EXCHANGE AGREEMENT
Exhibit 10.56
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/ Xxxx X.
Xxxxxxxxxx
Name:
Xxxx X. Xxxxxxxxxx
Title: CEO-
-
Creditor:
By: /s/ Xxxxx
Xxxxxxx
Name:
Xxxxx Xxxxxx
Title:
Manager
