as of the date thereof all outstanding
secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has
commitments. For the purposes of this Agreement,
“Indebtedness” means (x) any liabilities for borrowed
money or amounts owed in excess of $50,000 (other than accounts
payable incurred in the ordinary course of business), (y) all
guaranties, endorsements and other contingent obligations in
respect of indebtedness of others, whether or not the same are or
should be reflected in the Company’s consolidated balance
sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the
present value of any lease payments in excess of $50,000 due under
leases required to be capitalized in accordance with GAAP. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
(cc) Tax
Status. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material
Adverse Effect, the Company and its Subsidiaries each (i) has made
or filed all United States federal, state and local income and all
foreign income and franchise tax returns, reports and declarations
required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns,
reports and declarations and (iii) has set aside on its books
provision reasonably adequate for the payment of all material taxes
for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any
jurisdiction, and to the Company’s knowledge, the officers of
the Company or of any Subsidiary know of no basis for any such
claim.
(dd) No
General Solicitation. Neither the Company nor any Person acting on
behalf of the Company has offered or sold any of the Securities by
any form of general solicitation or general advertising. The
Company has offered the Securities for sale only to the Purchasers
and certain other “accredited investors” within the
meaning of Rule 501 under the Securities Act.
(ee) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to
the knowledge of the Company or any Subsidiary, any agent or other
person acting on behalf of the Company or any Subsidiary, has (i)
directly or indirectly, used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign
or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate
funds, (iii) failed to disclose fully any contribution made by the
Company or any Subsidiary (or made by any person acting on its
behalf of which the Company is aware) which is in violation of law
or (iv) violated in any material respect any provision of
FCPA.
(ff) Accountants.
The Company’s accounting firm is set forth on Schedule
3.1(ff) of the Disclosure Schedules. To the knowledge and belief of
the Company, such accounting firm (i) is a registered public
accounting firm as required by the Exchange Act and (ii) shall
express its opinion with respect to the financial statements to be
included in the Company’s Annual Report for the fiscal year
ending December 31.
(gg) Seniority.
As of the Closing Date, no Indebtedness or other claim against the
Company is senior to the Debentures in right of payment, whether
with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior
only as to the property covered thereby).
(hh) No
Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.
(ii) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchaser or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.
(jj) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this
Agreement or elsewhere herein to the contrary notwithstanding
(except for Sections 3.2(g) and 4.13 hereof), it is understood and
acknowledged by the Company that: (i) none of the Purchasers has
been asked by the Company to agree, nor has any Purchaser agreed,
to desist from purchasing or selling, long and/or short, securities
of the Company, or “derivative” securities based on
securities issued by the Company or to hold the Securities for any
specified term, (ii) past or future open market or other
transactions by any Purchaser, specifically including, without
limitation, Short Sales or “derivative” transactions,
before or after the closing of this or future private placement
transactions, may negatively impact the market price of the
Company’s publicly-traded securities, (iii) any Purchaser,
and counter-parties in “derivative” transactions to
which any such Purchaser is a party, directly or indirectly, may
presently have a “short” position in the Common Stock
and (iv) each Purchaser shall not be deemed to have any affiliation
with or control over any arm’s length counter-party in any
“derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may
engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation,
during the periods that the value of the Underlying Shares
deliverable with respect to Securities are being determined, and
(z) such hedging activities (if any) could reduce the value of the
existing stockholders' equity interests in the Company at and after
the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do
not constitute a breach of any of the Transaction
Documents.
(kk) Regulation
M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase
any other securities of the Company, other than, in the case of
clauses (ii) and (iii), compensation paid to the Company’s
placement agent in connection with the placement of the
Securities.
(ll) FDA.
As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal Food,
Drug and Cosmetic Act, as amended, and the regulations thereunder
(“FDCA”) that is manufactured, packaged, labeled,
tested, distributed, sold, and/or marketed by the Company or any of
its Subsidiaries (each such product, a “Pharmaceutical
Product”), such Pharmaceutical Product is being manufactured,
packaged, labeled, tested, distributed, sold and/or marketed by the
Company in compliance with all applicable requirements under FDCA
and similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect. There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect. The properties, business and
operations of the Company have been and are being conducted in all
material respects in accordance with all applicable laws, rules and
regulations of the FDA. The Company has not been informed by the
FDA that the FDA will prohibit the marketing, sale, license or use
in the United States of any product proposed to be developed,
produced or marketed by the Company nor has the FDA expressed any
concern as to approving or clearing for marketing any product being
developed or proposed to be developed by the
Company.
(mm) Stock
Option Plans. Each stock option granted by the Company under the
Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.
(nn) Office
of Foreign Assets Control. Neither the Company nor any Subsidiary
nor, to the Company's knowledge, any director, officer, agent,
employee or affiliate of the Company or any Subsidiary is currently
subject to any U.S. sanctions administered by the Office of Foreign
Assets Control of the U.S. Treasury Department
(“OFAC”).
(oo) U.S.
Real Property Holding Corporation. The Company is not and has never
been a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and
the Company shall so certify upon Purchaser’s
request.
(pp) Bank
Holding Company Act. Neither the Company nor any of its
Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation
by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”). Neither the Company nor any of its
Subsidiaries or Affiliates owns or controls, directly or
indirectly, five percent (5%) or more of the outstanding shares of
any class of voting securities or twenty-five percent or more of
the total equity of a bank or any entity that is subject to the
BHCA and to regulation by the Federal Reserve. Neither the Company
nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity
that is subject to the BHCA and to regulation by the Federal
Reserve.
(qq) Money
Laundering. The operations of the Company and its Subsidiaries are
and have been conducted at all times in compliance with applicable
financial record-keeping and reporting requirements of the Currency
and Foreign Transactions Reporting Act of 1970, as amended,
applicable money laundering statutes and applicable rules and
regulations thereunder (collectively, the “Money Laundering
Laws”), and no Action or Proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving
the Company or any Subsidiary with respect to the Money Laundering
Laws is pending or, to the knowledge of the Company or any
Subsidiary, threatened.
(rr) No
Disqualification Events. With respect to the Securities to be
offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any
affiliated issuer, to the Company’s knowledge any director,
executive officer, other officer of the Company participating in
the offering hereunder, any beneficial owner of 20% or more of the
Company’s outstanding voting equity securities, calculated on
the basis of voting power, nor any promoter (as that term is
defined in Rule 405 under the Securities Act) connected with the
Company in any capacity at the time of sale (each, an “Issuer
Covered Person” and, together, “Issuer Covered
Persons”) is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under
the Securities Act (a “Disqualification Event”), except
for a Disqualification Event covered by Rule 506(d)(2) or (d)(3).
The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Purchasers
a copy of any disclosures provided thereunder.
(ss) Other
Covered Persons. The Company is not aware of any person (other than
any Issuer Covered Person) that has been or will be paid (directly
or indirectly) remuneration for solicitation of purchasers in
connection with the sale of any Securities.
(tt) Notice
of Disqualification Events. The Company will notify the Purchasers
in writing, prior to the Closing Date of (i) any Disqualification
Event relating to any Issuer Covered Person and (ii) any event that
would, with the passage of time, become a Disqualification Event
relating to any Issuer Covered Person.
3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and
for no other Purchaser, hereby represents and warrants as of the
date hereof and as of the Closing Date to the Company as follows
(unless as of a specific date therein, in which case they shall be
accurate as of such date):
(a) Organization;
Authority. Such Purchaser is either an individual or an entity duly
incorporated or formed, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or formation with
full right, corporate, partnership, limited liability company or
similar power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by
the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or
similar action, as applicable, on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed
by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.
(b) Own
Account. Such Purchaser understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Purchaser’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable
federal and state securities laws). Such Purchaser is acquiring the
Securities hereunder in the ordinary course of its
business.
(c) Purchaser
Status. At the time such Purchaser was offered the Securities, it
was, and as of the date hereof it is, and on each date on which it
exercises any Warrants it will be an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act.
(d) Experience
of Such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in
the Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
(e) General
Solicitation. Such Purchaser is not, to such Purchaser’s
knowledge, purchasing the Securities as a result of any
advertisement, article, notice or other communication regarding the
Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or,
to the knowledge of such Purchaser, any other general solicitation
or general advertisement.
(f) Access
to Information. Such Purchaser acknowledges that it has had the
opportunity to review the Transaction Documents (including all
exhibits and schedules thereto) and the SEC Reports and has been
afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities;
(ii) access to information about the Company and its financial
condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information
that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment
decision with respect to the investment.
(g) Certain
Transactions and Confidentiality. Other than consummating the
transactions contemplated hereunder, such Purchaser has not, nor
has any Person acting on behalf of or pursuant to any understanding
with such Purchaser, directly or indirectly executed any purchases
or sales, including Short Sales, of the securities of the Company
during the period commencing as of the time that such Purchaser
first received a term sheet (written or oral) from the Company or
any other Person representing the Company setting forth the
material terms of the transactions contemplated hereunder and
ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed
investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the
portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of
such Purchaser’s assets, the representation set forth above
shall only apply with respect to the portion of assets managed by
the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other
Persons party to this Agreement or to such Purchaser’s
representatives, including, without limitation, its officers,
directors, partners, legal and other advisors, employees, agents
and Affiliates, such Purchaser has maintained the confidentiality
of all disclosures made to it in connection with this transaction
(including the existence and terms of this transaction).
Notwithstanding the foregoing, for the avoidance of doubt, nothing
contained herein shall constitute a representation or warranty
against, or a prohibition of, any actions with respect to the
borrowing of, arrangement to borrow, identification of the
availability of, and/or securing of, securities of the Company in
order for such Purchaser (or its broker or other financial
representative) to effect Short Sales or similar transactions in
the future.
(h) Canadian
Purchaser Representations. In the event that such Purchaser resides
in or is a citizen of Canada, such Purchaser shall complete,
execute and deliver the Subscription For Units attached hereto as
Annex A concurrently with the execution of this Agreement, which
document shall be incorporated by reference under this Section 3.2
as if made hereunder.
The
Company acknowledges and agrees that the representations contained
in this Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transactions contemplated hereby. Notwithstanding the
foregoing, for the avoidance of doubt, nothing contained herein
shall constitute a representation or warranty, or preclude any
actions, with respect to locating or borrowing shares in order to
effect Short Sales or similar transactions in the
future.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration
statement or Rule 144, to the Company or to an Affiliate of a
Purchaser or in connection with a pledge as contemplated in Section
4.1(b), the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and the Registration Rights Agreement
and shall have the rights and obligations of a Purchaser under this
Agreement and the Registration Rights
Agreement.
(b) The
Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following
form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER
LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
The
Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or
all of the Securities to a financial institution that is an
“accredited investor” as defined in Rule 501(a) under
the Securities Act and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or
transfer would not be subject to approval of the Company and no
legal opinion of legal counsel of the pledgee, secured party or
pledge or shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate
Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are
subject to registration pursuant to the Registration Rights
Agreement, the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) under the Securities Act or other
applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders (as defined in the Registration
Rights Agreement) thereunder.
(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Registration
Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Underlying
Shares pursuant to Rule 144 (assuming cashless exercise of the
Warrants), (iii) if such Underlying Shares are eligible for sale
under Rule 144 (assuming cashless exercise of the Warrants),
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such
Underlying Shares and without volume or manner-of-sale restrictions
or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent or the Purchaser if required by the
Transfer Agent to effect the removal of the legend hereunder, or if
requested by a Purchaser, respectively. If all or any portion of a
Debenture (if and when issued) or Preferred Stock is converted or
Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Underlying
Shares, or if such Underlying Shares may be sold under Rule 144
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 (assuming
cashless exercise of the Warrants) as to such Underlying Shares and
without volume or manner-of-sale restrictions or if such legend is
not otherwise required under applicable requirements of the
Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Commission) then such
Underlying Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such
legend is no longer required under this Section 4.1(c), it will, no
later than the earlier of (i) two (2) Trading Days and (ii) the
number of Trading Days comprising the Standard Settlement Period
(as defined below) following the delivery by a Purchaser to the
Company or the Transfer Agent of a certificate representing
Underlying Shares, as applicable, issued with a restrictive legend
(such date, the “Legend Removal Date”), deliver or
cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on
transfer set forth in this Section 4. Certificates for Underlying
Shares subject to legend removal hereunder shall be transmitted by
the Transfer Agent to the Purchaser by crediting the account of the
Purchaser’s prime broker with the Depository Trust Company
System as directed by such Purchaser. As used herein,
“Standard Settlement Period” means the standard
settlement period, expressed in a number of Trading Days, on the
Company’s primary Trading Market with respect to the Common
Stock as in effect on the date of delivery of a certificate
representing Underlying Shares, as applicable, issued with a
restrictive legend.
(d) Each
Purchaser, severally and not jointly with the other Purchasers,
agrees with the Company that such Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company’s reliance upon this
understanding.
4.2 Acknowledgment
of Dilution. The Company acknowledges that the issuance of the
Securities may result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain
market conditions. The Company further acknowledges that its
obligations under the Transaction Documents, including, without
limitation, its obligation to issue the Underlying Shares pursuant
to the Transaction Documents, are unconditional and absolute and
not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any
claim the Company may have against any Purchaser and regardless of
the dilutive effect that such issuance may have on the ownership of
the other stockholders of the Company.
4.3 Furnishing
of Information; Public Information. If the Common Stock is not
registered under Section 12(b) or 12(g) of the Exchange Act on the
date hereof, the Company agrees to cause the Common Stock to be
registered under Section 12(g) of the Exchange Act on or before the
60th
calendar day following the date
hereof. Until the earliest of the time that (i) no Purchaser owns
Securities or (ii) the Warrants have expired, the Company covenants
to maintain the registration of the Common Stock under Section
12(b) or 12(g) of the Exchange Act and to timely file (or obtain
extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the
date hereof pursuant to the Exchange Act even if the Company is not
then subject to the reporting requirements of the Exchange
Act.
4.4 Integration.
The Company shall not sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities
or that would be integrated with the offer or sale of the
Securities for purposes of the rules and regulations of any Trading
Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is
obtained before the closing of such subsequent
transaction.
4.5 Exercise
Procedures. Each of the form of Notice of Exercise included in the
Warrants or Certificate of Designation set forth the totality of the procedures required
of the Purchasers in order to exercise the Warrants or Preferred
Stock. Without limiting the preceding sentences, no ink-original
Notice of Exercise shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any
Notice of Exercise form be required in order to exercise the
Warrants or convert the Preferred Stock. No additional legal
opinion, other information or instructions shall be required of the
Purchasers to exercise their Warrants or convert their Preferred
Stock. The Company shall honor exercises of the Warrants and
conversions of the Preferred Stock and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods
set forth in the Transaction Documents.
4.6 Securities
Laws Disclosure; Publicity. The Company shall file a Current Report
on Form 8-K, including the Transaction Documents as exhibits
thereto, with the Commission within the time required by the
Exchange Act. From and after the issuance of such press release,
the Company represents to the Purchasers that it shall have
publicly disclosed all material, non-public information delivered
to any of the Purchasers by the Company or any of its Subsidiaries,
or any of their respective officers, directors, employees or agents
in connection with the transactions contemplated by the Transaction
Documents. In addition, effective upon the issuance of such press
release, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether
written or oral, between the Company, any of its Subsidiaries or
any of their respective officers, directors, agents, employees or
Affiliates on the one hand, and any of the Purchasers or any of
their Affiliates on the other hand, shall terminate. The Company
and each Purchaser shall consult with each other in issuing any
other press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement
without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each
Purchaser, with respect to any press release of the Company, which
consent shall not unreasonably be withheld or delayed, except if
such disclosure is required by law, in which case the disclosing
party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with
the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (a) as required
by federal securities law in connection with (i) any registration
statement contemplated by the Registration Rights Agreement and
(ii) the filing of final Transaction Documents with the Commission
and (b) to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure permitted under
this clause (b).
4.7 Shareholder
Rights Plan. No claim will be made or enforced by the Company or,
with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control
share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or similar anti-takeover
plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of
any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement
between the Company and the Purchasers.
4.8 Non-Public
Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction
Documents, which shall be disclosed pursuant to Section 4.6, the
Company covenants and agrees that neither it, nor any other Person
acting on its behalf will provide any Purchaser or its agents or
counsel with any information that constitutes, or the Company
reasonably believes constitutes, material non-public information,
unless prior thereto such Purchaser shall have consented to the
receipt of such information and agreed with the Company to keep
such information confidential. The Company understands and confirms
that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the
Company.
4.9 Use
of Proceeds. Except as set forth on Schedule 4.9 attached hereto,
the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and to repay GPB
up to $2.4 million in cash (with the balance of any debt owed to
GPB to be exchanged into equity of the
Company).
4.10 Indemnification
of Purchasers. Subject to the provisions of this Section 4.10, the
Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents
(and any other Persons with a functionally equivalent role of a
Person holding such titles notwithstanding a lack of such title or
any other title), each Person who controls such Purchaser (within
the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their
respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the
transactions contemplated by the Transaction Documents (unless such
action is solely based upon a material breach of such Purchaser
Party’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such
Purchaser Party may have with any such stockholder or any
violations by such Purchaser Party of state or federal securities
laws or any conduct by such Purchaser Party which is finally
judicially determined to constitute fraud, gross negligence or
willful misconduct). If any action shall be brought against any
Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly
notify the Company in writing, and the Company shall have the right
to assume the defense thereof with counsel of its own choosing
reasonably acceptable to the Purchaser Party. Any Purchaser Party
shall have the right to employ separate counsel in any such action
and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party
except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company
has failed after a reasonable period of time to assume such defense
and to employ counsel or (iii) in such action there is, in the
reasonable opinion of counsel, a material conflict on any material
issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for
the reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party
under this Agreement (y) for any settlement by a Purchaser Party
effected without the Company’s prior written consent, which
shall not be unreasonably withheld or delayed; or (z) to the
extent, but only to the extent that a loss, claim, damage or
liability is attributable to any Purchaser Party’s breach of
any of the representations, warranties, covenants or agreements
made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section
4.10 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when
bills are received or are incurred. The indemnity agreements
contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others
and any liabilities the Company may be subject to pursuant to
law.
4.11 Reservation
and Listing of Securities.
(a) The
Company shall maintain a reserve of the Required Minimum from its
duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may then be required to
fulfill its obligations in full under the Transaction
Documents.
(b) If,
on any date, the number of authorized but unissued (and otherwise
unreserved) shares of Common Stock is less than the Required
Minimum on such date, then the Board of Directors shall use
commercially reasonable efforts to amend the Company’s
certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the
Required Minimum at such time, as soon as possible and in any event
not later than the 75th day after such date.
(c) The
Company shall, if applicable: (i) in the time and manner required
by the principal Trading Market, prepare and file with such Trading
Market an additional shares listing application covering a number
of shares of Common Stock at least equal to the Required Minimum on
the date of such application, (ii) take all steps necessary to
cause such shares of Common Stock to be approved for listing or
quotation on such Trading Market as soon as possible thereafter,
(iii) provide to the Purchasers evidence of such listing or
quotation and (iv) maintain the listing or quotation of such Common
Stock on any date at least equal to the Required Minimum on such
date on such Trading Market or another Trading Market. The Company
agrees to maintain the eligibility of the Common Stock for
electronic transfer through the Depository Trust Company or another
established clearing corporation, including, without limitation, by
timely payment of fees to the Depository Trust Company or such
other established clearing corporation in connection with such
electronic transfer.
4.12 Certain
Transactions and Confidentiality. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that neither it, nor
any Affiliate acting on its behalf or pursuant to any understanding
with it will execute any purchases or sales of any of the
Company’s securities during the period commencing with the
execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly
announced pursuant to the initial press release as described in
Section 4.6. Each Purchaser, severally and not jointly with the
other Purchasers, covenants that neither it, nor any Affiliate
acting on its behalf or pursuant to any understanding with it will
execute any Short Sales of any of the Company’s securities
during the period commencing with the execution of this Agreement
and ending on the earlier of (a) such time as none of the
Purchasers hold any of the Preferred Stock and (b) the two-year
anniversary of the Closing Date. Each Purchaser, severally and not
jointly with the other Purchasers, covenants that until such time
as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as
described in Section 4.6, such Purchaser will maintain the
confidentiality of the existence and terms of this transaction and
the information included in the Disclosure
Schedules.
4.13 Form
D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Securities as required under Regulation D and
to provide a copy thereof, promptly upon request of any Purchaser.
The Company shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for, or to
qualify the Securities for, sale to the Purchasers at the Closing
under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of such
actions promptly upon request of any Purchaser.
4.14 Exchange
Right Into Debenture. Commencing on the date that the Company
receives the approval of the TSX Venture Exchange, each Purchaser
shall have the right, upon 5 days’ notice to the Company, to
exchange its Preferred Stock into Debentures. Such exchange shall
be on a $1 Stated Value of Preferred Stock for $1 principal amount
of Debenture Basis.
4.15 TSX
Venture Exchange Listing. The Company shall use commercially
reasonable efforts to obtain a listing of the Common Stock on the
TSX Venture Exchange following the Closing.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such
Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other
Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before November 30, 2019; provided,
however, that no such termination will affect the right of any
party to sue for any breach by any other party (or
parties).
5.2 Fees
and Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of this Agreement. The Company shall pay all Transfer Agent fees
(including, without limitation, any fees required for same-day
processing of any instruction letter delivered by the Company and
any conversion or exercise notice delivered by a Purchaser), stamp
taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.
5.3 Entire
Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the
parties with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have
been merged into such documents, exhibits and
schedules.
5.4 Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of: (a) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment at the email
address as set forth on the signature pages attached hereto at or
prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the
next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number or
email attachment as set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m.
(New York City time) on any Trading Day, (c) the second
(2nd) Trading Day following the date of mailing, if
sent by U.S. nationally recognized overnight courier service or (d)
upon actual receipt by the party to whom such notice is required to
be given. The address for such notices and communications shall be
as set forth on the signature pages attached hereto. To the extent
that any notice provided pursuant to any Transaction Document
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived, modified,
supplemented or amended except in a written instrument signed, in
the case of an amendment, by the Company and Purchasers which
purchased at least 50.1% in interest of the shares of Preferred
Stock and Debentures, if any and as applicable, based on the
initial Subscription Amounts hereunder or, in the case of a waiver,
by the party against whom enforcement of any such waived provision
is sought, provided that if any amendment, modification or waiver
disproportionately and adversely impacts a Purchaser (or group of
Purchasers), the consent of such disproportionately impacted
Purchaser (or group of Purchasers) shall also be required. No
waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of any party to exercise any right
hereunder in any manner impair the exercise of any such right. Any
proposed amendment or waiver that disproportionately, materially
and adversely affects the rights and obligations of any Purchaser
relative to the comparable rights and obligations of the other
Purchasers shall require the prior written consent of such
adversely affected Purchaser. Any amendment effected in accordance
with this Section 5.5 shall be binding upon each Purchaser and
holder of Securities and the Company.
5.6 Headings.
The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of each
Purchaser (other than by merger). Any Purchaser may assign any or
all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided that such
transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions of the Transaction
Documents that apply to the
“Purchasers.”
5.8 No
Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as
otherwise set forth in Section 4.10 and this Section
5.8.
5.9 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all
legal Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any
other Transaction Documents (whether brought against a party hereto
or its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any Action or
Proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such Action or Proceeding is
improper or is an inconvenient venue for such Proceeding. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding
by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the
address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any other
manner permitted by law. If any party shall commence an Action or
Proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section
4.10, the prevailing party in such Action or Proceeding shall be
reimbursed by the non-prevailing party for its reasonable
attorneys’ fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Action or
Proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive
the Closing and the delivery of the Securities.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of
which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file,
such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed)
with the same force and effect as if such facsimile or
“.pdf” signature page were an original
thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any
of the other Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time
to time upon written notice to the Company, any relevant notice,
demand or election in whole or in part without prejudice to its
future actions and rights; provided, however, that, in the case of
a rescission of a conversion of Preferred Stock or exercise of a
Warrant, the applicable Purchaser shall be required to return any
shares of Common Stock subject to any such rescinded conversion or
exercise notice concurrently with the return to such Purchaser of
the aggregate exercise price paid to the Company for such shares
and the restoration of such Purchaser’s right to acquire such
shares pursuant to such Purchaser’s Warrant (including,
issuance of a replacement warrant certificate evidencing such
restored right).
5.14 Replacement
of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific
performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert
in any Action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
5.16 Payment
Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.
5.17 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by any Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate authorized
under applicable law (the “Maximum Rate”), and, without
limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other
sums in the nature of interest that the Company may be obligated to
pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law
and applicable to the Transaction Documents is increased or
decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the
Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.
5.18 Independent
Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and
not joint with the obligations of any other Purchaser, and no
Purchaser shall be responsible in any way for the performance or
non-performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or
the transactions contemplated by the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce
its rights, including, without limitation, the rights arising out
of this Agreement or out of the other Transaction Documents, and it
shall not be necessary for any other Purchaser to be joined as an
additional party in any Proceeding for such purpose. Each Purchaser
has been represented by its own separate legal counsel in its
review and negotiation of the Transaction Documents. The Company
has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by any of the
Purchasers. It is expressly understood and agreed that each
provision contained in this Agreement and in each other Transaction
Document is between the Company and a Purchaser, solely, and not
between the Company and the Purchasers collectively and not between
and among the Purchasers.
5.19 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument
or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been
canceled.
5.20 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking
of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken
or such right may be exercised on the next succeeding Business
Day.
5.21 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.
5.22 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
IN
WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
|
GUIDED THERAPEUTICS, INC.
|
Address
for Notice:
5835
Peachtree Corners East
Suite
B
Norcross,
Georgia 30092
|
|
By:/S/
Gene S. Cartwright
Name:
Gene S. Cartwright
Title:
CEO
With
a copy to (which shall not constitute notice):
|
Email:
Fax:
|
|
|
|
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
[PURCHASER
SIGNATURE PAGES TO GTHP SECURITIES PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated
above.
Name
of Purchaser:
________________________________________________________
Signature of Authorized
Signatory of Purchaser:
__________________________________
Name
of Authorized Signatory:
____________________________________________________
Title
of Authorized Signatory:
_____________________________________________________
Email
Address of Authorized Signatory:
_____________________________________________
Facsimile
Number of Authorized Signatory:
__________________________________________
Address
for Notice to Purchaser:
Address
for Delivery of Securities to Purchaser (if not same as address for
notice):
Subscription
Amount: $_____________
Shares:
Shares
of Preferred Stock:
Warrant
Shares: _________________
EIN Number: _______________________
[SIGNATURE
PAGES CONTINUE]
Exhibit 10.47
REGISTRATION RIGHTS
AGREEMENT
This Registration Rights Agreement (this
“Agreement”)
is made and entered into as of December 30, 2019, between Guided
Therapeutics, Inc., a Delaware corporation (the
“Company”),
and each of the several purchasers signatory hereto (each such
purchaser, a “Purchaser”
and, collectively, the “Purchasers”).
This Agreement is made pursuant to the Securities
Purchase Agreement, dated as of the date hereof, between the
Company and each Purchaser (the “Purchase
Agreement”).
The
Company and each Purchaser hereby agrees as follows:
1.
Definitions.
Capitalized terms used and not
otherwise defined herein that are defined in the Purchase Agreement
shall have the meanings given such terms in the Purchase
Agreement. As used in this
Agreement, the following terms shall have the following
meanings:
“Advice”
shall have the meaning set forth in Section
6(c).
“Effectiveness
Date” means, with respect
to the Initial Registration Statement required to be filed
hereunder, the 120th
calendar day following the date hereof
(or, in the event of a “full review” by the Commission,
the 150th
calendar day following the date
hereof) and with respect to any additional Registration Statements
which may be required pursuant to Section 2(c) or Section 3(c), the
120th
calendar day following the date on
which an additional Registration Statement is required to be filed
hereunder (or, in the event of a “full review” by
150th
the Commission, the calendar day
following the date such additional Registration Statement is
required to be filed hereunder); provided,
however,
that in the event the Company is notified by the Commission that
one or more of the above Registration Statements will not be
reviewed or is no longer subject to further review and comments,
the Effectiveness Date as to such Registration Statement shall be
the fifth Trading Day following the date on which the Company is so
notified if such date precedes the dates otherwise required above,
provided, further, if such Effectiveness Date falls on a day that
is not a Trading Day, then the Effectiveness Date shall be the next
succeeding Trading Day.
“Effectiveness
Period” shall have the
meaning set forth in Section 2(a).
“Event”
shall have the meaning set forth in Section
2(d).
“Event
Date” shall have the
meaning set forth in Section 2(d).
“Filing
Date” means, with respect
to the Initial Registration Statement required hereunder, the
90th
calendar day following the date hereof
and, with respect to any additional Registration Statements which
may be required pursuant to Section 2(c) or Section 3(c), the
earliest practical date on which the Company is permitted by SEC
Guidance to file such additional Registration Statement related to
the Registrable Securities.
“Holder”
or “Holders”
means the holder or holders, as the case may be, from time to time
of Registrable Securities.
“Indemnified
Party” shall have the
meaning set forth in Section 5(c).
“Indemnifying
Party” shall have the
meaning set forth in Section 5(c).
“Initial Registration
Statement” means the
initial Registration Statement filed pursuant to this
Agreement.
“Losses”
shall have the meaning set forth in Section
5(a).
“Plan of
Distribution” shall have
the meaning set forth in Section 2(a).
“Prospectus”
means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated by the Commission pursuant to the Securities Act), as
amended or supplemented by any prospectus supplement, with respect
to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other
amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such
Prospectus.
“Registrable
Securities” means, as of
any date of determination, (a) all Shares of the shares of Common
Stock then issued and issuable upon conversion in full of the
Debentures (assuming on such date the Debentures are converted in
full without regard to any conversion limitations therein), (b) all
shares of Common Stock issued and issuable as interest on the
Debentures assuming all permissible interest payments are made in
shares of Common Stock and the Debentures are held until maturity
(c) all Warrant Shares then issued and issuable upon exercise of
the Warrants (assuming on such date the Warrants are exercised in
full without regard to any exercise limitations therein), (d) any
additional shares of Common Stock issued and issuable in connection
with any anti-dilution provisions in the Debentures or the Warrants
(in each case, without giving effect to any limitations on
conversion set forth in the Debentures or limitations on exercise
set forth in the Warrants) and (e) any securities issued or then
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the
foregoing; provided,
however, that any such
Registrable Securities shall cease to be Registrable Securities
(and the Company shall not be required to maintain the
effectiveness of any, or file another, Registration Statement
hereunder with respect thereto) for so long as (a) a Registration
Statement with respect to the sale of such Registrable Securities
is declared effective by the Commission under the Securities Act
and such Registrable Securities have been disposed of by the Holder
in accordance with such effective Registration Statement, (b) such
Registrable Securities have been previously sold in accordance with
Rule 144, or (c) such securities become eligible for resale without
volume or manner-of-sale restrictions and without current public
information pursuant to Rule 144 as set forth in a written opinion
letter to such effect, addressed, delivered and acceptable to the
Transfer Agent and the affected Holders (assuming that such
securities and any securities issuable upon exercise, conversion or
exchange of which, or as a dividend upon which, such securities
were issued or are issuable, were at no time held by any Affiliate
of the Company, and all Warrants are exercised by “cashless
exercise” as provided in Section 2(c) of each of the
Warrants, as reasonably determined by the Company, upon the advice
of counsel to the Company.
“Registration
Statement” means any
registration statement required to be filed hereunder pursuant to
Section 2(a) and any additional registration statements
contemplated by Section 2(c) or Section 3(c), including (in each
case) the Prospectus, amendments and supplements to any such
registration statement or Prospectus, including pre-and
post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference
in any such registration statement.
“Rule
415” means Rule 415
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Rule
424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.
“Selling Stockholder
Questionnaire” shall have
the meaning set forth in Section 3(a).
“SEC
Guidance” means (i) any
publicly-available written or oral guidance of the Commission
staff, or any comments, requirements or requests of the Commission
staff and (ii) the Securities Act.
2. Shelf
Registration.
(a) On or prior to each Filing Date, the Company
shall prepare and file with the Commission a Registration Statement
covering the resale of all of the Registrable Securities that are
not then registered on an effective Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415.
Each Registration Statement filed hereunder shall be on Form S-3
(except if the Company is not then eligible to register for resale
the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance
herewith, subject to the provisions of Section 2(e)) and shall
contain (unless otherwise directed by at least 85% in interest of
the Holders) substantially the “Plan of Distribution”
attached hereto as Annex A
and substantially the
“Selling
Stockholder” section
attached hereto as Annex
B; provided,
however,
that no Holder shall be required to be named as an
“underwriter” without such Holder’s express prior
written consent. Subject to the terms of this Agreement, the
Company shall use its commercially reasonable efforts to cause a
Registration Statement filed under this Agreement (including,
without limitation, under Section 3(c)) to be declared effective
under the Securities Act as promptly as possible after the filing
thereof, but in any event no later than the applicable
Effectiveness Date, and shall use its commercially reasonable
efforts to keep such Registration Statement continuously effective
under the Securities Act until the date that all Registrable
Securities covered by such Registration Statement (i) have been
sold, thereunder or pursuant to Rule 144, or (ii) may be sold
without volume or manner-of-sale restrictions pursuant to Rule 144
and without the requirement for the Company to be in compliance
with the current public information requirement under Rule 144, as
determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the
Transfer Agent and the affected Holders (the
“Effectiveness Period”).
The Company shall telephonically request effectiveness of a
Registration Statement as of 5:00 p.m. Eastern Time on a Trading
Day. The Company shall immediately notify the Holders via facsimile
or by e-mail of the effectiveness of a Registration Statement on
the same Trading Day that the Company telephonically confirms
effectiveness with the Commission, which shall be the date
requested for effectiveness of such Registration Statement. The
Company shall, by 9:30 a.m. Eastern Time on the Trading Day after
the effective date of such Registration Statement, file a final
Prospectus with the Commission as required by Rule 424. Failure to
so notify the Holder within one (1) Trading Day of such
notification of effectiveness or failure to file a final Prospectus
as foresaid shall be deemed an Event under Section
2(d).
(b) Notwithstanding the registration obligations
set forth in Section 2(a), if the Commission informs the Company
that all of the Registrable Securities cannot, as a result of the
application of Rule 415, be registered for resale as a secondary
offering on a single registration statement, the Company agrees to
promptly inform each of the Holders thereof and use its
commercially reasonable efforts to file amendments to the Initial
Registration Statement as required by the Commission, covering the
maximum number of Registrable Securities permitted to be registered
by the Commission, on Form S-3 or such other form available to
register for resale the Registrable Securities as a secondary
offering, subject to the provisions of Section 2(e); with respect
to filing on Form S-3 or other appropriate form, and subject to the
provisions of Section 2(d) with respect to the payment of
liquidated damages; provided,
however,
that prior to filing such amendment, the Company shall be obligated
to use diligent efforts to advocate with the Commission for the
registration of all of the Registrable Securities in accordance
with the SEC Guidance, including without limitation, Compliance and
Disclosure Interpretation 612.09.
(c)
Notwithstanding any other provision of this Agreement, if the
Commission or any SEC Guidance sets forth a limitation on the
number of Registrable Securities permitted to be registered on a
particular Registration Statement as a secondary offering (and
notwithstanding that the Company used diligent efforts to advocate
with the Commission for the registration of all or a greater
portion of Registrable Securities), unless otherwise directed in
writing by a Holder as to its Registrable Securities, the number of
Registrable Securities to be registered on such Registration
Statement will be reduced as follows:
a.
First, the Company shall reduce or eliminate any securities to be
included other than Registrable Securities;
b.
Second, the Company shall reduce Registrable Securities represented
by Warrant Shares (applied, in the case that some Warrant Shares
may be registered, to the Holders on a pro rata basis based on the
total number of unregistered Warrant Shares held by such Holders);
and
c.
Third, the Company shall reduce Registrable Securities represented
by Conversion Shares (applied, in the case that some Conversion
Shares may be registered, to the Holders on a pro rata basis based
on the total number of unregistered Conversion Shares held by such
Holders).
In
the event of a cutback hereunder, the Company shall give the Holder
at least five (5) Trading Days prior written notice along with the
calculations as to such Holder’s allotment. In the event the
Company amends the Initial Registration Statement in accordance
with the foregoing, the Company will use its commercially
reasonable efforts to file with the Commission, as promptly as
allowed by Commission or SEC Guidance provided to the Company or to
registrants of securities in general, one or more registration
statements on Form S3 or such other form available to register for
resale those Registrable Securities that were not registered for
resale on the Initial Registration Statement, as
amended.
(d) If: (i) the Initial Registration Statement is
not filed on or prior to its Filing Date (if the Company files the
Initial Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by
Section 3(a) herein, the Company shall be deemed to have not
satisfied this clause (i)), or (ii) the Company fails to file with
the Commission a request for acceleration of a Registration
Statement in accordance with Rule 461 promulgated by the Commission
pursuant to the Securities Act, within five Trading Days of the
date that the Company is notified (orally or in writing, whichever
is earlier) by the Commission that such Registration Statement will
not be “reviewed” or will not be subject to further
review, or (iii) a Registration Statement registering for resale
all of the Registrable Securities is not declared effective by the
Commission by the Effectiveness Date of the Initial Registration
Statement, or (iv) after the effective date of a Registration
Statement, such Registration Statement ceases for any reason to
remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Holders are
otherwise not permitted to utilize the Prospectus therein to resell
such Registrable Securities, for more than twenty (20) consecutive
calendar days or more than an aggregate of fifteen (15) calendar
days (which need not be consecutive calendar days) during any
12-month period (any such failure or breach being referred to as an
“Event”,
and for purposes of clauses (i) and (iv), the date on which such
Event occurs, and for purpose of clause (ii) the date on which such
five (5) Trading Day period is exceeded, and for purpose of clause
(iv) the date on which such twenty (20) or thirty (30) calendar day
period, as applicable, is exceeded being referred to as
“Event
Date”), then, in addition
to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly
anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is
cured, the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to the
product of 1.0% multiplied by the aggregate Subscription Amount
paid by such Holder pursuant to the Purchase Agreement. The parties
agree that the maximum aggregate liquidated damages payable to a
Holder under this Agreement shall be 4% of the aggregate
Subscription Amount paid by such Holder pursuant to the Purchase
Agreement. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after
the date payable, the Company will pay interest thereon at a rate
of 12% per annum (or such lesser maximum amount that is permitted
to be paid by applicable law) to the Holder, accruing daily from
the date such partial liquidated damages are due until such
amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply
on a daily pro rata basis for any portion of a month prior to the
cure of an Event.
(e)
If Form S-3 is not available for the registration of the resale of
Registrable Securities hereunder, the Company shall (i) register
the resale of the Registrable Securities on another appropriate
form and (ii) undertake to register the Registrable Securities on
Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration
Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been
declared effective by the Commission.
(f)
Notwithstanding anything to the contrary contained herein, in no
event shall the Company be permitted to name any Holder or
affiliate of a Holder as any Underwriter without the prior written
consent of such Holder.
3. Registration
Procedures.
In
connection with the Company’s registration obligations
hereunder, the Company shall:
(a) Not less than five (5) Trading Days prior to
the filing of each Registration Statement and not less than one (1)
Trading Day prior to the filing of any related Prospectus or any
amendment or supplement thereto (including any document that would
be incorporated or deemed to be incorporated therein by reference),
the Company shall (i) furnish to each Holder copies of all such
documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be
subject to the review of such Holders, and (ii) cause its officers
and directors, counsel and independent registered public
accountants to respond to such inquiries as shall be necessary, in
the reasonable opinion of respective counsel to each Holder, to
conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file a Registration Statement
or any such Prospectus or any amendments or supplements thereto to
which the Holders of 67% of the Registrable Securities shall
reasonably object in good faith, provided that, the Company is
notified of such objection in writing no later than five (5)
Trading Days after the Holders have been so furnished copies of a
Registration Statement or one (1) Trading Day after the Holders
have been so furnished copies of any related Prospectus or
amendments or supplements thereto. Each Holder agrees to furnish to
the Company a completed questionnaire in the form attached to this
Agreement as Annex B
(a “Selling Stockholder
Questionnaire”) on a date
that is not less than two (2) Trading Days prior to the Filing Date
or by the end of the fourth (4th)
Trading Day following the date on which such Holder receives draft
materials in accordance with this Section.
(b)
(i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep
a Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and
prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act
all of the Registrable Securities, (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus
supplement (subject to the terms of this Agreement), and, as so
supplemented or amended, to be filed pursuant to Rule 424, (iii)
respond as promptly as reasonably possible to any comments received
from the Commission with respect to a Registration Statement or any
amendment thereto and provide as promptly as reasonably possible to
the Holders true and complete copies of all correspondence from and
to the
Commission
relating to a Registration Statement (provided that, the Company
shall excise any information contained therein which would
constitute material non-public information regarding the Company or
any of its Subsidiaries), and
(iv)
comply in all material respects with the applicable provisions of
the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance (subject to
the terms of this Agreement) with the intended methods of
disposition by the Holders thereof set forth in such Registration
Statement as so amended or in such Prospectus as so
supplemented.
(c)
If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 100% of the number of shares of
Common Stock then registered in a Registration Statement, then the
Company shall file as soon as reasonably practicable, but in any
case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not
less than the number of such Registrable Securities.
(d) Notify the Holders of Registrable Securities
to be sold (which notice shall, pursuant to clauses (iii) through
(vi) hereof, be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made) as
promptly as reasonably possible (and, in the case of (i)(A) below,
not less than one (1) Trading Day prior to such filing) and (if
requested by any such Person) confirm such notice in writing no
later than one (1) Trading Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment
to a Registration Statement is proposed to be filed, (B) when the
Commission notifies the Company whether there will be a
“review” of such Registration Statement and whenever
the Commission comments in writing on such Registration Statement,
and (C) with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii)
of any request by the Commission or any other federal or state
governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information,
(iii) of the issuance by the Commission or any other federal or
state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of
the Registrable Securities or the initiation of any Proceedings for
that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities
for sale in any jurisdiction, or the initiation or threatening of
any Proceeding for such purpose, (v) of the occurrence of any event
or passage of time that makes the financial statements included in
a Registration Statement ineligible for inclusion therein or any
statement made in a Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any
revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading, and (vi) of the occurrence or existence of any
pending corporate development with respect to the Company that the
Company believes may be material and that, in the determination of
the Company, makes it not in the best interest of the Company to
allow continued availability of a Registration Statement or
Prospectus, provided,
however,
in no event shall any such notice contain any information which
would constitute material, non-public information regarding the
Company or any of its Subsidiaries.
(e)
Use its commercially reasonable efforts to avoid the issuance of,
or, if issued, obtain the withdrawal of (i) any order stopping or
suspending the effectiveness of a Registration Statement, or (ii)
any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(f)
Furnish to each Holder, without charge, at least one conformed copy
of each such Registration Statement and each amendment thereto,
including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference to
the extent requested by such Person, and all exhibits to the extent
requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such
documents with the Commission; provided, that any such item which
is available on the EDGAR system (or successor thereto) need not be
furnished in physical form.
(g)
Subject to the terms of this Agreement, the Company hereby consents
to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto, except after
the giving of any notice pursuant to Section 3(d).
(h)
Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate
with the selling Holders in connection with the registration or
qualification (or exemption from the Registration or qualification)
of such Registrable Securities for the resale by the Holder under
the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder reasonably requests in writing, to keep
each registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and to do any and all
other acts or things reasonably necessary to enable the disposition
in such jurisdictions of the Registrable Securities covered by each
Registration Statement, provided that the Company shall not be
required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any
material tax in any such jurisdiction where it is not then so
subject or file a general consent to service of process in any such
jurisdiction.
(i)
If requested by a Holder, cooperate with such Holder to facilitate
the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to
a Registration Statement, which certificates shall be free, to the
extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Holder may
request.
(j)
Upon the occurrence of any event contemplated by Section 3(d), as
promptly as reasonably possible under the circumstances taking into
account the Company’s good faith assessment of any adverse
consequences to the Company and its stockholders of the premature
disclosure of such event, prepare a supplement or amendment,
including a post-effective amendment, to a Registration Statement
or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered,
neither a Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading. If the Company notifies the Holders in
accordance with clauses
(iii)
through (vi) of Section 3(d) above to suspend the use of any
Prospectus until the requisite changes to such Prospectus have been
made, then the Holders shall suspend use of such Prospectus. The
Company will use its commercially reasonable efforts to ensure that
the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right
under this Section 3(j) to suspend the availability of a
Registration Statement and Prospectus, subject to the payment of
partial liquidated damages otherwise required pursuant to Section
2(d), for a period not to exceed 60 calendar days (which need not
be consecutive days) in any 12-month period.
(k)
Otherwise use commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission under the
Securities Act and the Exchange Act, including, without limitation,
Rule 172 under the Securities Act, file any final Prospectus,
including any supplement or amendment thereof, with the Commission
pursuant to Rule 424 under the Securities Act, promptly inform the
Holders in writing if, at any time during the Effectiveness Period,
the Company does not satisfy the conditions specified in Rule 172
and, as a result thereof, the Holders are required to deliver a
Prospectus in connection with any disposition of Registrable
Securities and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable
Securities hereunder.
(l)
The Company shall use its commercially reasonable efforts to
maintain eligibility for use of Form S-3 (or any successor form
thereto) for the registration of the resale of Registrable
Securities.
(m)
The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common
Stock beneficially owned by such Holder and, if required by the
Commission, the natural persons thereof that have voting and
dispositive control over the shares. During any periods that the
Company is unable to meet its obligations hereunder with respect to
the registration of the Registrable Securities solely because any
Holder fails to furnish such information within three Trading Days
of the Company’s request, any liquidated damages that are
accruing at such time as to such Holder only shall be tolled and
any Event that may otherwise occur solely because of such delay
shall be suspended as to such Holder only, until such information
is delivered to the Company.
4. Registration
Expenses. All fees and expenses
incident to the performance of or compliance with, this Agreement
by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration
and filing fees (including, without limitation, fees and expenses
of the Company’s counsel and independent registered public
accountants) (A) with respect to filings made with the Commission,
(B) with respect to filings required to be made with any Trading
Market on which the Common Stock is then listed for trading, and
(C) in compliance with applicable state securities or Blue Sky laws
reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in
connection with Blue Sky qualifications or exemptions of the
Registrable Securities), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable
Securities), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company, (v) Securities
Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the
Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be
responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting
duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder. In no
event shall the Company be responsible for any broker or similar
commissions of any Holder or, except to the extent provided for in
the Transaction Documents, any legal fees or other costs of the
Holders.
5.
Indemnification.
(a) Indemnification by the
Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and
hold harmless each Holder, the officers, directors, members,
partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any
failure to perform under a margin call of Common Stock), investment
advisors and employees (and any other Persons with a functionally
equivalent role of a Person holding such titles, notwithstanding a
lack of such title or any other title) of each of them, each Person
who controls any such Holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, members, stockholders, partners, agents and
employees (and any other Persons with a functionally equivalent
role of a Person holding such titles, notwithstanding a lack of
such title or any other title) of each such controlling Person, to
the fullest extent permitted by applicable law, from and against
any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses
(collectively, “Losses”),
as incurred, arising out of or relating to (1) any untrue or
alleged untrue statement of a material fact contained in a
Registration Statement, any Prospectus or any form of prospectus or
in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of any
Prospectus or supplement thereto, in light of the circumstances
under which they were made) not misleading or (2) any violation or
alleged violation by the Company of the Securities Act, the
Exchange Act or any state securities law, or any rule or regulation
thereunder, in connection with the performance of its obligations
under this Agreement, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent
that such information relates to such Holder or such Holder’s
proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly
for use in a Registration Statement, such Prospectus or in any
amendment or supplement thereto (it being understood that the
Holder has approved Annex A hereto for this purpose) or (ii) in the
case of an occurrence of an event of the type specified in Section
3(d)(iii)-(vi), the use by such Holder of an outdated, defective or
otherwise unavailable Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated, defective
or otherwise unavailable for use by such Holder and prior to the
receipt by such Holder of the Advice contemplated in Section 6(c).
The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding arising from or in connection
with the transactions contemplated by this Agreement of which the
Company is aware. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such
indemnified person and shall survive the transfer of any
Registrable Securities by any of the Holders in accordance with
Section 6(g).
(b) Indemnification by
Holders. Each Holder shall,
severally and not jointly, indemnify and hold harmless the Company,
its directors, officers, agents and employees, each Person who
controls the Company (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from
and against all Losses, as incurred, to the extent arising out of
or based solely upon: any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, any
Prospectus, or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the
case of any Prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading (i) to the
extent, but only to the extent, that such untrue statement or
omission is contained in any information so furnished in writing by
such Holder to the Company expressly for inclusion in such
Registration Statement or such Prospectus or (ii) to the extent,
but only to the extent, that such information relates to such
Holder’s information provided in the Selling Stockholder
Questionnaire or the proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by
such Holder expressly for use in a Registration Statement (it being
understood that the Holder has approved Annex A hereto for this
purpose), such Prospectus or in any amendment or supplement
thereto. In no event shall the liability of a selling Holder be
greater in amount than the dollar amount of the proceeds (net of
all expenses paid by such Holder in connection with any claim
relating to this Section 5 and the amount of any damages such
Holder has otherwise been required to pay by reason of such untrue
statement or omission) received by such Holder upon the sale of the
Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.
(c) Conduct of
Indemnification Proceedings. If
any Proceeding shall be brought or asserted against any Person
entitled to indemnity hereunder (an “Indemnified
Party”), such Indemnified
Party shall promptly notify the Person from whom indemnity is
sought (the “Indemnifying
Party”) in writing, and
the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees
and expenses incurred in connection with defense thereof, provided
that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have materially and
adversely prejudiced the Indemnifying Party. An Indemnified Party
shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has
agreed in writing to pay such fees and expenses, (2) the
Indemnifying Party shall have failed promptly to assume the defense
of such Proceeding and to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding, or (3) the named
parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
counsel to the Indemnified Party shall reasonably believe that a
material conflict of interest is likely to exist if the same
counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense
thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written
consent, which consent shall not be unreasonably withheld or
delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding. Subject to the terms of this
Agreement, all reasonable fees and expenses of the Indemnified
Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within ten
Trading Days of written notice thereof to the Indemnifying Party,
provided that the Indemnified Party shall promptly reimburse the
Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is
finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) not to be
entitled to indemnification hereunder.
(d)
Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an
Indemnified Party harmless for any Losses, then each Indemnifying
Party shall contribute to the amount paid or payable by such
Indemnified Party, in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party and Indemnified Party
in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates
to information supplied by, such Indemnifying Party or Indemnified
Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the
limitations set forth in this Agreement, any reasonable
attorneys’ or other fees or expenses incurred by such party
in connection with any Proceeding to the extent such party would
have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such
party in accordance with its terms. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this
Section 5(d) were determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
In no event shall the contribution obligation of a Holder of
Registrable Securities be greater in amount than the dollar amount
of the proceeds (net of all expenses paid by such Holder in
connection with any claim relating to this Section 5 and the amount
of any damages such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission) received by it upon the sale of the Registrable
Securities giving rise to such contribution
obligation.
The
indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.
Miscellaneous.
(a) Remedies.
In the event of a breach by the Company or by a Holder of any of
their respective obligations under this Agreement, each Holder or
the Company, as the case may be, in addition to being entitled to
exercise all rights granted by law and under this Agreement,
including recovery of damages, shall be entitled to specific
performance of its rights under this Agreement. Each of the Company
and each Holder agrees that monetary damages would not provide
adequate compensation for any losses incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in
respect of such breach, it shall not assert or shall waive the
defense that a remedy at law would be adequate.
(b) No Piggyback on
Registrations; Prohibition on Filing Other Registration
Statements. Except as set forth
on Schedule 6(b)
attached hereto and in connection with
transactions contemplated by clause (d) under Exempt Issuance,
neither the Company nor any of its security holders (other than the
Holders in such capacity pursuant hereto) may include securities of
the Company in any Registration Statements other than the
Registrable Securities. The Company shall not file any other
registration statements until all Registrable Securities are
registered pursuant to a Registration Statement that is declared
effective by the Commission, provided that this Section 6(b) shall
not prohibit the Company from filing amendments to registration
statements filed prior to the date of this
Agreement.
(c) Discontinued
Disposition. By its acquisition
of Registrable Securities, each Holder agrees that, upon receipt of
a notice from the Company of the occurrence of any event of the
kind described in Section 3(d)(iii) through (vi), such Holder will
forthwith discontinue disposition of such Registrable Securities
under a Registration Statement until it is advised in writing (the
“Advice”)
by the Company that the use of the applicable Prospectus (as it may
have been supplemented or amended) may be resumed. The Company will
use its commercially reasonable efforts to ensure that the use of
the Prospectus may be resumed as promptly as is practicable. The
Company agrees and acknowledges that any periods during which the
Holder is required to discontinue the disposition of the
Registrable Securities hereunder shall be subject to the provisions
of Section 2(d).
(d) Piggy-Back
Registrations. If, at any time
during the Effectiveness Period, there is not an effective
Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its
own account or the account of others under the Securities Act of
any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with the Company’s stock
option or other employee benefit plans, then the Company shall
deliver to each Holder a written notice of such determination and,
if within fifteen days after the date of the delivery of such
notice, any such Holder shall so request in writing, the Company
shall include in such registration statement all or any part of
such Registrable Securities such Holder requests to be
registered; provided,
however,
that the Company shall not be required to register any Registrable
Securities pursuant to this Section 6(d) that are eligible for
resale pursuant to Rule 144 (without volume restrictions or current
public information requirements) promulgated by the Commission
pursuant to the Securities Act or that are the subject of a then
effective Registration Statement that is available for resales or
other dispositions by such Holder.
(e) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the
same shall be in writing and signed by the Company and the Holders
of 51% or more of the then outstanding Registrable Securities (for
purposes of clarification, this includes any Registrable Securities
issuable upon exercise or conversion of any Security), provided
that, if any amendment, modification or waiver disproportionately
and adversely impacts a Holder (or group of Holders), the consent
of such disproportionately impacted Holder (or group of Holders)
shall be required. If a Registration Statement does not register
all of the Registrable Securities pursuant to a waiver or amendment
done in compliance with the previous sentence, then the number of
Registrable Securities to be registered for each Holder shall be
reduced pro rata among all Holders and each Holder shall have the
right to designate which of its Registrable Securities shall be
omitted from such Registration Statement. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of
a Holder or some Holders and that does not directly or indirectly
affect the rights of other Holders may be given only by such Holder
or Holders of all of the Registrable Securities to which such
waiver or consent relates; provided,
however,
that the provisions of this sentence may not be amended, modified,
or supplemented except in accordance with the provisions of the
first sentence of this Section 6(e). No consideration shall be
offered or paid to any Person to amend or consent to a waiver or
modification of any
provision
of this Agreement unless the same consideration also is offered to
all of the parties to this Agreement.
(f) Notices.
Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be delivered as set
forth in the Purchase Agreement.
(g) Successors and
Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the
benefit of each Holder. The Company may not assign (except by
merger) its rights or obligations hereunder without the prior
written consent of all of the Holders of the then outstanding
Registrable Securities. Each Holder may assign their respective
rights hereunder in the manner and to the Persons as permitted
under Section 5.7 of the Purchase Agreement.
(h) No Inconsistent
Agreements. Neither the Company
nor any of its Subsidiaries has entered, as of the date hereof, nor
shall the Company or any of its Subsidiaries, on or after the date
of this Agreement, enter into any agreement with respect to its
securities, that would have the effect of impairing the rights
granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Except as set forth on
Schedule
6(h), neither the Company nor
any of its Subsidiaries has previously entered into any agreement
granting any registration rights with respect to any of its
securities to any Person that have not been satisfied in
full.
(i) Execution and
Counterparts. This Agreement
may be executed in two or more counterparts, all of which when
taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each
party and delivered to the other party, it being understood that
both parties need not sign the same counterpart. In the event that
any signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.
(j) Governing
Law. All questions concerning
the construction, validity, enforcement and interpretation of this
Agreement shall be determined in accordance with the provisions of
the Purchase Agreement.
(k) Cumulative
Remedies. The remedies provided
herein are cumulative and not exclusive of any other remedies
provided by law.
(l) Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.
(m) Headings.
The headings in this Agreement are for convenience only, do not
constitute a part of the Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
(n) Independent Nature of
Holders’ Obligations and Rights. The obligations of each Holder hereunder are
several and not joint with the obligations of any other Holder
hereunder, and no Holder shall be responsible in any way for the
performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document
delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the
Holders as a partnership, an association, a joint venture or any
other kind of group or entity, or create a presumption that the
Holders are in any way acting in concert or as a group or entity
with respect to such obligations or the transactions contemplated
by this Agreement or any other matters, and the Company
acknowledges that the Holders are not acting in concert or as a
group, and the Company shall not assert any such claim, with
respect to such obligations or transactions. Each Holder shall be
entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall
not be necessary for any other Holder to be joined as an additional
party in any proceeding for such purpose. The use of a single
agreement with respect to the obligations of the Company contained
was solely in the control of the Company, not the action or
decision of any Holder, and was done solely for the convenience of
the Company and not because it was required or requested to do so
by any Holder. It is expressly understood and agreed that each
provision contained in this Agreement is between the Company and a
Holder, solely, and not between the Company and the Holders
collectively and not between and among Holders.
********************
(Signature Pages Follow)
IN
WITNESS THEREOF, the undersigned Buyer and the Company have caused
this agreement to be duly executed as of date first above
written.
GUIDED THERAPEUTICS, INC.
/s/
Gene S. Cartwright
Gene
S. Cartwright
Chef
Executive Officer
[signature
page of Holders to follows]
[SIGNATURE
PAGE OF HOLDERS TO GTHP RRA]
Name of Holder: __________________________
Signature of
Authorized Signatory of Holder:
__________________________ Name
of Authorized Signatory: _________________________ Title of
Authorized Signatory:
__________________________
[SIGNATURE
PAGES CONTINUE]
Annex A
Plan
of Distribution
Each Selling Stockholder (the
“Selling
Stockholders”) of the
securities and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of
their securities covered hereby on the principal Trading Market or
any other stock exchange, market or trading facility on which the
securities are traded or in private transactions. These sales may
be at fixed or negotiated prices. A Selling Stockholder may use any
one or more of the following methods when selling
securities:
●
ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
● block
trades in which the broker-dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
● purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account;
● an
exchange distribution in accordance with the rules of the
applicable exchange;
● privately
negotiated transactions;
● settlement
of short sales;
● in
transactions through broker-dealers that agree with the Selling
Stockholders to sell a specified number of such securities at a
stipulated price per security;
● through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
● a
combination of any such methods of sale; or
● any
other method permitted pursuant to applicable law.
The Selling Stockholders may also sell securities
under Rule 144 or any other exemption from registration under the
Securities Act of 1933, as amended (the “Securities
Act”), if available,
rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal
transaction a markup or markdown in compliance with FINRA
IM-2440.
In
connection with the sale of the securities or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are
involved in
selling
the securities may be deemed to be “underwriters”
within the meaning of the
Securities
Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
Each Selling Stockholder has informed the Company that it does not
have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the
securities.
The
Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the securities. The
Company has agreed to indemnify the Selling Stockholders against
certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for the Company to be in compliance with the current
public information under Rule 144 under the Securities Act or any
other rule of similar effect or
(ii)
all of the securities have been sold pursuant to this prospectus or
Rule 144 under the Securities Act or any other rule of similar
effect. The resale securities will be sold only through registered
or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale
securities covered hereby may not be sold unless they have been
registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is
available and is complied with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Stockholders
or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
|
Number of shares ofMaximum Number ofNumber of shares ofCommon Stock
Ownedshares of Common StockCommon Stock OwnedName of Selling
ShareholderPrior to Offeringto be Sold Pursuant to this
ProspectusAfter Offering
|
SELLING SHAREHOLDERS
The
common stock being offered by the selling shareholders are those
previously issued to the selling shareholders, and those issuable
to the selling shareholders, upon exercise of the warrants. For
additional information regarding the issuances of those shares of
common stock and warrants, see "Private Placement of Common Shares
and Warrants" above. We are registering the shares of common stock
in order to permit the selling shareholders to offer the shares for
resale from time to time. Except for the ownership of the shares of
common stock and the warrants, the selling shareholders have not
had any material relationship with us within the past three
years.
The
table below lists the selling shareholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling shareholders. The second column lists the
number of shares of common stock beneficially owned by each selling
shareholder, based on its ownership of the shares of common stock
and warrants, as of ________, 2016, assuming exercise of the
warrants held by the selling shareholders on that date, without
regard to any limitations on exercises.
The
third column lists the shares of common stock being offered by this
prospectus by the selling shareholders.
In
accordance with the terms of a registration rights agreement with
the selling shareholders, this prospectus generally covers the
resale of the sum of (i) the number of shares of common stock
issued to the selling shareholders in the __________________ and
(ii) the maximum number of shares of common stock issuable upon
exercise of the related warrants, determined as if the outstanding
warrants were exercised in full as of the trading day immediately
preceding the date this registration statement was initially filed
with the SEC, each as of the trading day immediately preceding the
applicable date of determination and all subject to adjustment as
provided in the registration right agreement, without regard to any
limitations on the exercise of the warrants. The fourth column
assumes the sale of all of the shares offered by the selling
shareholders pursuant to this prospectus.
Under
the terms of the warrants, a selling shareholder may not exercise
the warrants to the extent such exercise would cause such selling
shareholder, together with its affiliates and attribution parties,
to beneficially own a number of shares of common stock which would
exceed [4.99]% of our then outstanding common stock following such
exercise, excluding for purposes of such determination shares of
common stock issuable upon exercise of the warrants which have not
been exercised. The number of shares in the second column does not
reflect this limitation. The selling shareholders may sell all,
some or none of their shares in this offering. See "Plan of
Distribution."
Annex C
GUIDED THERAPEUTICS, INC.
Selling Stockholder Notice and Questionnaire
The undersigned beneficial owner of common stock
(the “Registrable
Securities”) of Guided
Therapeutics, Inc., a Delaware corporation (the
“Company”),
understands that the Company has filed or intends to file with the
Securities and Exchange Commission (the “Commission”)
a registration statement (the “Registration
Statement”) for the
registration and resale under Rule 415 of the Securities Act of
1933, as amended (the “Securities
Act”), of the Registrable
Securities, in accordance with the terms of the Registration Rights
Agreement (the “Registration Rights
Agreement”) to which this
document is annexed. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth
below. All capitalized terms not otherwise defined herein shall
have the meanings ascribed thereto in the Registration Rights
Agreement.
Certain
legal consequences arise from being named as a selling stockholder
in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a
selling stockholder in the Registration Statement and the related
prospectus.
NOTICE
The undersigned beneficial owner (the
“Selling
Stockholder”) of
Registrable Securities hereby elects to include the Registrable
Securities owned by it in the Registration
Statement.
The
undersigned hereby provides the following information to the
Company and represents and warrants that such information is
accurate:
QUESTIONNAIRE
1. Name.
(a)
Full
Legal Name of Selling Stockholder
(b)
Full Legal Name of Registered Holder (if not the same as (a) above)
through which Registrable Securities are held:
(c)
Full Legal Name of Natural Control Person (which means a natural
person who directly or indirectly alone or with others has power to
vote or dispose of the securities covered by this
Questionnaire):
2. Address for Notices to Selling Stockholder:
Telephone:
Fax:
Contact
Person:
3. Broker-Dealer Status:
(a)
Are you a broker-dealer? Yes
No
(b)
If “yes” to Section 3(a), did you receive your
Registrable Securities as compensation for investment banking
services to the Company?
Yes
No
Note:
If “no” to Section 3(b), the Commission’s staff
has indicated that you should be identified as an underwriter in
the Registration Statement.
(c)
Are you an affiliate of a broker-dealer?
Yes
No
(d)
If you are an affiliate of a broker-dealer, do you certify that you
purchased the Registrable Securities in the ordinary course of
business, and at the time of the purchase of the Registrable
Securities to be resold, you had no agreements or understandings,
directly or indirectly, with any person to distribute the
Registrable Securities?
Yes
No
Note:
If “no” to Section 3(d), the Commission’s staff
has indicated that you should be identified as an underwriter in
the Registration Statement.
4. Beneficial Ownership of Securities of the Company Owned by the
Selling Stockholder.
Except as set forth below in this Item 4, the undersigned is not
the beneficial or registered owner of any securities of the Company
other than the securities issuable pursuant to the Purchase
Agreement.
(a)
Type and Amount of other securities beneficially owned by the
Selling Stockholder:
5. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners
of 5% of more of the equity securities of the undersigned) has held
any position or office or has had any other material relationship
with the Company (or its predecessors or affiliates) during the
past three years.
State
any exceptions here:
The
undersigned agrees to promptly notify the Company of any material
inaccuracies or changes in the information provided herein that may
occur subsequent to the date hereof at any time while the
Registration Statement remains effective; provided, that the
undersigned shall not be required to notify the Company of any
changes to the number of securities held or owned by the
undersigned or its affiliates.
By signing below, the undersigned consents to the
disclosure of the information contained herein in its answers to
Items 1 through 5 and the inclusion of such information in the
Registration Statement and the related prospectus
and any amendments or
supplements thereto. The
undersigned understands that such information will be relied upon
by the Company in connection with the preparation or amendment of
the Registration Statement and the related prospectus and any
amendments or supplements thereto.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered
either in person or by its duly authorized agent.
Date:
Beneficial Owner:
By:
Name:
Title:
PLEASE FAX A COPY (OR EMAIL A .PDF COPY) OF THE COMPLETED AND
EXECUTED NOTICE AND QUESTIONNAIRE TO:
Exhibit 10.48
FORM OF ADDITIONAL DEBTOR JOINDER
Security Agreement dated as of December 30, 2019
made by Guided Therapeutics, Inc. and its subsidiaries party
thereto from time to time, as Debtors to and in favor of the
Secured Parties identified therein (the “Security
Agreement”)
Reference
is made to the Security Agreement as defined above; capitalized
terms used herein and not otherwise defined herein shall have the
meanings given to such terms in, or by reference in, the Security
Agreement.
The
undersigned hereby agrees that upon delivery of this Additional
Debtor Joinder to the Secured Parties referred to above, the
undersigned shall (a) be an Additional Debtor under the Security
Agreement, (b) have all the rights and obligations of the Debtors
under the Security Agreement as fully and to the same extent as if
the undersigned was an original signatory thereto and (c) be deemed
to have made the representations and warranties set forth therein
as of the date of execution and delivery of this Additional Debtor
Joinder. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE
UNDERSIGNED SPECIFICALLY GRANTS TO THE SECURED PARTIES A SECURITY
INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH IN THE SECURITY
AGREEMENT AND ACKNOWLEDGES AND AGREES TO THE WAIVER OF JURY TRIAL
PROVISIONS SET FORTH THEREIN.
Attached
hereto are supplemental and/or replacement Schedules to the
Security Agreement, as applicable.
An
executed copy of this Joinder shall be delivered to the Secured
Parties, and the Secured Parties may rely on the matters set forth
herein on or after the date hereof. This Joinder shall not be
modified, amended or terminated without the prior written consent
of the Secured Parties.
IN
WITNESS WHEREOF, the undersigned has caused this Joinder to be
executed in the name and on behalf of the undersigned. [Name of
Additional Debtor
By:
Name:
Title:
Address:
Dated:
Exhibit
10.49
EXCHANGE
AGREEMENT
This
EXCHANGE AGREEMENT (this “Agreement”) is made and
entered into effective as of the ___ day of December, 2019, by and
between GUIDED THERAPEUTICS, INC., a Delaware corporation (the
“Company”) and the
undersigned creditor of the Company (the “Creditor”).
W I
T N E S S E T H :
WHEREAS, the
Creditor is the payee of certain obligations owed to the Creditor
by the Company as set forth on Exhibit A hereto (the
“Obligations”);
WHEREAS, in
satisfaction in full of the Obligations, which may include both
cash and associated warrants to purchase the Company’s common
stock, the Creditor is willing to accept certain new securities of
the Company as set forth on Exhibit B hereto (the
“Securities”) and such
transaction, the “Exchange”, thereby
forfeiting any rights to warrants or other equity associated with
such Obligations;
WHEREAS, the
Exchange is being made in reliance upon the exemption from
registration provided by Section 4(a)(2) of the Securities Act;
and
WHEREAS, the
Company and the Creditor desire to enter into this Agreement to
evidence and set forth the terms of the exchange of the Securities
for and in satisfaction of the Obligations;
NOW,
THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties
hereto, being duly sworn, do covenant, agree and certify as
follows:
1. Recitals.
The parties hereto acknowledge and agree that the foregoing
recitals are true and accurate and constitute part of this
Agreement to the same extent as if contained in the body
hereof.
2. Definitions.
In addition to the terms defined elsewhere in this Agreement: (a)
capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Obligations (as defined
herein), and (b) the following terms have the meanings set forth in
this Section 1.1:
“Affiliate” means any
Creditor that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Creditor, as such terms are used in and construed
under Rule 405 under the Securities Act.
“Board of Directors” means
the board of directors of the Company.
“Common Stock” means the
common stock of the Company, par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
“Liens” means a lien,
charge, pledge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
“Creditor” means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Securities” has the
meaning set forth in the Preamble of this Agreement.
“Securities Act” means the
Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
3. Exchange
and Satisfaction. The
Obligations are hereby surrendered by the Creditor and exchanged
for the Securities and other considerations according to the
following terms and conditions.
a.
As of December
____, 2019, the Creditor currently holds unsecured notes with
Company in the amount of $_______, including both principal and
interest,. Both the Company and Creditor wish to continue their
relationship under mutually agreeable terms.
b.
In lieu of agreeing
to dismiss the entire amount of what the Creditor is currently owed
by the Company, the Creditor agrees to accept in exchange 1,905,270
shares of the Company’s Stock and warrants to purchase the
Company’s common shares, pursuant to a separate warrant
agreement to be executed once the Company has successfully
completed a new financing as defined in Section 3c. below. The
schedule of warrants to purchase common shares of Guided
Therapeutics is listed below:
(i)
Warrants to
purchase ______ shares at $0.20 (twenty cents) each.
(ii)
Warrants to
purchase ______ shares at $0.25 (twenty-five cents)
each.
(iii)
Warrants to
purchase ______ shares at $0.75 (seventy-five cents)
each.
All
warrants will be exercisable immediately upon issuance and will
expire after three years. Warrants will not have a cashless
exercise provision unless they are not registered within six (6)
months of issuance.
c.
Both parties agree
that the exchange of debt for equity contemplated by this Agreement
shall occur once the Company has successfully raised a minimum of
one million dollars ($1,000,000) in a new financing.
d.
A 10% blocker shall
be effected such that the Creditor agrees to restrict its holdings
of the Company’s Common Shares to less than 10% of the total
number of the Company’s outstanding common shares at one
point in time.
4. Representations
and Warranties of the Company. The Company hereby makes the following
representations and warranties to Creditor:
(a) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and otherwise to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith. This Agreement have been (or
upon delivery will have been) duly executed by the Company and,
when delivered in accordance with the terms hereof and thereof,
will constitute the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms,
except: (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of
creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or
other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable
law.
(b) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with this Agreement, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens imposed
by the Company. The shares of Common Stock underlying the
Securities (if any), when issued in accordance with the terms of
the Securities, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company
other than restrictions on transfer required by law.
5. Representations
and Warranties of the Creditor. Creditor hereby represents
and warrants as of the date hereof and as of the Closing Date to
the Company as follows (unless as of a specific date
therein):
(a) Own
Account. Creditor understands that the Securities are
“restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and
is acquiring the Securities as principal for its own account and
not with a view to or for distributing or reselling such Securities
or any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or
indirect arrangement or understandings with any other Creditors to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Creditor’s right to sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable
federal and state securities laws). The Creditor is acquiring the
Securities hereunder in the ordinary course of its
business.
(c) Creditor’s
Status. At the time the Creditor was offered the Securities,
it was, and as of the date hereof it is, an “accredited
investor” as defined in Rule 501(a) under the Securities
Act.
(d) Experience
of Creditor. Creditor, either alone or together with its
representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Such Creditor is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
6. Release.
The Creditor acknowledges and agrees that it shall have no further
rights or interest in, and shall not receive any further
consideration, payment or distribution of any kind with respect to,
the Obligations. In such regard, the Creditor hereby waives,
relinquishes, remises and releases all rights, claims, interests or
liabilities, known and unknown, of any nature whatsoever in law or
equity which the Creditor may previously have had or may now or
hereafter have as against or to receive from the Company arising
out of, resulting from or relating to the Obligations or any rights
or interest of the Creditor with respect thereto.
7. Transfer
Restrictions. The Securities may only be disposed of in
compliance with state and federal securities laws. In connection
with any transfer of Securities other than pursuant to an effective
registration statement or Rule 144 under the Securities Act, to the
Company or to an Affiliate of a Creditor, the Company may require
the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement. The Creditors agree to the imprinting of a
legend on any of the Securities in the following form:
[NEITHER] THIS
SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER
LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
8. Further
Assurances. The
Creditor shall hereafter, without further consideration, execute
and deliver promptly to the Company such further consents, waivers,
assignments, endorsements and other documents and instruments, and
to take all such further actions, as the Company may from time to
time reasonably request with respect to the exchange and
satisfaction of the Obligations Interest and the consummation in
full thereof.
9. Successors
and Assigns. This
Agreement is binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors and
assigns.
10. Counterparts.
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which, when taken
together, shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, the parties hereto have affixed their hands and
seals by signing this Agreement as of the day and year first above
written.
[Signatures on
Following Page]
Company:
GUIDED
THERAPEUTICS, INC.
By:
/s/Gene S. Cartwright
Name:
Gene Cartwright
Title:
CEO
Creditor:
____________________________________
Address:
_____________________________
_____________________________
_____________________________
Exhibit 10.50
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "Agreement")
is made and entered into effective
as of the 30th day
of December, 2019,
by and between
GUIDED THERAPEUTICS,
INC., a Delaware corporation (the "Company")
and the undersigned creditor of the Company
(the "Creditor").
WITNESSETH:
WHEREAS, the
Creditor is the payee of certain obligations owed to the Creditor
by the Company as set
forth on Exhibit
A
hereto (the "Obligations");
WHEREAS, in
satisfaction in full
of the Obligations, the
Creditor is willing to accept certain securities of the Company
as set forth on
Exhibit B
hereto (the
"Securities" and such
transaction, the "Exchange");
WHEREAS, the Exchange is
being made in reliance upon the exemption from registration
provided by Section 4(a)(2) of the Securities
Act; and
WHEREAS, the
Company and the Creditor desire to enter into
this Agreement to evidence and
set forth the terms of
the exchange of
the Securities for and in
satisfaction of the Obligations;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained,
and intending to be legally
bound hereby, the parties hereto, being duly sworn, do covenant,
agree and certify
as follows:
1. Recitals.
The parties hereto acknowledge and agree that the
foregoing recitals are true and
accurate and
constitute part of
this Agreement to the
same extent as if
contained in the body
hereof.
2. Definitions.
In addition to the terms
defined elsewhere
in this Agreement: (a) capitalized
terms that are not otherwise defined herein have the meanings given
to
such terms in the
Obligations (as defined herein), and
(b) the following terms have the
meanings set
forth in this Section I .
I:
"Affiliate"
means any Creditor
that, directly or indirectly
through one or
more intermediaries, controls or
is controlled by or is under common control
with a
Creditor, as such
terms are used in and construed
under Rule 405 under the Securities Act.
"Board
of
Directors"
means the board of
directors of the
Company.
"Common
Stock"
means the common stock of the Company, par value
$0.001 per share, and
any other class of
securities into which
such securities may hereafter be reclassified
or changed.
"Exchange
Act" means the Securities Exchange Act of
1934, as
amended, and
the rules and regulations promulgated thereunder.
“Liens" means a lien, charge, pledge, security interest,
encumbrance, right
of first
refusal, preemptive right or other
restriction.
"Creditor"
means an individual or
corporation,
partnership, trust,
incorporated or unincorporated
association, joint
venture, limited liability
company, joint stock
company, government (or an agency or
subdivision thereof) or
other entity of
any kind.
"Securities"
has the
meaning set forth in the
Preamble of this Agreement.
"Securities
Act" means
the Securities Act of
1933,
as amended, and
the rules and regulations promulgated
thereunder.
3. Exchange
and
Satisfaction. The
Obligations are
hereby surrendered by
the Creditor and exchanged
for the Securities and
other considerations according to the following
terms and
conditions.
a.
As of December 7,
2019, the Creditor
currently holds unsecured notes
with Company
in the amount of $790,544,
including both principal
and interest, Both the Company and Creditor wish
to continue their relationship under mutually
agreeable
terms.
b.
In lieu of
agreeing to dismiss the
entire amount of what
the Creditor is currently
owed by the
Company, the Creditor
agrees to accept in exchange 1,905,270 shares
of the Company's Stock
and warrants to purchase
the Company's common
shares, pursuant
to a separate
warrant agreement to be
executed once the Company has successfully
completed a new
financing as
defined in Section 3c.
below. The schedule of warrants to purchase common shares of Guided Therapeutics is listed
below:
(i)
Warrants to purchase 496,602 shares at
$0.20 (twenty cents) each.
(ii)
Warrants to purchase 704,334 shares at
$0.25 (twenty-five cents) each.
(iii)
Warrants to purchase 704,334 shares at
$0.75 (seventy-five
cents) each.
All warrants will be exercisable immediately upon
issuance and
will expire after three years. Warrants will
not have a cashless
exercise provision unless
they are not registered
within six (6) months of
issuance.
c.
Both parties agree
that the exchange of debt for equity
contemplated by
this Agreement shall occur once the Company has
successfully raised a minimum of
one million dollars ($1,000,000)
in a new
financing.
d.
A 10%
blocker shall
be effected such that the Creditor agrees to restrict its
holdings of the Company's Common
Shares to
less
than 10% of the total number of the
Company’s outstanding common shares at one
point in time.
4. Representations
and Warranties of the Company. The Company hereby makes the following
representations and warranties to Creditor:
(a)
Authorization;
Enforcement. The Company has
the requisite corporate power and authority to enter into and to
consummate the transactions, contemplated
by this Agreement and otherwise to carry out its obligations
hereunder The execution and delivery of this Agreement by the
Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and
no further action is required by the Company, the Board of
Directors or the Company's stockholders in connection he11 with or
therewith. This Agreement have been (or upon delivery will have
been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligations of the Company enforceable again t
the Company in accordance with their terms,
except: {i) as limited by general equitable principles and
applicable bankruptcy, insolvency, reorganization, moratorium and
there laws of general application affecting enforcement of
creditors' rights generally, ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and
contribution pro
may
be limited by applicable law.
(b)
Issuance
of the Securities.
The Securities are duly authorized
and, hence issued and paid for in accordance with this Agreement,
will be duly and validly issued, fully paid and non-assessable,
free and clear of all Liens imposed by the
Company. The shares of Common Stock underlying the
Securities (if any), when issued in accordance with
the.terms of the Securities, will be validly
issued, fully paid and non-assessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer required by law.
5. Representations
and Warranties of the Creditor. Creditor hereby represents and
warrants as of the date hereof and as of the
Closing Date to the Company as follows (unless as of
· a specific datetherein):
(a) Own
Account. Creditor understands that the Securities are "restricted
securities":
and have not been registered under the
Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or
any part thereof in violation of the Securities Act or any
applicable state securities law, has no present intention of
distributing and such Securities in violation of the Securities Act
or any applicable state securities law and as no direct or indirect
arrangement or understandings with any other Creditors to
distribute or regarding the distribution of such Securities in
violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such
Creditor's right to sell the
Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). The
Creditor is acquiring the S,ecurities
hereunder in the ordinary course of its
business.
(b) Creditor's
Status. At the time the Creditor was offered the Securities, it was
and as of the date hereof it is, an "accredited investor'' as
defined in Rule 501 (a) under the Securities Act.
(c) Experience
of Creditor. Creditor, either alone or together representatives,
has such knowledge, sophistication and experience in business and
fin matters so as to be capable of evaluating the merits and risks
of the prospective invest in the Securities, and has so evaluated
the merits and risks of such investment. Creditor is
able to bear the economic risk of an investment in the Securities
and, present time,
is able to afford a complete loss of
such investment.
6. Release.
The Creditor acknowledges and agrees
that it shall have no her rights or interest in, and shall
not receive any further consideration, payment or distribution of
any kind with respect to, the Obligations. In such regard, the
Creditor hereby waives, relinquishes, remises and releases all
rights, claims, interests or liabilities, known and own, of any
nature whatsoever in law or equity which the Creditor may
previously have had o may now or hereafter have as against or to
receive from the Company arising out of, resulting from or relating
to the Obligations or any rights or interest of the Creditor with
respect thereto.
7. Transfer
Restrictions.
The Securities may only be disposed of
in compliance with state and federal securities
laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule
144 under the Securities Act, o the Company or to an Affiliate of a
Creditor, the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require
registration o such 1
transferred Securities under the
Securities Act. As a condition of transfer, any such transferee
shall agree in writing to be bound by the terms of this Agreement.
The Creditors agree to the imprinting of a legend on any of the
Securities in the following form:
[NEITHER] THIS SECURITY [NOR THE SECURITIES INTO
WHICH THIS SECURITY IS [EXERCISABLE] [CONVERTIBLE)] HAS [NOT] BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (“THE
"SECURITIES ACT"), AND
ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A. TRANSACTION
NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE UPON [EXERCISE]
[CONVERSION] OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
8 .
Further
Assurances. The Creditor shall
hereafter, without further consideration execute and deliver
promptly to the Company such further consents, waivers,
assignments,
endorsements and other documents and
instruments, and to take all such further
actions, as the Company
may from time to time reasonably request with respect to the
exchange and satisfaction of the Obligations Interest and the
consummation in full thereof.
9. Successors
and Assigns. This Agreement is
binding upon,
and shall inure t
the
benefit of, the parties hereto and their
respective successors and assigns.
10. Counterparts.
This Agreement may be executed in
multiple counterparts,
each of which shall be deemed
an original and all of which, when taken
together, shall constitute one
and
the same instrument.
IN WITNESS WHEREOF, the parties
hereto have affixed their hands and seal by signing this Agreement
as of the day and year first above written.
[Signatures on Following Page]
Company:
Guided
Therapeutics, Inc.
By:
/s/ Gene
Cartwright
Name:
Gene Cartwright
Title:
CEO
Creditor:
By:
/s/ Richard P.
Blumberg
Name:
Richard P. Blumberg
For K2
Medical, LLC (fka Shenghuo Medical, LLC)
By:
/s/ Mark
Pearlstein
Name:
Mark Pearlstein
For K2
Medical, LLC (fka Shenghuo Medical, LLC)
Address: 175
Strafford Ave, Suite One,
Wayne,
PA 19087
Exhibit 10.51
EXCHANGE AGREEMENT
THE EXCHANGE GREEMENT (this "Agreement")
is made
and entered
into effective as
of the 30 day of
December, 2019,
by and between GUIDED THERAPEUTICS,
INC., a
Delaware corporation
(the "Company")
and the undersigned
creditor
of the
Company
(the "Creditor").
WHEREAS, the
Creditor
is the
payee of
certain obligations
owed to the
Creditor
by the Company as
set forth on Exhibit
A
hereto
(the "Obligations");
WH EREAS,
in satisfaction in
full of the
Obligations, which may include both cash and
associated warrants to
purchase the Company's
common stock,
the Creditor
is willing to
accept certain
new
securities
of the
Company as set
forth on Exhibit B hereto (the "Securities")
and such
transaction, the "Exchange", thereby
forfeiting any rights
to warrants or
other
equity
associated with such
Obligations;
WHEREAS, the
Exchange
is being
made in reliance upon the exemption
from registration
provided by Section 4(a)(2)
of the Securities
Act; and
WH EREAS,
the Company
and the Creditor
desire to enter
into this Agreement
to
evidence and set
forth the terms of
the exchange of the
Securities for and in
satisfaction
of the Obligations;
NOW,
THEREFORE, in
consideration of the
mutual covenants
herein
contained,
and intending to
be legally bound
hereby,
the parties hereto,
being duly sworn,
do covenant, agree
and certify as follows:
I. Recitals. The parties hereto acknowledge and agree that
the foregoing
recitals are
true and accurate
and constitute part of
this Agreement to
the same extent
as if contained in the
body hereof.
2. Definitions. In
addition to the
terms defined
elsewhere
in this
Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given
to such
terms in the
Obligations
(as defined herein), and
(b) the following terms have
the meanings
set forth in this
Section I. I
:
"Affiliate" means
any Creditor
that, directly
or indirectly
through one or
more intermediaries,
controls or is
controlled by or is
under
common control with
a Creditor,
as such
terms are
used in
and construed under
Rule 405 under
the Securities Act.
"Board of
Directors"
means the
board of
directors of
the Company.
"Common
Stock" means
the common stock of
the Company,
par
value
$0.00 I per share,
and any
other class of
securities
into which such
securities
may hereafter be
reclassified
or changed.
"Exchange
Act"
means
the Securities
Exchange
Act of
1934, as
amended,
and the rules
and regulations
promulgated
thereunder.
"Liens"
means a
lien,
charge,
pledge,
security
interest,
encumbrance,
right
of first refusal,
preemptive
right
or other
restriction.
"Creditor"
means
an individual
or corporation,
partnership,
trust,
incorporated
or
unincorporated
association,
joint venture,
limited
liability
company,
joint stock
company,
government
(or an
agency
or subdivision
thereof)
or other
entity of any
kind.
"Securities" has
the meaning
set forth in
the Preamble
of this Agreement.
"Securities
Act" means
the Securities Act
of 1933,
as amended,
and the
rules and
regulations
promulgated
thereunder.
3. Exchange and
Satisfaction. The
Obligations
are hereby
surrendered by
the Creditor
and
exchanged
for the
Securities and
other
considerations
according
to the
following
terms and
conditions.
a. As of December
7, 2019,
the
Creditor
currently
holds unsecured
notes
with Company
in the amount
of $305,320,
including both
principal
and interest,.
Both
the Company
and Creditor
wish to
continue
their relationship under
mutually
agreeable
terms.
b.
In lieu
of agreeing
to dismiss
the entire
amount
of what
the Creditor
is currently
owed by the
Company,
the Creditor
agrees to accept in
exchange
1,167,630
shares of
the Company's
Stock and
warrants
to purchase
the Company's
common
shares,
pursuant
to a separate
warrant
agreement
to be
executed
once
the Company
has successfully
completed
a new financing as
defined in
Section
3c.
below.
The schedule of warrants
to purchase
common
shares
of Guided
Therapeutics
is listed
below:
|
(i)
|
Warrants
to purchase
928,318
shares at
$0.20
(twenty
cents)
each.
|
|
(ii)
|
Warrants
to purchase
11 9,656 shares
at $0.25
(twenty-five
cents)
each.
|
|
(iii)
|
Warrants
to purchase
11 9,656
shares at
$0. 75
(seventy-five
cents)
each.
|
All
warrants
will be exercisable
immediately
upon
issuance
and will
expire after
three years.
Warrants
will not have
a cashless
exercise
provision
unless they
are not
registered
within six
(6) months
of issuance.
c.
Both parties agree
that
the exchange of
debt
for equity
contemplated
by this
Agreement
shall
occur once
the Company
has successfully
raised a
minimum of one
million
dollars
($1,000,000)
in a new
financing.
d. A
10% blocker
shall
be effected such
that the
Creditor agrees to
restrict its holdings
of the Company's
Common
Shares to
less than
10% of the
total
number of
the Company's
outstanding
common
shares at
one point in
time.
4. Representations and Warranties
of the Company. The
Company
hereby makes
the following representations and warranties to
Creditor:
(a) Authorization; Enforcement. The
Company has the
requisite corporate power and
authority to
enter into and to
consummate the transactions
contemplated by this
Agreement and otherwise
to carry out its obligations hereunder. The
execution and delivery
of this
Agreement by the Company
and the consummation by
it of the transactions contemplated hereby and thereby
have been duly
authorized by all necessary action
on the part of the Company and no further action is
required by the Company,
the Board of Directors or the
Company's stockholders in
connection herewith or
therewith. This Agreement have
been (or upon delivery will have
been) duly executed by
the Company
and, when delivered
in accordance with the terms hereof and thereof, will
constitute the
valid and binding obligations of the Company
enforceable against the
Company in accordance with their terms,
except: (i) as limited
by general equitable principles and
applicable bankruptcy, insolvency, reorganization,
moratorium and other
laws of general application affecting enforcement of
creditors' rights generally, (ii)
as limited by laws relating to
the availability of
specific performance, injunctive
relief or other
equitable remedies
and (iii) insofar
as indemnification and contribution provisions may be limited by applicable law.
(b) Issuance of the
Securities. The Securities are
duly authorized and, when issued and paid for
in accordance with
this Agreement, will be duly
and validly issued, fully paid and nonassessable, free
and clear of all Liens
imposed by the Company.
The shares
of Common Stock underlying the
Securities (if
any), when issued
in accordance
with the terms
of the Securities, will be validly issued,
fully paid and nonassessable,
free and clear of all
Liens imposed by the
Company other than restrictions
on transfer
required by law.
5. Representations and Warranties of
the Creditor. Creditor
hereby represents and warrants as of
the date hereof and as
of the Closing Date to
the Company as follows (unless as of a
specific date therein):
(a) Own Account. Creditor
understands that the Securities
are "restricted securities"
and have not been registered
under the Securities Act or any
applicable state
securities law
and is acquiring the Securities
as principal for
its own account and
not with a view to or for
distributing or reselling such
Securities or any part thereof
in violation of
the Securities Act or any applicable state
securities law,
has no
present intention of distributing any
of such Securities in violation
of the Securities Act or any applicable state
securities law
and has
no direct or indirect arrangement or understandings with any other Creditors to distribute
or regarding the distribution of such Securities
in violation of the Securities Act or any applicable
state securities law
(this representation and warranty not limiting such
Creditor's right to
sell the Securities pursuant to the
Registration Statement or
otherwise in
compliance with applicable federal and
state securities laws).
The Creditor is acquiring
the Securities hereunder
in the ordinary course
of its
business.
(c) Creditor's Status. At the time the Creditor was offered the Securities, it was, and as
of the date hereof it
is, an "accredited investor" as defined in Rule 501 (a) under the
Securities Act.
(d) Experience of Creditor.
Creditor, either alone or together with its
representatives,
has such
knowledge, sophistication
and experience in business
and financial matters so as
to be capable of evaluating the merits and risks of the
prospective investment
in the
Securities, and has so
evaluated the merits and risks of such
investment. Such Creditor is able
to bear the economic risk of an investment in the Securities and, at the present time,
is able to
afford a complete loss
of such investment.
1.
Release. The
Creditor acknowledges and agrees that it
shall have no further
rights or interest
in, and shall not receive any further consideration, payment or distribution of any kind with respect to,
the Obligations. In such
regard, the
Creditor hereby waives, relinquishes,
remises and releases all rights,
claims, interests
or liabilities, known
and unknown, of
any nature whatsoever in
law or equity which
the Creditor may
previously have had or
may now or hereafter
have as against or to receive
from the Company arising out of, resulting
from or relating to the Obligations or
any rights or interest of the Creditor
with respect thereto.
2.
Transfer Restrictions. The
Securities may
only be disposed of in
compliance with state and federal
securities laws. In
connection with any
transfer of Securities other than pursuant to an
effective registration statement or Rule 144 under the Securities Act, to
the Company or to an Affiliate of a Creditor,
the Company may
require the transferor
thereof to provide
to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the Company, the form and
substance of which opinion shall be reasonably satisfactory
to the Company,
to the effect that such
transfer does not
require registration of
such transferred
Securities under the
Securities Act. As a condition of transfer, any
such transferee
shall agree in writing to
be bound by the terms of this
Agreement. The Creditors agree to
the imprinting
of a legend on any
of the Securities in
the following
form:
[NEITH
ER] THIS SECURITY [NOR THE SECURITIES TNTO WHICH
THIS SECURITY
IS
[EXERCISABLE] [CONVERTIBLE]]
HAS [NOT] BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMM ISSION OR THE
SECURITIES COMM
ISS ION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE
SECURITIES ACT OF
1933, AS
AMENDED (THE "SECURITIES
ACT"), AND,
ACCORDTNGL Y, MAY NOT BE
OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR TN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT
AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY [AND THE
SECURITIES ISSUABLE UPON
[EXERCISE] [CONVERSION] OF THIS
SECURITY] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FTNANCIAL TNSTITUTION THAT IS AN
"ACCREDITED INVESTOR"
AS DEFTNED TN RULE 50 1(a)
UNDER THE SECURITIES ACT
OR OT HER
LOAN SECURED BY SUCH
SECURITIES.
8. Further
Assurances. The Creditor shall hereafter, without
further consideration,
execute and
deliver promptly to the
Company such
further consents, waivers, assignments, endorsements and other
documents and instruments, and to take all
such further
actions, as
the Company may from time to time reasonably request with respect
to the exchange
and satisfaction of the
Obligations Interest and
the consummation in full thereof.
1.
Successors and Assigns.
This Agreement is binding
upon, and shall inure
to the benefit of, the parties hereto and
their respective successors and assigns.
2.
Counterparts.
This Agreement may
be executed in
multiple counterparts,
each of which shall
be deemed an original and all
of which, when
taken together, shall
constitute one and the
same instrument.
IN WITNESS WHEREOF,
the parties hereto
have affixed
their hands and
seals
by
signing
this Agreement as of
the day and year
first above
written.
[Signatures on
Following Page]
Company:
GUIDED THERAPEUTICS,
INC.
By: /s/ Gene
S. Cartwright
Name: Gene
Cartwright
Title:
CEO
Creditor:
By:
/s/ Richard Blumberg
Name:
Richard Blumberg
Exhibit 10.53
EXCHANGE
AGREEMENT
This
EXCHANGE AGREEMENT (this "Agreement") is made and entered into
effective as of the 6th day of January, 2020, by and between GUIDED
THERAPEUTICS, INC., a Delaware corporation (the "Company") and the
undersigned creditor of the Company (the "Creditor").
WHEREAS, the
Company has entered into certain agreements with investors for a
recapitalization of the Company in which the Company will receive
at least $2,000,000 in cash (the "Financing") and, as part of the
Financing, the Company will file a registration statement on Form
S-l (the "S-l") to register the offering and sale of certain of its
securities with the U.S. Securities and Exchange Commission (the
"SEC");
WHEREAS, in
connection with the Financing, the Company desires to eliminate or
satisfy certain obligations to third parties;
WHEREAS, the
Creditor has performed legal services for the Company and the
Company currently owes the Creditor an aggregate of $1,744,767.62
for such services (collectively, the "Obligation");
WHEREAS, in
satisfaction in full of the Obligation, the Creditor is willing to
accept a cash payment and certain promissory notes of the Company
(such transaction, the "Exchange");
WHEREAS, the
Exchange is being made in reliance upon the exemption from
registration provided by Section 4(a)(2) of the Securities Act of
1933, as amended (the "Securities Act"); and
WHEREAS, the
Company and the Creditor desire to enter into this Agreement to
evidence and set forth the terms of the Exchange;
NOW,
THEREFORE, in consideration of the mutual covenants herein
contained, and intending to be legally bound hereby, the parties
hereto, being duly sworn, do covenant, agree and certify as
follows:
I.
Recitals. The parties hereto
acknowledge and agree that the foregoing recitals are true and
accurate and constitute part of this Agreement to the same extent
as if contained in the body hereof.
2.
Definitions. In addition to
the terms defined elsewhere in this Agreement, the following terms
have the meanings set forth in this Section 2:
"Affiliate" means
any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.
"Closing Date"
means any date, chosen by the Company at its discretion, that is on
or prior to the date that the S-I is declared effective by the SEC,
and shall be evidenced by delivery in full by the Company to the
Creditor of the consideration described in Section 3.
"Liens"
means a lien, charge, pledge, security interest, encumbrance, right
of first refusal, preemptive right or other
restriction.
"Person" means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
3.
Exchange and Satisfaction. On the Closing Date, subject to delivery
in full of the following consideration, the Obligation shall be
surrendered by the Creditor in its entirety:
(I)
a cash payment, wired to the Creditor
(to an account specified in writing by the Creditor), of $175,000
(the "Cash Payment");
(2)
an unsecured promissory note, in substantially the form set forth
on Exhibit A hereto, in the principal amount of $550,000, due 13
months from the date of issuance, that may be called by the Company
at any time prior to maturity upon a payment of $150,000 to the
Creditor (such note, the "13-Month Note"); and
(3)
an unsecured promissory note, in substantially the form set forth
on Exhibit B hereto, in the principal amount of $444,767.62,
bearing an annualized interest rate of 6% and due in four equal
annual installments beginning on the second anniversary of date of
issuance (the "Five- Year Note" and, with the 13-Month Note, the
"Notes").
4.
Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to
Creditor:
(a)
Authorization: Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the
transactions contemplated by this Agreement and the Notes and
otherwise to carry out its obligations hereunder and thereunder.
The execution and delivery of this Agreement and the Notes by the
Company and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required
by the Company, its board of directors or its stockholders in
connection herewith or therewith. This Agreement and the Notes have
been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and
thereof, will constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their
respective terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by
applicable law.
(b)
Issuance of the Notes. The Notes are duly authorized and, when
issued and paid for in accordance with this Agreement, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens.
5.
Representations and Warranties of the Creditor. The Creditor hereby
represents and warrants as of the date hereof and as of the
issuance of the Notes to the Company as follows (unless as of a
specific date therein):
(a)
Own Account. The Creditor understands that the Notes are
"restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is
acquiring the Notes for its own account and not with a view to or
for distributing or reselling such Notes or any part thereof in
violation of the Securities Act or any applicable state securities
law, has no present intention of distributing any of such Notes in
violation of the Securities Act or any applicable state securities
law and has no direct or indirect arrangement or understandings
with any other Persons to distribute or regarding the distribution
of such Notes in violation of the Securities Act or any applicable
state securities law (this representation and warranty not limiting
the Creditor's right to sell the Notes pursuant to a registration
statement under the Securities Act or otherwise in compliance with
applicable federal and state securities laws).
(b)
Experience of Creditor. The Creditor, either alone or together with
its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in
the Notes, and has so evaluated the merits and risks of such
investment. The Creditor is able to bear the economic risk of an
investment in the Notes and, at the present time, is able to afford
a complete loss of such investment.
Release.
Upon the Exchange and the delivery the Cash Payment and the Notes
to the Creditor, the Creditor shall have no further rights or
interest in, and shall not receive any further consideration,
payment or distribution of any kind with respect to, the
Obligation. In such regard, the Creditor hereby waives,
relinquishes, remises and releases all rights, claims, interests or
liabilities, known and unknown, of any nature whatsoever in law or
equity which the Creditor may previously have had or may now or
hereafter have as against or to receive from the Company arising
out of, resulting from or relating to the Obligation or any rights
or interest of the Creditor with respect thereto. The foregoing has
no effect on the Company's obligations under this Agreement or the
Notes, nor the Creditor's rights hereunder or thereunder. Transfer
Restrictions. The Notes may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer
of the Notes other than pursuant to an effective registration
statement or Rule 144 under the Securities Act, to the Company or
to an Affiliate of the Creditor, the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement. The Creditor agrees to the imprinting of a
legend on the Notes in the following form:
THIS
SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMlSSION OR THE SECURITIES COMMlSSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES
ACT'), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAlLABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED
IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY
SUCH SECURITY.
1.
Further
Assurances. The Creditor shall hereafter, without further
consideration, execute and deliver promptly to the Company such
further consents, waivers, assignments, endorsements and other
documents and instruments, and to take all such further actions, as
the Company may from time to time reasonably request with respect
to the exchange and satisfaction of the Obligation.
2.
No
Attorney-Client Relationship. The Company acknowledges that the
Creditor is not the Company's lawyer and is not providing, and has
not provided since the date last indicated on its invoices to the
Company, legal representation to the Company, and neither this
Agreement, the Notes, nor the negotiation hereof or thereof, is
intended to be legal representation in any manner by the Creditor
to the Company.
3.
No
Construction Against Drafter. Each party has participated in
negotiating and drafting this Agreement, so if an ambiguity or a
question of intent or interpretation arises, this Agreement is to
be construed as if the parties had drafted it jointly, as opposed
to being construed against a party because it was responsible for
drafting one or more provisions of this Agreement.
11 .
Successors and Assigns. This Agreement is binding upon, and shall
inure to the benefit of, the parties hereto and their respective
successors and assigns.
12.
Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of
which, when taken together, shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, the parties hereto have affixed their hands and
seals by signing this Agreement as of the day and year first above
written.
[Signatures on
Following Page]
Company:
GUIDED THERAPEUTICS, INC.
/s/ Gene S. Cartwright
Name:
Gene S. Cartwright
Title:
CEO
Creditor: JONES DAY
______________________
Exhibit
A
Form
of 13-Month Note
THIS SECURITY HAS NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED
IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY
SUCH SECURITY.
PROMISSORY
NOTE
Exhibit 10.52
EXCHANGE AGREEMENT
THE EXCHANGE AGREEMENT
(this "Agreement") is made and entered
into effective as
of the 30th
day of December, 2019,
by and between GUIDED THERAPEUTICS,
INC., a
Delaware corporation
(the "Company")
and the undersigned
creditor
of the
Company
(the "Creditor").
WHEREAS, the
Creditor
is the
payee of
certain obligations
owed to the
Creditor
by the Company as
set forth on Exhibit
A
hereto
(the "Obligations");
WH EREAS,
in satisfaction in
full of the
Obligations, which may include both cash and
associated warrants to
purchase the Company's
common stock,
the Creditor
is willing to
accept certain
new
securities
of the
Company as set
forth on Exhibit B hereto (the "Securities")
and such
transaction, the "Exchange", thereby
forfeiting any rights
to warrants or
other
equity
associated with such
Obligations;
WHEREAS, the
Exchange
is being
made in reliance upon the exemption
from registration
provided by Section 4(a)(2)
of the Securities
Act; and
WH EREAS,
the Company
and the Creditor
desire to enter
into this Agreement
to
evidence and set
forth the terms of
the exchange of the
Securities for and in
satisfaction
of the Obligations;
NOW,
THEREFORE, in
consideration of the
mutual covenants
herein
contained,
and intending to
be legally bound
hereby,
the parties hereto,
being duly sworn,
do covenant, agree
and certify as follows:
I. Recitals. The parties hereto acknowledge and agree that
the foregoing
recitals are
true and accurate
and constitute part of
this Agreement to
the same extent
as if contained in the
body hereof.
2. Definitions. In
addition to the
terms defined
elsewhere
in this
Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given
to such
terms in the
Obligations
(as defined herein), and
(b) the following terms have
the meanings
set forth in this
Section I. I
:
"Affiliate" means
any Creditor
that, directly
or indirectly
through one or
more intermediaries,
controls or is
controlled by or is
under
common control with
a Creditor,
as such
terms are
used in
and construed under
Rule 405 under
the Securities Act.
"Board of
Directors"
means the
board of
directors of
the Company.
"Common
Stock" means
the common stock of
the Company,
par
value
$0.00 I per share,
and any
other class of
securities
into which such
securities
may hereafter be
reclassified
or changed.
"Exchange Act" means the Securities
Exchange Act of 1934,
as amended, and the rules
and regulations
promulgated thereunder.
"Liens"
means a lien,
charge, pledge,
security
interest, encumbrances, right
of first
refusal,
preemptive right or other restriction.
"Creditor" means
an individual or
corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint
stock company, government (or an
agency or subdivision thereof)
or other entity of any
kind.
"Securities" has the meaning set forth in
the Preamble of
this Agreement.
"Securities Act" means
the Securities Act of 1933,
as amended, and the
rules and
regulations
promulgated
thereunder.
3. Exchange and Satisfaction.
The Obligations are
hereby surrendered
by the Creditor
and exchanged for the Securities and
other considerations according to
the following
terms and
conditions.
a. As of
December 7, 2019,
the Creditor currently holds unsecured notes with Company in
the amount of
$400,417, including both principal and
interest,. Both the Company and Creditor
wish to continue
their relationship under
mutually agreeable
terms.
b. In
lieu of agreeing
to dismiss the
entire amount of what
the Creditor
is currently owed by the Company, the
Creditor agrees to accept in exchange 1,699,255 shares
of the Company's
Stock and warrants to purchase
the Company's common shares,
pursuant to a
separate warrant agreement to be executed
once the Company
has successfully completed a new financing
as defined in Section 3c. below. The schedule
of warrants to purchase
common shares of
Guided Therapeutics is listed
below:
|
(i)
|
Warrants to purchase 1,497,367 shares at
$0.20 (twenty cents) each.
|
|
(i i)
|
Warrants to
purchase 100,944 shares
at $0.25 (twenty-five cents)
each.
|
|
(iii)
|
Warrants to purchase 100,944
shares at $0.75 (seventy-five cents)
each.
|
All warrants will be exercisable immediately upon issuance and will expire after three years.
Warrants will not
have a cashless exercise
provision
unless they are not
registered
within six (6) months
of issuance.
c. Both parties agree that the exchange of
debt for equity contemplated by this
Agreement shall occur once the Company
has successfully
raised
a minimum of one
million dollars
($1 ,000,000) in a
new financing.
d.
A 10% blocker shall
be effected such
that the Creditor
agrees to restrict
its holdings
of the Company's Common Shares to
less than 10%
of the total
number of the
Company's outstanding common shares
at one point in time.
4. Representations and Warranties
of the Company. The
Company
hereby makes
the following representations and
warranties to Creditor:
(a) Authorization; Enforcement. The
Company has the
requisite corporate
power and authority
to enter into
and to consummate
the transactions
contemplated
by this Agreement
and otherwise to
carry out
its obligations hereunder. The
execution and delivery of
this Agreement by the
Company
and the consummation by it of
the transactions
contemplated hereby
and thereby have been duly authorized by
all necessary action
on the
part of the
Company
and no further
action is
required by the
Company, the
Board
of Directors or
the Company's
stockholders in
connection
herewith or
therewith. This Agreement
have been (or upon
delivery will have
been)
duly executed
by the Company
and, when delivered in accordance with the terms hereof
and thereof,
will constitute the
valid and binding obligations
of the Company
enforceable against
the Company
in accordance with their terms, except:
(i) as limited
by general
equitable principles
and applicable bankruptcy, insolvency, reorganization,
moratorium
and other
laws of
general application affecting enforcement of creditors'
rights generally,
(ii) as limited
by laws relating
to the availability of specific
performance,
injunctive relief
or other
equitable remedies and (iii) insofar
as indemnification
and contribution provisions
may be
limited by applicable
law.
(b) Issuance
of the Securities. The
Securities are
duly authorized and,
when issued and paid for in
accordance with this
Agreement, will
be duly and validly
issued, fully paid and nonassessable, free
and clear of all Liens
imposed by
the Company. The
shares of
Common Stock underlying
the Securities (if any),
when issued in accordance
with the terms of
the Securities, will be validly issued,
fully paid
and nonassessable,
free and clear of all
Liens imposed by the Company other than restrictions on
transfer
required by law.
5. Representations and
Warranties of
the Creditor. Creditor
hereby
represents and
warrants as of the date hereof
and as of the
Closing
Date to the Company
as follows
(unless
as of a specific
date therein):
(a) Own Account. Creditor
understands
that the Securities are
"restricted
securities"
and have not
been registered under the Securities Act or
any applicable
state securities
law and
is acquiring
the Securities as principal
for its own account and not
with a view
to or for
distributing or reselling
such
Securities or any part
thereof in violation
of the Securities
Act or any
applicable state
securities law,
has no present intention
of distributing any
of such
Securities in violation
of the Securities Act or
any applicable state
securities law and
has no
direct
or indirect arrangement or
understandings
with any other
Creditors to distribute or
regarding the distribution of such
Securities
in violation
of the Securities Act or
any
applicable state
securities law (this
representation and
warranty not limiting
such Creditor's right to
sell the Securities pursuant to the
Registration Statement or otherwise in compliance with applicable federal and
state securities
laws). The Creditor
is acquiring the
Securities hereunder in the
ordinary course of its
business.
(c) Creditor's Status. At the time
the Creditor was offered
the Securities,
it was, and as of the
date hereof it
is, an "accredited
investor" as
defined in Rule 501 (a) under the Securities Act.
(d) Experience of Creditor. Creditor, either alone
or together with its representatives, has such
knowledge, sophistication and experience in business and
financial matters
so as to be capable
of evaluating the merits
and risks of the prospective investment in the
Securities, and has so
evaluated the merits and
risks of such investment. Such Creditor is able
to bear the economic risk of
an investment in the
Securities and, at the present
time, is able
to afford a complete loss
of such
investment.
1.
Release. The Creditor acknowledges and agrees that it shall have
no further rights or
interest in, and
shall not receive
any further consideration, payment or distribution of any kind
with respect to,
the Obligations. In such
regard, the Creditor
hereby waives,
relinquishes, remises
and releases
all rights,
claims, interests or
liabilities, known
and unknown, of any nature
whatsoever in law
or equity
which the Creditor may
previously have had
or may now or
hereafter have as against or to receive
from the Company arising out of, resulting
from or relating to the Obligations or any rights or
interest
of the Creditor with respect
thereto.
2.
Transfer Restrictions. The Securities may only be
disposed of in compliance with state and
federal securities laws. In
connection with any
transfer
of Securities other than pursuant to
an effective registration statement or Rule 144 under the Securities Act, to the Company
or to an Affiliate of a
Creditor,
the Company may
require the transferor thereof to provide to
the Company an
opinion of counsel selected by
the transferor and
reasonably
acceptable to the
Company,
the form and substance of which opinion
shall be
reasonably
satisfactory to the Company,
to the effect
that such
transfer does not
require registration of
such transferred Securities under the Securities Act. As a condition of transfer,
any such
transferee
shall agree in writing to be bound by
the terms of
this Agreement.
The Creditors
agree to the imprinting
of a legend
on any of the Securities in the
following form:
[NEITH
ER) THIS SECURITY [NOR
THE SECURITIES
INTO WHICH THIS SECURITY IS
[EXERCISABLE) [CONVERTIBLE))
HAS [NOT) BEEN
REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933,
AS AMENDED (THE
"SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD
EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITI ES
ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM,
OR IN A
TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT
AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY [AND THE SECURITIES ISSUABLE
UPON [EXERCISE)
[CONVERSION) OF TH
IS SECURITY)
MAY BE PLEDGED IN CONNECTION
WITH A BONA FlDE
MARGIN ACCOUNT WITH A REGISTERED BROKER·DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION
THAT IS
AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a) UNDER
THE SECURITIES ACT OR
OTHER LOAN SECURED BY
SUCH SECURITIES.
8. Further
Assurances. The Creditor shall
hereafter, without further consideration, execute
and deliver promptly to the
Company such
further consents, waivers, assignments, endorsements
and other documents and instruments, and
to take all such further actions,
as the Company may from time
to time reasonably
request with
respect to the
exchange and satisfaction
of the Obligations Interest and
the consummation in
full thereof.
9. Successors and Assigns. This
Agreement is binding
upon, and shall inure to the benefit of, the
parties hereto and their
respective successors
and assigns.
10.
Counterparts.
This Agreement may be executed in
multiple counterparts, each of
which shall be
deemed an original and all of
which, when taken together, shall
constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto
have affixed
their hands and
seals
by signing
this Agreement as of the day and
year first above written.
[Signatures on Following Page]
Company:
GUIDED THERAPEUTICS, INC.
By:
/s/ Gene S. Cartwright
Name: Gene Cartwright
Title: CEO
CREDITOR:
By:
/s/ John Imhoff
Name:
John Imhoff, MD
Exhibit
10.54
FINDER'S
FEE AGREEMENT FOR IRON STONE CAPITAL
This
AGREEMENT (the"Agreement") dated this ___ day of August, 2019
BETWEEN:
Guided
Therapeutics Inc., 5835 Peachtree Comers East, Suite D, Norcross,
GA 30092 (the "Company")
-AND-
Iron
Stone Capital 20 Scrivener Square Suite 607 Toronto, M4W 3X9 Canada
("ISC")
WHEREAS
ISC has offered to provide certain services to GTI in GTI's capital
raising efforts,
WHEREAS
GTI is in need of ISC's services to raise capital in Canada,
WHEREAS ISC has already provided good and valuable services and it
is expected that it will continue to do so,
IT IS
HEREBY AGREED AS FOLLOWS: Services Provided
1. ISC will
assist GTI in raising capital in Canada (and elsewhere if possible)
in GTI' s current fund-raising efforts.
Compensation
Package
2.
ISC
will receive 5% cash and 5% warrants on all funds it raises
including bridge loans to assist the company in closing the deal.
The warrants are at a cost of25 cents, exercisable for 3 years. To
be clear, if, for example, $1OOk is raised with warrants at an
exercise price of $.25, the fees will be $5,000 and the number of
warrants will be 20,000 ($1OOk divided by $.25 multiplied by
5%).
3.
All
warrants set forth herein shall be specified as and are fully
transferrable.
4.
ISC
will be working with others to help raise capital. Others may
require fees of 7% cash and 7% warrants, in which case they will
receive such fees and warrants and ISC will receive no fees and
warrants on such capital raised.
Notice
5. All
notices, requests, demands or other communications required or
permitted by the terms of this Agreement will be given in writing
and delivered to the Parties at the following
addresses:
a.
Company 5835 Peachtree Comers East, Suite B, Norcross, GA
30092
b.
B&B 20 Scrivener Square Suite 607, Toronto, M4W 3X9 Canada or
to such other address as either Party may from time to time notify
the other. Indemnification
6.
Except to the extent paid in settlement from any applicable
insurance policies, and to the extent permitted by applicable law,
each Party agrees to indemnify and hold harmless the other Party,
and its respective affiliates, officers, agents, employees, and
permitted successors and assigns against any and all claims,
losses, damages, liabilities, penalties, punitive damages,
expenses, reasonable legal fees and costs of any kind or amount
whatsoever, which result from or arise out of any act or omission
of the indemnifying party that the other Party, its respective
affiliates, officers, agents, employees, and permitted successors
and assigns that occurs in connection with this Agreement were
unaware of.
Confidentiality
7. The
terms of this agreement shall remain confidential and not revealed
by the parties to any other person or entity without the agreement
of both parties.
Modification of
Agreement
8. Any
amendment or modification of this Agreement or additional
obligation assumed by either Party in connection with this
Agreement will only be binding if evidenced in writing signed by
both Parties or an authorized representative of each
Party.
Time of
the Essence
9. Time
is of the essence in this Agreement. No extension or variation of
this Agreement will operate as a waiver of this
provision.
Assignment
10.
Neither Party will voluntarily, or by operation of law, assign or
otherwise transfer its obligations under this Agreement without the
prior written consent of the other Party.
Entire
Agreement II. It is agreed
that there is no representation, warranty, collateral agreement or
condition affecting this Agreement except as expressly provided in
this Agreement.
Enurement
12.
This Agreement will ensure to the benefit of and be binding on the
Parties and their respective heirs, executors, administrators and
permitted successors and assigns.
Titles/Headings
13.
Headings are inserted for the convenience of the Parties only and
are not to be considered when interpreting this
Agreement.
Gender
14.
Words in the singular mean and include the plural and vice versa.
Words in the masculine mean and include the feminine and vice
versa.
Governing
Law
15.
This Agreement will be governed by and construed in accordance with
the laws of the State of Georgia in the United States and venue for
any action involving this agreement shall be in the County in which
the Company is situated in the State of Georgia. In the event of a
dispute, the first step towards a resolution will be to implement
the services of a qualified mediator for which the cost of said
services will be borne by the Company. If one mediator should fail
to facilitate reconciliation of the dispute, then three qualified
mediators will be engaged and the fees for all three will be borne
equally by the parties.
Severability
16.
In the event that any of the
provisions of this Agreement are held to be invalid or
unenforceable in whole or in part, all other provisions will
nevertheless continue to be valid and enforceable with the invalid
or unenforceable parts severed from the remainder of this
Agreement.
Waiver
17. The
waiver by either Party of a breach, default, delay or omission of
any of the provisions of this Agreement by the other Party will not
be construed as a waiver of any subsequent breach of the same or
other provisions.
|
01/06/2020
|
Company: GUIDED
THERAPEUTICS, INC.
|
|
Date:
|
By: /s/
Gene S. Cartwright
|
|
|
Name:
Gene S. Cartwright
|
|
|
Title:
CEO
|
|
01/06/2020
|
Company: IRON STONE
CAPITAL
|
|
Date:
|
By:
|
Exhibit 10.55
Page
1 of 1 Howe File Number: 17-10826
PROMISSORY
NOTE
STATE
OF GEORGIA
COUNTY OF ____
FOR AND IN CONSIDERATION OF the sum of
Ten ($10.00) Dollar cash in hand, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, GUIDED
THERAPEUTICS, INC., presently of 5835 Peachtree Corners
East, STE B, Peachtree Comers, GA 30092, ("Promisor"), hereby
unconditionally promises to pay to the order of lRTH COMMUNICATIONS, LLC ("Promisee")
the present sum of ninety-nine thousand, three hundred sixty-eight
dollars and ninety-seven cents ($99,368.97), plus interest accruing
at the rate of 6%, to or for the benefit of Promisee, until paid in
full, payable and due according to the following
schedule:
$18,000.00 due on
or before January 16, 2020 then $6,000.00 per month beginning
February 1, 2020 and on the 1st day of each
consecutive month following, until the above sum has been paid in
full, together with (in the event of a default) all costs of
collection. This debt shall bear simple interest at a rate of
eighteen (18%) percent per annum following default.
THIS PROMISSORY NOTE is, a compromise
made in repayment of a debt owed to the Promisee by the Promissor
pursuant to the sales of goods by Promissee to Community Christian
School.
AMOUNTS DUE under this Promissory Note
are payable at the following address: HOWE LAW FIRM, P.C., P.e.,
4385 Kimball Bridge Road, Suite 100, Alpharetta, Georgia
30022.
ALL PAYMENTS shall be made payable to
the order of IRTH Communications, LLC.
TIME IS OF THE ESSENCE regarding
Promissor' s obligations hereunder.
No
delay or forbearance by Promisee in collecting the aforesaid debt
shall be construed as a waiver of Promisee's collection rights
hereunder. Time is of the essence of this Agreement.
AND Promissor hereby fully waives and
renounces, for itself and family, any and all exemption rights
which it, may have under or by virtue of the Constitution or laws
of Georgia, or of any other state, or of the United States, as
against this debt or any renewal hereof; and further waives demand,
protest and notice of demand, protest and non-payment.
Payment of this Promissory Note shall
constitute full and complete satisfaction of any and all claims,
actions, causes of action, demands, rights damages, costs, expenses
and compensation whatsoever relating to the 2012-2013 school
year.
Promisor agrees
that this PROMISSORY NOTE is not a guarantee or suretyship
instrument, but an original obligation making Promisee liable for
the amounts due hereunder.
GIVEN UNDER my hand and seal this 15 day
of January, 2020.
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PROMISEE:
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PROMISSOR:
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IRTH
COMMUNICATIONS, LLC
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GUIDED
THERAPEUTICS, INC.
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_ ___
____(SEAL)
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/s/
Gene S. Cartwright
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Gene S.
Cartwright, CEO
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CORPORATE
OFFICER
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CORPORATE
OFFICER
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Signed,
sealed and delivered in the presence of:
Witness: /s/MICHELE
NEITESHEIM
Notary
Public: /s/MICHELE NEITESHEIM.
My
Commission Expires: August 30, 2021
Pagelof2
Howe
File Number: 17-10826
PROMISSORY
NOTE
STATE
OF GEORGIA
COUNTY
OF ____
FOR AND
IN CONSIDERATION OF the sum of Ten ($10.00) Dollar cash in hand,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, GUIDED THERAPEUTICS,
INC., presently of 5835 Peachtree Corners East, STE B, Peachtree
Comers, GA 30092, ("Promisor"), hereby unconditionally promises to
pay to the order of IRTH COMMUNICATIONS, LLC ("Promisee") the
present sum of ninety-nine thousand, three hundred sixty-eight
dollars and ninety-seven cents ($99,368.97), plus interest accruing
at the rate of6%, to or for the benefit of Promisee, until paid in
full , payable and due according to the following
schedule:
$18,000.00 due on
or thefore January 16,2020 then $6,000.00 per month beginning
February 1, 2020 and on the 1st day of each consecutive month
following, until the above sum has been paid in full , together
with (in the event of a default) all costs of collection. This debt
shall bear simple interest at a rate of eighteen (18%) percent per
annum following default.
THlS
PROMISSORY NOTE is, a compromise made in repayment of a debt owed
to the Promisee by the Promissor pursuant to the sales of goods by
Promissee to Community Christian School.
AMOUNTS
DUE under this Promissory Note are payable at the following
address: HOWE LAW FIRM, P.C., P.C., 4385 Kimball Bridge Road, Suite
100, Alpharetta, Georgia 30022.
ALL
PAYMENTS shall be made payable to the order of lrth Communications,
LLC.
TIME IS
OF THE ESSENCE regarding Promissor' s obligations
hereunder.
No
delay or forbearance by Promisee in collecting the aforesaid debt
shall be construed as a waiver of Promisee's collection rights
hereunder. Time is of the essence of this Agreement.
AND
Promissor hereby fully waives and renounces, for itself and family,
any and all exemption rights which it, may have under or by virtue
of the Constitution or laws of Georgia, or of any other state, or
of the United States, as against this debt or any renewal hereof;
and further waives demand, protest and notice of demand, protest
and non-payment.
Payment of this
Promissory Note shall constitute full and complete full and
complete satisfaction of all and all claims, actions, causes of
action, demands, rights damages, costs, expenses and compensation
whatsoever relating to the 2012-2013 school
year.
Promisor
agrees that this PROMISSORY NOTE is not a guarantee or suretyship
instrument, but an original obligation making Promisee liable for
the amounts due hereunder.
GIVEN
UNDER my hand and seal this _____ day of __________,
2020.
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PROMISOR
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GUIDED THERAPEUTICS, INC.
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/s/
Gene S. Cartwright
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Gene
S. Cartwright
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CEO
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Signed,
sealed and delivered in the presence of:
_____________________
Witness
_____________________
Notary
Public
_____________________
My
Commission Expires:
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IRTH COMMUNICATIONS, LLC
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__________________________
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Corporate
Officer
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Exhibit 10.56
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (this "Agreement") is made
and entered into effective as of the 16th day
of January, 2020 by and between GUIDED
THERAPEUTICS, INC.,
a Delaware corporation (the "Company")
and the undersigned creditor of the Company (the
"Creditor").
WHEREAS, the Creditor is the payee of certain
obligations owed to the Creditor by the Company as set forth below
and on Exhibit
A hereto (the
"Obligations");
WHEREAS, in
satisfaction
in
full of the
Obligations, the Creditor is willing to accept, under the circumstances set forth
herein,
certain cash payments
from the Company and securities of the Company as set forth
on Exhibit B hereto (the "Securities" and such transaction, the
"Exchange");
WHEREAS, the Exchange is being made in
reliance upon the exemption from registration provided by
Section 4(a)(2) of the Securities Act; and
WHEREAS, the Company and the Creditor desire to enter into this Agreement to
evidence and set forth the terms of the exchange of
the Securities for and payment of cash in satisfaction of the
Obligations;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained, and intending
to be legally bound hereby, the parties hereto, being duly sworn,
do covenant, agree
and certify as
follows:
I.
Recitals.
The parties hereto acknowledge and agree that the foregoing
recitals are true and accurate and constitute part of this
Agreement to the same extent as if contained in the body
hereof.
2.
Definitions. In addition to the terms defined elsewhere in this
Agreement: (a) capitalized terms that are not otherwise defined
herein have the meanings given to such terms in the Obligations (as
defined herein), and (b) the following terms have the meanings set
forth in this Section 1.1:
"Affiliate" means any Person that,
directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person,
as such terms are used in and construed under Rule 405
under the Securities Act.
"Board of
Directors" means the board of directors of the
Company.
"Common Stock"
means the common stock of the Company,
par value $0.001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated there under.
"Liens"
means a lien, charge, pledge, security interest, encumbrance, right
of first refusal, preemptive right or other
restriction.
"Net
Proceeds" Means the gross amount of cash raised in the Series D
Unit Financing minus commissions and legal costs.
"Person"
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Securities"
has the meaning set forth in the Preamble of this
Agreement.
"Securities
Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
3. Exchange and
Satisfaction. The Obligations
shall be surrendered by the Creditor and exchanged for the
Securities and other considerations according to this Agreement and
the following terms and conditions.
a.
The
Creditor currently holds two senior secured convertible notes one
in the original principal amount of $1,275,000 having an original
issue date of September 10, 2014 that was assigned to it on
February 12, 2016 and the other in the original principal amount of
$1,437,500 having an original issue date of February 12, 2016 (the
"Secured Notes") and a third unsecured note in the original
principal amount of $32,083 issued on November 21, 2016 issued by
the Company ( the Secured Notes and the third unsecured note being
collectively referred to as the ''Notes'') totaling in the amount
owed to Creditor of approximately $3,360,811 as of December
12,2019, including interest and other fees, and both parties wish
to continue a relationship under mutually agreeable
terms.
b.
The Company and the Creditor have agreed to divide the amount
intended to be exchanged, including interest, into two portions,
cash and Series D preferred units pursuant to certain circumstances
described below.
(1)
Upon a financing or series of financings or closings including the
contemplated Series D Unit Offering that results in the Company
paying $1,500,000 in cash to Creditor other than an Alternative
Financing as defined in clause (5) below, Creditor will have the
right to exchange the Notes (including interest and penalties) in
the amount of $3,360,811 as of December 12,2019 or such greater
amount that is owed under the Notes, less any cash received
pursuant to Sections (4) and (5) below, into the securities issued
in the Series D Preferred Unit Offering, such securities to be
issued to the Creditor upon the same terms as the other investors
in the Series D Unit Offering. In addition to the foregoing, for
each $100,000 above $4,000,000 up to $4,900,000 Net Proceeds raised
by the Series D Unit Offering, Creditor shall receive an additional
$50,000 to pay down other unsecured debt owed by the Company to the
Creditor.
(2)
If Net Proceeds of $5,000,000 to $6,000,000 are raised under the
Series D Unit Offering or any other financing, the Creditor will
have the right to exchange the Notes (including interest) in
consideration for the payment to the Creditor of a cash payment of
$2,500,000 (inclusive of amounts described above) from the proceeds
of the Series D Unit Offering;
(3)
If the maximum offering of over $6,000,000 in Net Proceeds is
raised under the Series D Unit Offering or any other financing,
Creditor will cancel Notes (including interest) in consideration
for a full cash payment of $3,392,963 or such larger amount as
shall be owed at such time.
(4)
As described above, if the Net Proceeds received by Creditor
pursuant to clauses (1)(2) or (3) above are less than the amount
owed under the Notes the balance of any shortfall of aforesaid
amount may be converted by Creditor, in its sole discretion, into
the securities issued in the Series D Unit Offering. For example,
if the investors in the future Series D Unit offering receive one
share of Series D Preferred Stock and a warrant to purchase one
share of common stock for each $100,000 invested then Creditor
shall receive such number of shares of Series D Preferred Stock and
a warrant to purchase such number of shares of common stock as
shall equal the outstanding amount owed under the Notes (including
interest and penalties) minus $1,500,000 in the case of a payment
of $1,500,000 under clause (1) above divided by $100,000. Creditor
acknowledges that they do not wish to participate in the first
tranche of the Series D financing closing in December
2019.
(5)
In the event of alternative financings (e:.g., the Auctus
Convertible Note), the Company may elect to pay to Creditor a total
of $1,500,000 in cash to the Creditor at which time Creditor shall
waive any security interest in the assets of the Company, and
Creditor shall exchange any remaining debt from the Notes into the
Series D Unit offering. Until such time that Creditor is paid a
total of $1,500,000 in cash from the Auctus Convertible Note, it
shall maintain its current seniority with respect to its lien on
the Company's assets and Auctus Fund, LLC ("Auctus")(or any other
secured lender) and Creditor shall enter into a subordination
agreement, in form and substance acceptable to Creditor. Creditor
will be paid $450,000 at the time of closing of Tranche 1 with
Auctus, $100,000 at the time of closing of Tranche 2 with Auctus,
and $950,000 at the time of closing of tranche 3 with
Auctus.
(6)
At any time while any amounts are outstanding under the Notes,
Creditor shall have the right, but not an obligation, to convert
all or a portion of the amounts owed to it under the Notes for an
equivalent amount of securities that are to be issued by the
Company in a financing transaction to investors upon the same terms
as the investors in such financing and based upon the price to be
paid by the investors in such financing . Creditor shall be
provided with at least 10 days written notice of any such
transaction and no less than 10 days from its receipt of such
notice to exercise the right.
(7)
A 9.99% blocker shall be affected such that the Creditor agrees to
restrict its holdings of the Company's Common Shares to less than
9.99% of the total number of the Company's outstanding common
shares at anyone point in time.
(8)
The number of shares and warrants issued shall take into account
the final amount owed that may be due to additional interest and
penalties at the time of closing, to be agreed by both Creditor and
the Company.
(9)
If Creditor is issued any shares of Series D Preferred Stock,
Creditor will have the same rights as the other holders of Series D
Preferred Stock, including any registration rights, rights of first
refusal, conversion rights, anti-dilution rights, etc. and such
rights shall not be changed without Creditor's
consent.
4.Representations
and Warranties of the Company. The Company hereby makes the following
representations and warranties to Creditor:
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c.
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As
a part of this Exchange Agreement, Company and Creditor agree
existing warrants previously issued to Creditor in 2016 are
exercisable for 7,185,000 shares of the Company's common stock. The
warrants will be repriced at $0.20. So long as the Series D and
alternate financings consunll1late as per pre-agreed design, the
warrants will not have ratchet or any other reset provisions, not
have a cashless exercise provision and not be exercisable until
after the first anniversary of the closing of the date hereof. The
warrants shall expire February 12,2023.
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d.
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All
royalty payments owed to Creditor pursuant thereto shall remain
obligations of the Company to Creditor and shall remain in full
force and effect.
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e.
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The
Company shall have a period of eight (8) months from the execution
date of this Exchange Agreement, subject to early termination as
set forth below (the "Forbearance Period") to make the cash
payments set forth in one of clauses (1)(2)(3)(4) or (5) above and
Creditor shall forbear from exercising its rights and remedies
against the Company for the prior defaults during the Forbearance
Period while the Company is seeking financing. The Company shall be
entitled to extend the Forbearance Period at its options and so
long as no additional defaults under the Notes exist or are
incurred for up to an additional four (4) months for an additional
cash payment per month of $50,000. These payments will contribute
to the $1,500,000 owed to the Creditor described in Section 3b(1)
above.
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f.
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If after the Series D (or other financing) results
in the Creditor owning Series D Shares and wanants and only having
been paid out $1.5 million, in the event of a future financing or
significant collaboration with a partner that resnlts in revenues
to the Company of greater than $1 million, the Company agrees to
buy back $500,000 of the Series D Shares from the Creditor
ifthe
price ofthe Series D unit round is higher than the new financing
round or prevailing market price.
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g.
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As
of the date hereof, the interest rate on the Notes will revert to
their original non default rates.
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(a) Authorization; Enforcement. The Company has
the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by this Agreement and
otherwise to carry out its obligations hereunder. The execution and
delivery of this Agreement by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company
and no further action is required by the Company, the Board of
Directors or the Company's stockholders in connection herewith or
therewith. This Agreement have been (or upon delivery will have
been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except: (i) as limited
by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally,
(ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies
and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(b)
Issuance of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable, free and
clear of all Liens imposed by the Company. The shares of Common
Stock underlying the Securities (if any), when issued in accordance
with the terms of the Securities, will be validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the
Company other than restrictions on transfer required by
law.
(c)
Representations and Warranties. The representations and warranties
of the Company set forth in Article III of the Securities Purchase
Agreement, dated February 11, 2016, are true and con-ect in all
material respects at and as of the time of the date hereof as
though such representations and warranties had been made on and as
of the date hereof, except that those that speak as of the date of
said Securities Purchase Agreement.
5.
Representations and Warranties of the Creditor. Creditor hereby
represents and warrants as of the date hereof and as of the Closing
Date to the Company as follows (unless as of a specific date
therein):
(a) Own
Account. Creditor understands that the Securities are "restricted
securities" and have not been registered under the Securities Act
or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Creditor's right to
sell the Securities pursuant to the Registration Statement or
otherwise in compliance with applicable federal and state
securities laws). The Creditor is acquiring the Securities
hereunder in the ordinary course of its business.
(c)
Creditor's Status. At the time the Creditor was offered the
Securities, it was, and as of the date hereof it is, an "accredited
investor" as defined in Rule 501(a) under the Securities
Act.
(d)
Experience of Creditor. Creditor, either alone or together with its
representatives, has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment. Such Creditor is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to
afford a complete loss of such investment.
1.
Release. The Creditor acknowledges and agrees that it shall
have no further rights or interest in, and shall not receive any
further consideration, payment or distribution of any kind with
respect to, the Obligations that are exchanged as set forth
above. In such regard, the Creditor hereby waives,
relinquishes, remises and releases all rights, claims, interests or
liabilities, known and unknown, of any nature whatsoever in law or
equity which the Creditor may previously have had or may now or
hereafter have as against or to receive from the Company arising
out of, resulting from or relating to such exchanged Obligations or
any rights or interest of the Creditor with respect thereto;
provided, however, that this release shall not be effective until
Creditor receives payment in full of all Obligations being
exchanged as set forth above
2.
Transfer Restrictions.
The Securities may only be disposed of
in compliance with state and federal securities laws.
In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144
under the Securities Act, to the Company or to an Affiliate of a
Creditor, the Company may require the transferor thereof to provide
to the Company an opinion of counsel selected by the transferor and
reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to
the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of
transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement. The Creditor agrees to the imprinting
of a legend on any of the Securities in the following
form:
[NEITHER] THIS
SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS
[EXERCISABLE] [CONVERTIBLE]] HAS [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN A V AILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
[AND THE SECURITIES ISSUABLE UPON [EXERCISE] [CONVERSION] OF THIS
SECURITY] MAYBE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A
FINANCIAL INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED
IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
1.
Further
Assurances. The patties hereto shall hereafter, without further
consideration, execute and deliver promptly to the other party such
further consents, waivers, assignments, endorsements and other
documents and instruments, and to take all such further actions, as
such party may from time to time reasonably request with respect to
the exchange and satisfaction of the Obligations in accordance with
the terms hereof. In this regard, the Creditor's obligation to
accept the Securities and effect the exchange contemplated hereby,
shall be subject to the execution of an appropriate subordination
agreement, in form and substance acceptable to the Creditor, by and
among the Creditor, the other senior creditors of the Company and
the Company.
2.
Successors
and Assigns. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and
assigns.
3.
Counterparts.
This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which, when taken
together, shall constitute one and the same
instrument.
IN
WITNESS WHEREOF, the parties hereto have affixed their hands and
seals by signing this Agreement as of the day and year first above
written.
[Signatures
on Following Page]
Company:
GUIDED THERAPEUTICS, INC..
By: /s/ Gene S.
Cartwright
Name:
Gene S. Cartwright
Title: CEO-
-
Creditor:
By: /s/ David
Gentile
Name:
David Gentil
Title:
Manager
Exhibit 10.57
AGREEMENT RELATED TO
PROMOTIONAL ACTIVITIES
THIS
AGREEMENT (the Agreement") dated this ___day of January, 2020
BETWEEN:
Guided
Therapeutics Inc. of5835 Peachtree Comers East, Suite B, Norcross,
GA 3009 (the "Company")
-AND-
Blumberg·&
Bowles Consulting, LLC, 2356 Hobart Ave SW, Seattle, WA 98116
("B&B").
WHEREAS
the Company needs to enhance its relationship with current and
potential investors so as to enhance the Company's reputation and
profile and the value of the Company's share price;
WHEREAS
B&B has established relationship with multiple individuals and
entities who can help further this ,goal, as well as work with, the
Company in providing materials for public consumption to dovetail
with this process;
WHEREAS
B&B is willing and able to provide these services for warrants,
at out-of-market prices and without any cash consideration,
including without payment of any expenses incurred by
B&B;
IN
CONSIDERATION OF the matters described above, the receipt and
sufficiency of which consideration is hereby acknowledged, the
Company and B&B (individually the "Party" an collectively the
“Parties" to this Agreement) agree as follows:
Term
of Agreement.
1.
The
term of this Agreement (the "Term") will begin on the Closing Date
of the Company's Private Placement & Unit Offering (the
"Offering") and will remain in force for two years. Successive
monthly terms may follow if agreed upon by both
parties.
2.
Except as otherwise provided in this Agreement, the obligations of
B&B will end upon the termination of this Agreement, or
subsequent renewals.
Services
Provided
3.
The Company hereby agrees to engage B&B to provide the Company
with the following services (the "Services"): work with current and
future investors to so as to enhance the Company’s reputation
and. profile and the value of the Company's share price and work
with the Company in providing materials for public consumption to
dovetail with this process.
Performance
4.
The Parties, agree to do everything reasonably necessary to ensure
that the terms of this Agreement take effect.
Compensation
Package
5. The Company will issue to B&B a total of
5,000,000 warrants in four tranches, all with an exercise price of
$0.25, based on, the following schedule:
(a)
25% (1 ,250,000 warrants) issued and exercisable no earlier than
six months after close of the Series D Unit Offering and with a
minimum share price of $0.50 based the 30-day VWAP immediately
prior to the issuance of the warrants. This tranche warrants shall
have a two (2) year term after issuance;
(b)
25% (1,250,000 warrants) issued and exercisable no earlier than
twelve months after the close of the Series D Unit offering and
with a minimum share price of $0.75 based on the: 30-dayVWAP
immediately prior to the issuance of the warrants. This tranche of
warrants shall have a one-and-half (1.5) year term after
issuance;
(c) 25% (1,250t
OOO warrants) issued and exercisable
no earlier than eighteen months after the close of the Series D
Unit Offering and with a minimum share price of $1.0 based on
a30-day VWAP immediately prior to the issuance of the warrants
tranche of warrants shall have a one (1) year term after
issuance;
and
(d)
25% (l, 250,000 warrants) issued and exercisable no earlier than
twenty-four months after the close of the Series D Unit Offering
and with a minimum share price of $1. 5 based on the 30-day VWAP
immediately prior to the issuance of the warrants. This tranche of
warrants shall have a one (1) year term after
issuance;
6.
All
warrants will expire three years after their scheduled issuance
date if the pricing threshold for that tranche of warrants is not
reached.
7.
All
warrants set forth herein shall be specified as and are fully
transferrable.
8.
B&B
will receive no compensation other than the warrants and will be
responsible for all expenses incurred in performing the
Services.
9.
B&B
agrees to a 10% blocker such that at any .point in time, B&B
cannot own more than the 10% of the total number of outstanding
shares of the Company.
Notice
10. All
notices" requests, demands or other ,\communications required or
permitted by the terms of this Agreement will be given in writing
and delivered to the Parties at the following
addresses:
a.
Company
5835
Peachtree Comers East, Suite B~ Norcross, GA 30092
b.
B&B
2356
Hobart Ave SW, Seattle, WA 98116
or
to such other address as either Party may from time to time notify
the other.
Indemnification
11.Except
to the extent paid in settlement from any applicable insurance
policies, and to extent permitted by applicable law, each Party
agrees to indemnify and hold harmless the other Party, and its
respective affiliates, officers, agents, employees, and permitted
successors and assigns against any and all claims, losses, damages,
liabilities, penalties, punitive damages, expenses, reasonable
legal fees and. costs of any kind or amount whatsoever, which
result from or arise out of any act or omission of the indemnifying
party that the other Party, its respective affiliates, officers,
agents, employees, and permitted successors and assigns that occurs
in connection with this Agreement were unaware of.
Confidentiality
12.
The terms of this agreement shall remain confidential and not
revealed by the parties any other person or entity without the
agreement of both parties.
Modification
of Agreement
13.
Any amendment or modification ofthis Agreement or additional
obligation assumed b either Party in connection with this Agreement
will only be binding if evidenced in writing signed by both Parties
or an authorized representative of each Party.
Time
of the Essence
14,.
Time is of the essence in this Agreement. No extension Of variation
of this Agreement will operate as a waiver of this
provision.
Assignment
15.
Neither Party will voluntarily, or by operation of law, assign or
otherwise transfer its obligations under this Agreement without the
prior written consent of the other Party.
Entire
Agreement
16. It
is agreed that there is no representation, warranty, collateral
agreement or condition affecting this Agreement except as expressly
provided in this Agreement.
Enurement
17.
This Agreement will ensure to the benefit of and be binding on the
Parties and their respective heirs, executors, administrators and
permitted successors and assigns.
respective heirs,
executors, admjnistrators ·and permitted successors and
assigns.
TitlesIHeadings
18.
Headings are inserted for the convenience of the Parties only and
are not to be considered when interpreting this
Agreement.
Gender
19.
Words in the ·singular mean and include the plural and vice
versa. Words in the masculine mean and include the feminine and
vice versa.
Governing
Law
20.
This Agreement will be governed by and constructed in accordance
with the laws of e State of Georgia in the United States and venue
for any action involving this agreement shall be in the County in
which the Company is situated in the State of Georgia. In e event
of a dispute the first step towards a resolution will be to
implement the services of a qualified mediator for which the cost
of said services will be borne by the Company. If one mediator
should fail to facilitate reconciliation of the dispute, then three
qualified mediators will be engaged and the fees for all three will
be borne equally by the parties.
Severability
21. In
the event that any of the provisions of this Agreement are held to
be invalid or unenforceable in whole or in part, all other
provisions will nevertheless continue to valid and enforceable with
the invalid or unenforceable parts severed from the remainder
ofthis Agreement.
Waiver
22. The
waiver by either Party of a breach, default, delay or omission of
any of the provisions of this Agreement by the other Party will not
be construed as a waiver of any subsequent breach of the same or
other provisions.
|
01/22/2020
|
/s/ Gene S. Cartwright
|
|
Date
|
Gene
S. Cartwright, CEO
|
|
|
Guided
Therapeutics, Inc
|
|
01/22/2020
|
/s/ Richard Blumberg
|
|
Date
|
Richard
Blumberg
|
|
|
B&B,
LLC
|
Exhibit 10.58
SECURITIES
PURCHASE AGREEMENT
This
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of March
31, 2020, by and between GUIDED THERAPEUTICS, INC., a Delaware
corporation, with headquarters located at 5835 Peachtree Comers
East, Suite D, Norcross, Georgia 30092 (the "Company"), and AUCTUS
FUND, LLC, a Delaware limited liability company, with its address
at 545 Boylston Street, 2nd Floor, Boston, MA 02116 (the
"Buyer").
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement
in reliance upon the exemption from securities registration
afforded by the rules and regulations as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");
B.
Buyer desires to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement the
12% convertible note of the Company, in the form attached hereto as
Exhibit A, in the aggregate principal amount of US$1l2,750.00
(together with any note(s) issued in replacement thereof or as a
dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the "Note"), convertible into shares of
common stock, $0.001 par value per share, of the Company (the
"Common Stock"), upon the terms and subject to the limitations and
conditions set forth in such Note.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in
this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto;
and
NOW
THEREFORE, the Company and the Buyer severally (and not jointly)
hereby agree as follows:
1.
PURCHASE AND SALE OF NOTE.
a.
Purchase of Note. On the Closing Date (as defined below), the
Company shall issue and sell to the Buyer and the Buyer agrees to
purchase from the Company such principal amount of Note as is set
forth immediately below the Buyer's name on the signature pages
hereto. In connection with the issuance of the Note, the Company
shall issue a common stock purchase warrant to Buyer to purchase
250,000 shares of the Company's common stock (the "Warrant") as a
commitment fee upon the terms and subject to the limitations and
conditions set forth in such Warrant.
b.
Form of Payment. On the Closing Date (as defined below), (i) the
Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the "Purchase Price")
by wire transfer of immediately available funds to the Company, in
accordance with the Company's written wiring instructions, against
delivery of the Note in the principal amount equal to the Purchase
Price as is set forth immediately below the Buyer' s name on the
signature pages hereto, and (ii) the Company shall deliver such
duly executed Note and Warrant on behalf of the Company, to the
Buyer, against delivery of such Purchase Price.
c.
Closing Date. Subject to the satisfaction (or written waiver) of
the conditions thereto set forth in Section 7 and Section 8 below,
the date and time of the issuance and sale of the Note pursuant to
this Agreement (the "Closing Date") shall be 12:00 noon, Eastern
Standard Time on or about March 31, 2020, or such other mutually
agreed upon time. The closing of the transactions contemplated by
this Agreement (the "Closing") shall occur on the Closing Date at
such location as may be agreed to by the parties.
2.
REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Company that:
a.
Investment Purpose. As of the date hereof, the Buyer is purchasing
the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note (including, without limitation,
such additional shares of Common Stock, if any, as are issuable (i)
on account of interest on the Note (ii) as a result of the events
described in Sections 1.3 and 1.4(g) of the Note or (iii) in
payment of the Standard Liquidated Damages Amount (as defined in
Section 2(t) below) pursuant to this Agreement, such shares of
Common Stock being collectively referred to herein as the
"Conversion Shares" and, collectively with the Note, Warrant, and
the shares of Common Stock issuable upon exercise of the Warrant,
the "Securities") for its own account and not with a present view
towards the public sale or distribution thereof, except pursuant to
sales registered or exempted from registration under the 1933 Act;
provided, however, that by making the representations herein, the
Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933
Act.
b.
Accredited Investor Status. The Buyer is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D (an
"Accredited Investor").
c. Reliance on Exemptions. The Buyer understands
that the Securities are being offered and sold to
it
in reliance upon specific exemptions
from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine
the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d.
Information. The Buyer and its advisors, if any, have been, and for
so long as the Note remains outstanding will continue to be,
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by the Buyer or
its advisors. The Buyer and its advisors, if any, have been, and
for so long as the Note remains outstanding will continue to be,
afforded the opportunity to ask questions of the Company.
Notwithstanding the foregoing, the Company has not disclosed to the
Buyer any material nonpublic information and will not disclose such
information unless such information is disclosed to the public
prior to or promptly following such disclosure to the Buyer.
Neither such inquiries nor any other due diligence investigation
conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The
Buyer understands that its investment in the Securities involves a
significant degree of risk. The Buyer is not aware of any facts
that may constitute a breach of any of the Company's
representations and warranties made herein.
e.
Governmental Review. The Buyer understands that no United States
federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of
the Securities.
f.
Transfer or Re-sale. The Buyer understands that (i) the sale or
re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the
Securities may not be transferred unless (a) the Securities are
sold pursuant to an effective registration statement under the 1933
Act, (b) the Buyer shall have delivered to the Company, at the cost
of the Company, an opinion of counsel that shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption
from such registration, which opinion shall be accepted by the
Company, (c) the Securities are sold or transferred to an
"affiliate" (as defined in Rule 144 promulgated under the 1933 Act
(or a successor rule) ("Rule 144")) of the Buyer who agrees to sell
or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, (d) the Securities
are sold pursuant to Rule 144, or (e) the Securities are sold
pursuant to Regulation S under the 1933 Act (or a successor rule)
("Regulation S"), and the Buyer shall have delivered to the
Company, at the cost of the Company, an opinion of counsel that
shall be in form, substance and scope customary for opinions of
counsel in corporate transactions, which opinion shall be accepted
by the Company; (ii) any sale of such Securities made in reliance
on Rille 144 may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any re-sale of
such Securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the
rules and regulations of the SEC thereunder;and (iii) neither the
Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or
to comply with the terms and conditions of any exemption thereunder
(in each case). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other
lending arrangement. In the event that the Company does not accept
the opinion of counsel provided by the Buyer with respect to the
transfer of Securities pursuant to an exemption from registration,
such as Rule 144 or Regulation S, within three (3) business days of
delivery of the opinion to the Company, the Company shall pay to
the Buyer liquidated damages of five percent (5%) of the
outstanding amount of the Note per day plus accrued and unpaid
interest on the Note, prorated for partial months, in cash or
shares at the option of the Buyer ("Standard Liquidated Damages
Amount"). If the Buyer elects to be pay the Standard Liquidated
Damages Amount in shares of Common Stock, such shares shall be
issued at the Conversion Price (as defined in the Note) at the time
of payment.
g.
Legends. The Buyer understands that the Note and, until such time
as the Conversion Shares have been registered under the 1933 Act
may be sold pursuant to Rule 144 or Regulation S without any
restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares may bear a
restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the
certificates for such Securities):
"NEITHER THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY TIDS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN
OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER),
IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (U) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
The
legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security
upon which it is stamped, if, unless otherwise required by
applicable state securities laws, (a) such Security is registered
for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 or
Regulation S without any restriction as to the number of securities
as of a particular date that can then be immediately sold, or (b)
such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under
the 1933 Act, which opinion shall be accepted by the Company so
that the sale or transfer is effected. The Buyer agrees to sell all
Securities, including those represented by a certificate(s) from
which the legend has been removed, in compliance with applicable
prospectus delivery requirements, if any. In the event that the
Company does not accept the opinion of counsel provided by the
Buyer with respect to the transfer of Securities pursuant to an
exemption from registration, such as Rule 144 or Regulation S, at
the Deadline, it will be considered an Event of Default pursuant to
Section 3.2 of the Note.
h.
Authorization; Enforcement. This Agreement has been duly and
validly authorized. This Agreement has been duly executed and
delivered on behalf of the Buyer, and this Agreement constitutes a
valid and binding agreement of the Buyer enforceable in accordance
with its terms.
I.
Residency. The Buyer is a resident of the jurisdiction set forth in
the preamble.
3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer that:
a.
Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, with full power and
authority (corporate and other) to own, lease, use and operate its
properties and to carry on its business as and where now owned,
leased, used, operated and conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which its
ownership or use of property or the nature of the business
conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect. "Material Adverse Effect" means any
material adverse effect on the business, operations, assets,
financial condition or prospects of the Company or its
Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be
entered into in connection herewith. "Subsidiaries" means any
corporation or other organization, whether incorporated or
unincorporated, in which the Company owns, directly or indirectly,
any equity or other ownership interest.
b.
Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this
Agreement, the Note and to consummate the transactions contemplated
hereby and thereby and to issue the Securities, in accordance with
the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Note by the Company and the consummation by it
of the transactions contemplated hereby and thereby (including
without limitation, the issuance of the Note and the issuance and
reservation for issuance of the Conversion Shares issuable upon
conversion or exercise thereof) have been duly authorized by the
Company's Board of Directors and no further consent or
authorization of the Company, its Board of Directors, or its
shareholders is required, (iii) this Agreement has been duly
executed and delivered by the Company by its authorized
representative, and such authorized representative is the true and
official representative with authority to sign this Agreement and
the other documents executed in connection herewith and bind the
Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such
instruments will constitute, a legal, valid and binding obligation
of the Company enforceable against the Company in accordance with
its terms.
c.
Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of: (i) 3,000,000,000 shares of Common
Stock, of which approximately 11,308,191 shares are issued and
outstanding; (ii) 9,000 shares of Series C preferred stock, of
which 300,000 are issued and outstanding, (iii) 20,300 shares of
Series Cl preferred stock, of which 1,000 are issued and
outstanding, and (iv) 5,000,000 shares of C2 preferred stock, of
which 3,300 are issued and outstanding. Except as disclosed in the
SEC Documents, no shares are reserved for issuance pursuant to the
Company's stock option plans, no shares are reserved for issuance
pursuant to securities (other than the Note and any other
convertible promissory note issued to the Buyer) exercisable for,
or convertible into or exchangeable for shares of Common Stock and
58,187,863 shares are reserved for issuance upon conversion of the
Note. All of such outstanding shares of capital stock are, or upon
issuance will be, duly authorized, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company are
subject to preemptive rights or any other similar rights of the
shareholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as
disclosed in the SEC Documents, as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip,
rights to subscribe for, puts, calls, rights of first refusal,
agreements, understandings, claims or other commitments or rights
of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of
the Company or any of its Subsidiaries, or arrangements by which
the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of
its Subsidiaries, (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933
Act and (iii) there are no anti-dilution or price adjustment
provisions contained in any security issued by the Company (or in
any agreement providing rights to security holders) that will be
triggered by the issuance of the Note or the Conversion Shares. The
Company has filed in its SEC Documents true and correct copies of
the Company's Certificate of Incorporation as in effect on the date
hereof ("Certificate of Incorporation"), the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect
thereto. The Company shall provide the Buyer with a written update
of this representation signed by the Company's Chief Executive on
behalf of the Company as of the Closing Date.
d.
Issuance of Shares. The issuance of the Note is duly authorized
and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and free from
all preemptive or similar rights, taxes, liens, charges and other
encumbrances with respect to the issue thereof. The Conversion
Shares are duly authorized and reserved for issuance and, upon
conversion of the Note in accordance with its respective terms,
will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances with respect to the
issue thereof and shall not be subject to preemptive rights or
other similar rights of shareholders of the Company and will not
impose personal liability upon the holder thereof.
e.
Acknowledgment of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock
upon the issuance of the Conversion Shares upon conversion of the
Note. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Note in accordance with
this Agreement, the Note is absolute and unconditional regardless
of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
f.
No Conflicts. The execution, delivery and performance of this
Agreement and the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for
issuance of the Conversion Shares) will not (i) conflict with or
result in a violation of any provision of the Certificate of
Incorporation or By-laws, or (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or
any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected (except for
such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor
any of its Subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under,
and neither the Company nor any of its Subsidiaries has taken any
action or failed to take any action that would give to others any
rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any
of its Subsidiaries is a party or by which any property or assets
of the Company or any of its Subsidiaries is bound or affected,
except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the
Company and its Subsidiaries, if any, are not being conducted, and
shall not be conducted so long as the Buyer owns any of the
Securities, in violation of any law, ordinance or regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or
registration with, any court, governmental agency, regulatory
agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its
obligations under this Agreement, the Note in accordance with the
terms hereof or thereof or to issue and sell the Note in accordance
with the terms hereof and to issue the Conversion Shares upon
conversion of the Note. All consents, authorizations, orders,
filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected
on or prior to the date hereof. The Company is not in violation of
the listing requirements of the OTC Pink (the "OTC Pink"), the
OTCQB or any similar quotation system, and does not reasonably
anticipate that the Common Stock will be delisted by the OTC Pink,
the OTCQB or any similar quotation system, in the foreseeable
future nor are the Company's securities "chilled" by DTC. The
Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the
foregoing.
g.
SEC Documents;Financial Statements. On or before February 10, 2020,
the Company will have filed all reports, schedules, forms,
statements and other documents required to be filed by it with the
SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by
reference therein, being hereinafter referred to herein as the "SEC
Documents"). The Company has delivered to the Buyer true and
complete copies of the SEC Documents, except for such exhibits and
incorporated documents. As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the statements
made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements
as have been amended or updated in subsequent filings prior the
date hereof). As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting
principles, consistently applied, during the periods involved and
fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except
as set forth in the financial statements of the Company included in
the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to September 30, 2019, and (ii)
obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally
accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the
Company. The Company is subject to the reporting requirements of
the 1934 Act For the avoidance of doubt, filing of the documents
required in this Section 3(g) via the SEC's Electronic Data
Gathering, Analysis, and Retrieval system ("EDGAR") shall satisfy
all delivery requirements of this Section 3(g).
h.
Absence of Certain Changes. Since September 30, 2019, there has
been no material adverse change and no material adverse development
in the assets, liabilities, business, properties, operations,
financial condition, results of operations, prospects or 1934 Act
reporting status of the Company or any of its
Subsidiaries.
i.
Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or,
to the knowledge of the Company or any of its Subsidiaries,
threatened against or affecting the Company or any of its
Subsidiaries, or their officers or directors in their capacity as
such, that could have a Material Adverse Effect Schedule 3(i)
contains a complete list and summary description of any pending or,
to the knowledge of the Company, threatened proceeding against or
affecting the Company or any of its Subsidiaries, without regard to
whether it would have a Material Adverse Effect The Company and its
Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing.
j.
Patents, Copyrights, etc. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how,
trade secrets, trademarks, trademark applications, service marks,
service names, trade names and copyrights ("Intellectual Property")
necessary to enable it to conduct its business as now operated
(and, as presently contemplated to be operated in the future).
Except as disclosed in the SEC Documents, there is no claim or
action by any person pertaining to, or proceeding pending, or to
the Company's knowledge threatened, which challenges the right of
the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now
operated (and, as presently contemplated to be operated in the
future); to the best of the Company's knowledge, the Company's or
its Subsidiaries' current and intended products, services and
processes do not infringe on any Intellectual Property or other
rights held by any person; and the Company is unaware of any facts
or circumstances which might give rise to any of the foregoing. The
Company and each of its Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of their
Intellectual Property.
k.
No Materially Adverse Contracts, Etc. Neither the Company nor any
of its Subsidiaries is subject to any charter, corporate or other
legal restriction, or any judgment, decree, order, rule or
regulation which in the judgment of the Company's officers has or
is expected in the future to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse
Effect.
l.. Tax
Status. The Company and each of its Subsidiaries has made or filed
all federal, state and foreign income and all other tax returns,
reports and declarations required by any jurisdiction to which it
is subject (unless and only to the extent that the Company and each
of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being
contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for
any such claim. The Company has not executed a waiver with respect
to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. None of the
Company's tax returns is presently being audited by any taxing
authority.
m.
Certain Transactions. Except for arm's length transactions pursuant
to which the Company or any of its Subsidiaries makes payments in
the ordinary course of business upon terms no less favorable than
the Company or any of its Subsidiaries could obtain from third
parties and other than the grant of stock options disclosed on
Schedule 3(c), none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or
any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer,
director, trustee or partner.
n.
Disclosure. All information relating to or concerning the Company
or any of its Subsidiaries set forth in this Agreement and provided
to the Buyer pursuant to Section 2( d) hereof and otherwise in
connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has
occurred or exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by
the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports
filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933
Act).
o.
Acknowledgment Regarding Buyer' Purchase of Securities. The Company
acknowledges and agrees that the Buyer is acting solely in the
capacity of arm's length purchasers with respect to this Agreement
and the transactions contemplated hereby. The Company further
acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any
statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer' purchase of the Securities.
The Company further represents to the Buyer that the Company's
decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its
representatives.
p.
No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or
solicited any offers to buy any security under circumstances that
would require registration under the 1933 Act of the issuance of
the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the
Company's securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its
securities.
q.
No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, transaction
fees or similar payments relating to this Agreement or the
transactions contemplated hereby.
r.
Permits; Compliance. The Company and each of its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its
properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), and there is no
action pending or, to the knowledge of the Company, threatened
regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict
with, or in default or violation of, any of the Company Permits,
except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Since September 30, 2019,
neither the Company nor any of its Subsidiaries has received any
notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to
possible conflicts, defaults or violations, which conflicts,
defaults or violations would not have a Material Adverse
Effect.
s.
Environmental Matters.
(i)
There are, to the Company's knowledge, with respect to the Company
or any of its Subsidiaries or any predecessor of the Company, no
past or present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions,
activities, circumstances, conditions, events, incidents, or
contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither the
Company nor any of its Subsidiaries has received any notice with
respect to any of the foregoing, nor is any action pending or, to
the Company's knowledge, threatened in connection with any of the
foregoing. The term "Environmental Laws" means all federal, state,
local or foreign laws relating to pollution or protection of human
health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals,
pollutants contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
(ii)
Other than those that are or were stored, used or disposed of in
compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or
used by the Company or any of its Subsidiaries, and no Hazardous
Materials were released on or about any real property previously
owned, leased or used by the Company or any of its Subsidiaries
during the period the property was owned, leased or used by the
Company or any of its Subsidiaries, except in the normal course of
the Company's or any of its Subsidiaries' business.
(iii)
There are no underground storage tanks on or under any real
property owned, leased or used by the Company or any of its
Subsidiaries that are not in compliance with applicable
law.
t.
Title to Property. Except as disclosed in the SEC Documents the
Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all
personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of
all liens, encumbrances and defects or such as would not have a
Material Adverse Effect. Any real property and facilities held
under lease by the Company and its Subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions
as would not have a Material Adverse Effect.
u.
Internal Accounting Controls. Except as disclosed in the SEC
Documents the Company and each of its Subsidiaries maintain a
system of internal accounting controls sufficient, in the judgment
of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting
principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any
differences.
v.
Foreign Corrupt Practices. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any Subsidiary has, in
the course of his actions for, or on behalf of, the Company, used
any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political
activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any
bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or
employee.
w.
Solvency. The Company (after giving effect to the transactions
contemplated by this Agreement) is solvent (i.e., its assets have a
fair market value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute
and matured) and currently the Company has no information that
would lead it to reasonably conclude that the Company would not,
after giving effect to the transaction contemplated by this
Agreement, have the ability to, nor does it intend to take any
action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with
respect to its most recent fiscal year end and, after giving effect
to the transactions contemplated by this Agreement, does not
anticipate or know of any basis upon which its auditors might issue
a qualified opinion in respect of its current fiscal year. For the
avoidance of doubt any disclosure of the Borrower's ability to
continue as a "going concern" shall not, by itself, be a violation
of this Section 3(w).
x.
No Investment Company. The Company is not, and upon the issuance
and sale of the Securities as contemplated by this Agreement will
not be an "investment company" required to be registered under the
Investment Company Act of 1940 (an "Investment Company"). The
Company is not controlled by an Investment Company.
y.
Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes
to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not have
a Material Adverse Effect. Upon written request the Company will
provide to the Buyer true and correct copies of all policies
relating to directors' and officers' liability coverage, errors and
omissions coverage, and commercial general liability
coverage.
z.
Bad Actor. No officer or director of the Company would be
disqualified under Rule 506( d) of the Securities Act as amended on
the basis of being a "bad actor" as that term is established in the
September 19, 2013 Small Entity Compliance Guide published by the
SEC.
aa.
Shell Status. The Company represents that it is not a "shell"
issuer and has never been a "shell" issuer, or that if it
previously has been a "shell" issuer, that at least twelve (12)
months have passed since the Company has reported Form 10 type
information indicating that it is no longer a "shell" issuer.
Further, the Company will instruct its counsel to either (i) write
a 144-3(a)(9) opinion to allow for salability of the Conversion
Shares or (ii) accept such opinion from Holder's
counsel.
bb.
No-Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company or any of
its Subsidiaries and an unconsolidated or other off balance sheet
entity that is required to be disclosed by the Company in its 1934
Act filings and is not so disclosed or that otherwise could be
reasonably likely to have a Material Adverse Effect.
cc.
Manipulation of Price. The Company has not, and to its knowledge no
one acting on its behalf has: (i) taken, directly or indirectly,
any action designed to cause or to result, or that could reasonably
be expected to cause or result, in the stabilization or
manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting
purchases of, any of the Securities, or (iii) paid or agreed to pay
to any person any compensation for soliciting another to purchase
any other securities of the Company.
dd.
Sarbanes-Oxley Act. The Company and each Subsidiary is in material
compliance with all applicable requirements of the Sarbanes-Oxley
Act of 2002 that are effective as of the date hereof, and all
applicable rules and regulations promulgated by the SEC thereunder
that are effective as of the date hereof.
ee.
Employee Relations. Neither the Company nor any of its Subsidiaries
is a party to any collective bargaining agreement or employs any
member of a union. The Company believes that its and its
Subsidiaries' relations with their respective employees are good.
No executive officer (as defined in Rule 501(£) promulgated
under the 1933 Act) or other key employee of the Company or any of
its Subsidiaries has notified the Company or any such Subsidiary
that such officer intends to leave the Company or any such
Subsidiary or otherwise terminate such officer's employment with
the Company or any such Subsidiary. To the knowledge of the
Company, no executive officer or other key employee of the Company
or any of its Subsidiaries is, or is now expected to be, in
violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such
executive officer or other key employee (as the case may be) does
not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all federal, state, local and
foreign laws and regulations respecting labor, employment and
employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in
compliance would not, either individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect. ff.
Breach of Representations and Warranties by the Company. The
Company agrees that if the Company breaches any of the
representations or warranties set forth in this Section 3, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement and it being considered an Event of Default under
Section 3.5 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Company, until such breach is cured. If
the Company elects to pay the Standard Liquidated Damages Amounts
in shares of Common Stock, such shares shall be issued at the
Conversion Price at the time of payment.
4.
COVENANTS.
a.
Best Efforts. The parties shall use their commercially reasonable
best efforts to satisfy timely each of the conditions described in
Section 7 and 8 of this Agreement.
b.
Form D; Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to
provide a copy thereof to the Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as
the Company shall reasonably determine is necessary to qualify the
Securities for sale to the Buyer at the applicable closing pursuant
to this Agreement under applicable securities or "blue sky" laws of
the states of the United States (or to obtain an exemption from
such qualification), and shall provide evidence of any such action
so taken to the Buyer on or prior to the Closing Date.
c.
Use of Proceeds. The Company shall use the proceeds from the sale
of the Note for working capital and other general corporate
purposes and shall not, directly or indirectly, use such proceeds
for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with
its currently existing direct or indirect
Subsidiaries).
d.
Right of First Refusal. Unless it shall have first delivered to the
Buyer, at least seventy two (72) hours prior to the closing of such
Future Offering (as defined herein), written notice describing the
proposed Future Offering, including the terms and conditions
thereof, and providing the Buyer an option during the seventy two
(72) hour period following delivery of such notice to purchase the
securities being offered in the Future Offering on the same terms
as contemplated by such Future Offering (the limitations referred
to in this sentence and the preceding sentence are collectively
referred to as the "Right of First Refusal") (and subject to the
exceptions described below), the Company will not conduct any
equity financing (including debt with an equity component) ("Future
Offerings") during the period beginning on the Closing Date and
ending twelve (12) months following the Closing Date. In the event
the terms and conditions of a proposed Future Offering are amended
in any respect after delivery of the notice to the Buyer concerning
the proposed Future Offering, the Company shall deliver a new
notice to the Buyer describing the amended terms and conditions of
the proposed Future Offering and the Buyer thereafter shall have an
option during the seventy two (72) hour period following delivery
of such new notice to purchase its pro rata share of the securities
being offered on the same terms as contemplated by such proposed
Future Offering, as amended. The foregoing sentence shall apply to
successive amendments to the terms and conditions of any proposed
Future Offering. The Right of First Refusal shall not apply to any
transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous
offering pursuant to Rule 415 under the 1933 Act), (ii) issuances
to employees, officers, directors, contractors, consultants or
other advisors approved by the Board, (iii) issuances to strategic
partners or other parties in connection with a commercial
relationship, or providing the Company with equipment leases, real
property leases or similar transactions approved by the Board (iv)
issuances of securities as consideration for a merger,
consolidation or purchase of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of
which is not to raise equity capital), or in connection with the
disposition or acquisition of a business, product or license by the
Company. The Right of First Refusal also shall not apply to the
issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of
the date hereof or to the grant of additional options or warrants,
or the issuance of additional securities, under any Company stock
option or restricted stock plan approved by the shareholders of the
Company.
e.
Expenses. The Company shall reimburse Buyer for any and all
expenses incurred by them in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith
("Documents"), including, without limitation, reasonable attorneys'
and consultants' fees and expenses, transfer agent fees, fees for
stock quotation services, fees relating to any amendments or
modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions
of counsel, escrow fees, and costs of restructuring the
transactions contemplated by the Documents. When possible, the
Company must pay these fees directly, including, but not limited
to, any and all wire fees, otherwise the Company must make
immediate payment for reimbursement to the Buyer for all fees and
expenses immediately upon written notice by the Buyer or the
submission of an invoice by the Buyer. At Closing, the Company's
initial obligation with respect to this transaction is to reimburse
Buyer's legal expenses shall be $2,750.00 plus the cost of wire
fees.
f.
Financial Information. The Company agrees to send or make available
the following reports to the Buyer until the Buyer transfers,
assigns, or sells all of the Securities:
(i)
within ten (10) days after the filing with the SEC, a copy of its
Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases issued by the Company or any
of its Subsidiaries;and (iii) contemporaneously with the making
available or giving to the shareholders of the Company, copies of
any notices or other information the Company makes available or
gives to such shareholders. For the avoidance of doubt, filing the
documents required in (i) above via EDGAR or releasing any
documents set forth in (ii) above via a recognized wire service
shall satisfy the delivery requirements of this Section
4(f).
g.
Listing. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and,
so long as the Buyer owns any of the Securities, shall maintain, so
long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable upon
conversion of the Note. The Company will obtain and, so long as the
Buyer owns any of the Securities, maintain the listing and trading
of its Common Stock on the OTC Pink, OTCQB or any equivalent
replacement exchange, the Nasdaq National Market (''Nasdaq''), the
Nasdaq SmallCap Market ("Nasdaq Small Cap"), the New York Stock
Exchange ("NYSE"), or the NYSE American and will comply in all
respects with the Company's reporting, filing and other obligations
under the bylaws or rules of the Financial Industry Regulatory
Authority ("FINRA") and such exchanges, as applicable. The Company
shall promptly provide to the Buyer copies of any material notices
it receives from the OTC Pink, OTCQB and any other exchanges or
quotation systems on which the Common Stock is then listed
regarding the continued eligibility of the Common Stock for listing
on such exchanges and quotation systems. The Company shall pay any
and all fees and expenses in connection with satisfying its
obligation under this Section 4(g).
h.
Corporate Existence. So long as the Buyer beneficially owns any
Note, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except
in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTC
Pink, OTCQB, Nasdaq, NasdaqSmallCap, NYSE or AMEX.
i.
No Integration. The Company shall not make any offers or sales of
any security (other than the Securities) under circumstances that
would require registration of the Securities being offered or sold
hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities
by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
j.
Failure to Comply with the 1934 Act. So long as the Buyer
beneficially owns the Note, the Company shall comply with the
reporting requirements of the 1934 Act; and the Company shall
continue to be subject to the reporting requirements of the 1934
Act.
k.
[Intentionally Omitted].
l.
Restriction on Activities. Commencing as of the date first above
written, and until the payment of the Note in full or full
conversion of the Note, the Company shall not, directly or
indirectly, without the Buyer' s prior written consent, which
consent shall not be unreasonably withheld: (a) change the nature
of its business; (b) sell, divest, acquire, change the structure of
any material assets other than in the ordinary course of business;
or (c) solicit any offers for, respond to any unsolicited offers
for, or conduct any negotiations with any other person or entity in
respect of any variable rate debt transactions (except with respect
to the Notes (as defined below» (i.e., transactions were the
conversion or exercise price of the security issued by the Company
varies based on the market price of the Common Stock), whether a
transaction similar to the one contemplated hereby or any other
investment (unless the proceeds are sufficient to repay the Notes
in the entirety pursuant to the provisions of the Notes and the
Company repays the Notes in the entirety within one (l) business
day of the closing of the variable rate debt transaction); or (d)
file any registration statements with the SEC (except with respect
to the Buyer).
m.
Legal Counsel Opinions. Upon the request of the Buyer from to time
to time, the Company shall be responsible (at its cost) for
promptly supplying to the Company's transfer agent and the Buyer a
customary legal opinion letter of its counsel (the "Legal Counsel
Opinion") to the effect that the sale of Conversion Shares by the
Buyer or its affiliates, successors and assigns is exempt from the
registration requirements of the 1933 Act pursuant to Rule 144
(provided the requirements of Rule 144 are satisfied and provided
the Conversion Shares are not then registered under the 1933 Act
for resale pursuant to an effective registration statement). Should
the Company's legal counsel fail for any reason to issue the Legal
Counsel Opinion, the Buyer may (at the Company's cost) secure
another legal counsel to issue the Legal Counsel Opinion, and the
Company will instruct its transfer agent to accept such
opinion.
n.
Par Value. If the closing bid price at any time the Note is
outstanding falls below $0.00 l, the Company shall cause the par
value of its Common Stock to be reduced to $0.0000 I or
less.
o.
Breach of Covenants. The Company agrees that if the Company
breaches any of the covenants set forth in this Section 4, and in
addition to any other remedies available to the Buyer pursuant to
this Agreement, it will be considered an Event of Default under
Section 3.4 of the Note, the Company shall pay to the Buyer the
Standard Liquidated Damages Amount in cash or in shares of Common
Stock at the option of the Buyer, until such breach is cured, or
with respect to Section 4( d) above, the Company shall pay to the
Buyer the Standard Liquidated Damages Amount in cash or shares of
Common Stock, at the option of the Buyer, upon each violation of
such provision. If the Company elects to pay the Standard
Liquidated Damages Amounts in shares of Common Stock, such shares
shall be issued at the Conversion Price at the time of
payment.
1. Transaction Expense Amount. Upon Closing, the
Company shall pay Ten Thousand and 00/100 United States Dollars (US$10,000.00) to Auctus
Fund Management, LLC ("Auctus Management") to cover the Holder's
due diligence, monitoring, and other transaction costs incurred for
services rendered in connection herewith (the "Transaction Expense
Amount"). The Transaction Expense Amount shall be offset against
the proceeds of the Note and shall be paid to Auctus Management
upon the execution hereof.
2.Transfer
Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent to issue certificates,
registered in the name of the Buyer or its nominee, for the
Conversion Shares in such amounts as specified from time to time by
the Buyer to the Company upon conversion of the Note in accordance
with the terms thereof (the "Irrevocable Transfer Agent
Instructions"). In the event that the Borrower proposes to replace
its transfer agent, the Borrower shall provide, prior to the
effective date of such replacement, a fully executed Irrevocable
Transfer Agent Instructions in a form as initially delivered
pursuant to the Purchase Agreement (including but not limited to
the provision to irrevocably reserve shares of Common Stock in the
Reserved Amount) signed by the successor transfer agent to Borrower
and the Borrower. Prior to registration of the Conversion Shares
under the 1933 Act or the date on which the Conversion Shares may
be sold pursuant to Rule 144 without any restriction as to the
number of Securities as of a particular date that can then be
immediately sold, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company
warrants that: (i) no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section, and stop
transfer instructions to give effect to Section 2(f) hereof (in the
case of the Conversion Shares, prior to registration of the
Conversion Shares under the 1933 Act or the date on which the
Conversion Shares may be sold pursuant to Rule 144 without any
restriction as to the number of Securities as of a particular date
that can then be immediately sold), will be given by the Company to
its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Note; (ii) it will
not direct its transfer agent not to transfer or delay, impair,
and/or hinder its transfer agent in transferring (or issuing)(
electronically or in certificated form) any certificate for
Conversion Shares to be issued to the Buyer upon conversion of or
otherwise pursuant to the Note as and when required by the Note and
this Agreement; and (iii) it will not fail to remove (or directs
its transfer agent not to remove or impairs, delays, and/or hinders
its transfer agent from removing) any restrictive legend (or to
withdraw any stop transfer instructions in respect thereof) on any
certificate for any Conversion Shares issued to the Buyer upon
conversion of or otherwise pursuant to the Note as and when
required by the Note and this Agreement. Nothing in this Section
shall affect in any way the Buyer's obligations and agreement set
forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon re-sale of the
Securities. If the Buyer provides the Company, at the cost of the
Company, with (i) an opinion of counsel in form, substance and
scope customary for opinions in comparable transactions, to the
effect that a public sale or transfer of such Securities may be
made without registration under the 1933 Act and such sale or
transfer is effected or (ii) the Buyer provides reasonable
assurances that the Securities can be sold pursuant to Rule 144,
the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates, free from restrictive legend, in such
name and in such denominations as specified by the Buyer. The
Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section may be inadequate and
agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyer shall be
entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer,
without the necessity of showing economic loss and without any bond
or other security being required.
7.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS TO SELL. The
obligation of the Company hereunder to issue and sell the Note to
the Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions
thereto, provided that these conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole
discretion:
a.
The Buyer shall have executed this Agreement and delivered the same
to the Company.
b.
The Buyer shall have delivered the Purchase Price in accordance
with Section 1 (b) above.
c.
The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date),
and the Buyer shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Buyer at or prior to the Closing Date.
d.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
8.
CONDITIONS PRECEDENT TO THE BUYER' S OBLIGATION TO PURCHASE. The
obligation of the Buyer hereunder to purchase the Note at the
Closing is subject to the satisfaction, at or before the Closing
Date of each of the following conditions, provided that these
conditions are for the Buyer's sole benefit and may be waived by
the Buyer at any time in its sole discretion:
a.
The Company shall have executed this Agreement and delivered the
same to the Buyer.
b.
The Company shall have delivered to the Buyer the duly executed
Note (in such denominations as the Buyer shall request) and in
accordance with Section 1 (b) above as well as the duly executed
Warrant.
c.
The Irrevocable Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyer, shall have
been delivered to and acknowledged in writing by the Company's
Transfer Agent.
d.
The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of
the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer
shall have received a certificate or certificates, executed by the
chief executive officer of the Company, dated as of the Closing
Date, to the foregoing effect and as to such other matters as may
be reasonably requested by the Buyer including, but not limited to
certificates with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating
to the transactions contemplated hereby.
e.
No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of
competent jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which prohibits the
consummation of any of the transactions contemplated by this
Agreement.
f.
No event shall have occurred which could reasonably be expected to
have a Material Adverse Effect on the Company including but not
limited to a change in the 1934 Act reporting status of the Company
or the failure of the Company to be timely in its 1934 Act
reporting obligations.
g.
The Conversion Shares shall have been authorized for quotation on
the OTC Pink, OTCQB or any similar quotation system and trading in
the Common Stock on the OTC Pink, OTCQB or any similar quotation
system shall not have been suspended by the SEC or the OTC Pink,
OTCQB or any similar quotation system.
h.
The Buyer shall have received an officer's certificate described
ill Section 3( c) above, dated as of the Closing Date.
9.
GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Nevada
without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the
transactions contemplated by this Agreement, the Note or any other
agreement, certificate, instrument or document contemplated hereby
shall be brought only in the state courts located in the
Commonwealth of Massachusetts or in the federal courts located in
the Commonwealth of Massachusetts. The parties to this Agreement
hereby irrevocably waive any objection to jurisdiction and venue of
any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon
forum non
conveniens. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR UNDER ANY
OTHER TRANSACTION DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY. The prevailing party shall be entitled to recover
from the other party its reasonable attorney's fees and costs. In
the event that any provision of this Agreement or any other
agreement delivered in connection herewith is invalid or
unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it
may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any such provision which may prove
invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process
and consents to process being served in any suit, action or
proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by law.
b.
Counterparts; Signatures by Facsimile. This Agreement may be
executed in one or more counterparts, each of which shall be deemed
an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party. This
Agreement, once executed by a party, may be delivered to the other
party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this
Agreement.
c.
Construction; Headings. This Agreement shall be deemed to be
jointly drafted by the Company and the Buyer and shall not be
construed against any person as the drafter hereof. The headings of
this Agreement are for convenience of reference only and shall not
form part of, or affect the interpretation of, this
Agreement.
d.
Severability. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to
conform with such statute or rule of law. Any provision hereof
which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision
hereof.
e.
Entire Agreement; Amendments. This Agreement, the Note and the
instruments referenced herein contain the entire understanding of
the parties with respect to the matters covered herein and therein
and, except as specifically set forth herein or therein, neither
the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision
of this Agreement may be waived or amended other than by an
instrument in writing signed by the majority in interest of the
Buyer.
f.
Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or
(iv) transmitted by hand delivery, telegram, email, or facsimile,
addressed as set forth below or to such other address as such party
shall have specified most recently by written notice. Any notice or
other communication required or permitted to be given hereunder
shall be deemed effective (a) upon hand delivery or delivery by
email or facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If
to the Company, to:
Guided
Therapeutics, Inc.
5835
Peachtree Comers East,
Suite
D
Norcross,
Georgia 30092
Attn:
Gene Cartwright
E-mail:
info@guidedinc.com
If
to the Buyer:
Auctus
Fund, LLC
545
Boylston Street, 2nd Floor
Boston,
MA 021 16
Attn:
Lou Posner
Facsimile: (617)
532-6420
With a
copy to (which copy shall not constitute notice):
Chad
Friend, Esq., LL.M.
Anthony
L.G., PLLC
625 N.
Flagler Drive, Suite 600
West
Palm Beach, FL 33401
E-mail:
CFriend@AnthonyPLLC.com
Each
party shall provide notice to the other party of any change in
address.
g.
Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and
assigns. Neither the Company nor the Buyer shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other. Notwithstanding the foregoing,
subject to Section 2(f), the Buyer may assign its rights hereunder
to any person that purchases Securities in a private transaction
from the Buyer or to any of its "affiliates," as that term is
defined under the 1934 Act, without the consent of the
Company.
h.
Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
i.
Survival. The representations and warranties of the Company and the
agreements and covenants set forth in this Agreement shall survive
the closing hereunder not withstanding any due diligence
investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their
officers, directors, employees and agents for loss or damage
arising as a result of or related to any breach or alleged breach
by the Company of any of its representations, warranties and
covenants set forth in this Agreement or any of its covenants and
obligations under this Agreement, including advancement of expenses
as they are incurred.
j.
Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions
contemplated hereby.
k. No
Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied
against any party.
l
Remedies. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Buyer by
vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at
law for a breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Agreement, that the
Buyer shall be entitled, in addition to all other available
remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining,
preventing or curing any breach of this Agreement and to enforce
specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security
being required.
m.
Publicity. The Company, and the Buyer shall have the right to
review a reasonable period of time before issuance of any press
releases, SEC, OTCQB or FINRA filings, or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the
prior approval of the Buyer, to make any press release or SEC,
OTCQB (or other applicable trading market) or FINRA filings with
respect to such transactions as is required by applicable law and
regulations (although the Buyer shall be consulted by the Company
in connection with any such press release prior to its release and
shall be provided with a copy thereof and be given an opportunity
to comment thereon).
n.
Indemnification. In consideration of the Buyer's execution and
delivery of this Agreement and acquiring the Securities hereunder,
and in addition to all of the Company's other obligations under
this Agreement or the Note, the Company shall defend, protect,
indemnify and hold harmless the Buyer and its stockholders,
partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or
other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee
is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any Indemnitee as a
result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made
by the Company in this Agreement or the Note or any other
agreement, certificate, instrument or document contemplated hereby
or thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in this Agreement or the Note or any other
agreement, certificate, instrument or document contemplated hereby
or thereby or (c) any cause of action, suit or claim brought or
made against such Indemnitee by a third party (including for these
purposes a derivative action brought on behalf of the Company) and
arising out of or resulting from (i) the execution, delivery,
performance or enforcement of this Agreement or the Note or any
other agreement, certificate, instrument or document contemplated
hereby or thereby, (ii) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities, or (iii) the status of the Buyer or
holder of the Securities as an investor in the Company pursuant to
the transactions contemplated by this Agreement. To the extent that
the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
that is permissible under applicable law.
[signature
page follows]
IN
WITNESS THEREOF, the undersigned Buyer and the Company have caused
this agreement to be duly executed as of date first above
written.
GUIDED THERAPEUTICS, INC.
/s/
Gene S. Cartwright
Gene
S. Cartwright
Chef
Executive Officer
AUCTUS FUND, LLC
/s/
Lou Posner
Lou
Posner
Managing
Director
Exhibit
23.1
12900
Hall Road, Suite 500
Sterling
Heights, MI 48313-1153
Telephone 586-254-1040
Fax 586-254-1805
Web
www.uhy-us.com
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby consent to the incorporation by reference in the
Registration Statements on Form S-1 (No. 333-335613 and 333-22429)
and Form S-8 (No. 333-63758, 333-81326, 333-128082, 333-178261 and
333-183312) of Guided Therapeutics, Inc. and Subsidiary of our report
dated April 20, 2020, relating to the consolidated financial
statements, which appears in this Form 10-K for the year ended
December 31, 2019.
|
|
/s/
UHY LLP
|
|
|
UHY
LLP
|
|
|
Sterling Heights,
Michigan
|
|
|
April 20,
2020
|
|
|
|
Exhibit
31
Rule
13a-14(a)/15(d)-14(a) Certifications
I, Gene
Cartwright, certify that:
1.
I have reviewed
this annual report on
Form 10-K of Guided Therapeutics, Inc.;
2.
Based on my
knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period
covered by this report;
3.
Based on my
knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4.
The
registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f) for the registrant and
have:
(a)
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
(b)
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
(c)
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
(d)
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant ‘s internal control over financial
reporting.
5.
The
registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a)
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
(b)
Any fraud, whether
or not material, that involves management or other employees who
have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
April 17, 2020
|
/s/ Gene
Cartwright
Gene
CartwrightPresident, Chief Executive Officer and
Acting
Chief Financial Officer
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|
Exhibit
32
SECTION
1350 CERTIFICATION
In
connection with the Annual Report of Guided Therapeutics, Inc. (the
“Company”) on Form 10-K for the year ended December 31,
2019, as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Gene Cartwright,
President, Chief Executive Officer and Acting Chief Financial
Officer of the Company, certify, pursuant to 18
U.S.C. Sec. 1350, as adopted pursuant to Sec 906 of
the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
(1) the
Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) the
information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
Date:
April 17, 2020
/s/ Gene
Cartwright
Name:
Gene Cartwright
Title:
President, Chief Executive Officer and
Acting
Chief Financial Officer
