SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 31, 2017
(Exact Name of Registrant as Specified in Its Charter)
|(State of Incorporation)||
4 Science Park, New Haven, CT 06511
(Address of principal executive offices) (Zip Code)
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report date)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|☐||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|☐||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|☐||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|☐||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
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. ☐
|Item 1.01||Entry into a Material Definitive Agreement.|
On October 31, 2017, Precipio, Inc. (the Company ) entered into a Debt Settlement Agreement (the Settlement Agreement ) with certain of its accounts payable vendors (the Creditors) pursuant to which the Creditors agreed to a reduction of approximately $5.0 million in currently due vendor liabilities. The Company and the Creditors agreed to restructure these liabilities into approximately $2.5 million in secured, long-term vendor obligations with payments beginning in July 2018 and continuing over 48 months. In connection with the settlement, the Company agreed to issue to certain of the Creditors warrants (the Warrants) to purchase approximately 86,000 shares of the Companys common stock at an exercise price of $7.50 per share.
The Company also entered into a Security Agreement (the Security Agreement), dated October 31, 2017, with a collateral agent for the Creditors, pursuant to which the Company granted to the collateral agent, for the benefit of the Creditors, a security interest in certain property of the Company to secure its obligations under the Settlement Agreement.
The Warrants have a per share exercise price of $7.50, are exercisable on the date of issuance and will expire five years from the date of issuance. The Company does not plan to apply to list the Warrants on the NASDAQ Capital Market, any other national securities exchange or any other nationally recognized trading system.
The foregoing is only a brief description of the material terms of the Settlement Agreement, the Security Agreement and the Warrants, and does not purport to be a complete description of the rights and obligations of the parties thereunder, and is qualified in its entirety by reference to the Settlement Agreement, the Security Agreement and the form of Warrant that are filed as Exhibits 10.1, 10.2 and 4.1, respectively, to this Current Report on Form 8-K and incorporated by reference herein.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
|Item 3.02||Unregistered Sales of Equity Securities.|
The information disclosed in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
The issuance of the Warrants is exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder.
|Item 9.01||Financial Statements and Exhibits.|
|4.1||Form of Warrant|
|10.1||Debt Settlement Agreement, dated October 31, 2017, by and among Precipio, Inc., the Creditors and Collateral Services LLC|
|10.2||Security Agreement, dated October 31, 2017, by and between Precipio, Inc. and Collateral Services LLC, in its capacity as collateral agent for the Vendors (as defined therein)|
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
/s/ Ilan Danieli
|Title:||Chief Executive Officer|
Date: November 6, 2017
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT ). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR A SALE IN COMPLIANCE WITH RULE 144 UNDER THE ACT.
WARRANT TO PURCHASE [ ] SHARES OF COMMON STOCK
Warrant No.: 2017-[ ]
Date of Issuance: October [ ], 2017
VOID AFTER October [ ], 2022
T HIS C ERTIFIES T HAT , for value received, [ ], or permitted registered assigns (the Holder ), is entitled to subscribe for and purchase at the Exercise Price (defined below) from Precipio, Inc., a Delaware corporation (the Company ), up to [ ] shares of the common stock of the Company, par value $7.50 per share (the Common Stock ). This warrant is one of a series of warrants issued by the Company as of the date hereof (individually a Warrant ; collectively, Company Warrants ) pursuant to those certain settlement agreements between the Company and each of the Holders, each dated as of October, [ ], 2017 (each, a Settlement Agreement ).
1. Definitions . Capitalized terms used herein but not otherwise defined herein shall have their respective meanings as set forth in the Settlement Agreement. As used herein, the following terms shall have the following respective meanings:
(A) Eligible Market means any of the New York Stock Exchange, the NYSE Amex, The NASDAQ Global Market, The NASDAQ Global Select Market or The NASDAQ Capital Market.
(B) Exercise Period shall mean the period ending five years from the date hereof, unless sooner terminated as provided below.
(C) Exercise Price shall mean $7.50 per share, subject to adjustment pursuant to Section 4 below.
(D) Exercise Shares shall mean the shares of Common Stock issuable upon exercise of this Warrant.
(E) Fundamental Transaction means that the Company shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (iii) enter into an agreement with another Person pursuant to
which such Person agrees to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (iv) consummate a stock 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 the 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 purchase agreement or other business combination), (v) reorganize, recapitalize or reclassify its Common Stock, or (vi) any person or group (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.
(F) Parent Entity of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(G) Person means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
(H) Successor Entity means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction shall have been entered into.
(I) Trading Day shall mean (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then a day on which trading occurs on the OTC Bulletin Board (or any successor thereto), or (c) if trading does not occur on the OTC Bulletin Board (or any successor thereto), any Business Day.
(J) Trading Market shall mean the OTC Bulletin Board or any other Eligible Market, or any national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted.
2. Exercise of Warrant .
2.1 Exercise . The rights represented by this Warrant may be exercised in whole or in part at any time during the Exercise Period, by delivery of the following to the Company at its address set forth on the signature page hereto (or at such other address as it may designate by notice in writing to the Holder):
(A) An executed Notice of Exercise in the form attached hereto;
(B) Payment of the Exercise Price either (i) in cash or by check or (ii) pursuant to Section 2.2 below; and
(C) This Warrant.
Execution and delivery of the Notice of Exercise shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Exercise Shares, if any.
Certificates for shares purchased hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holders prime broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission system if the Company is a participant in such system, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within three business days from the delivery to the Company of the Notice of Exercise, surrender of this Warrant and payment of the aggregate Exercise Price as set forth above. This Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company.
The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.
Subject to the final sentence of this paragraph and to the extent permitted by law, the Companys obligations to issue and deliver Exercise Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or entity or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other person or entity of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person or entity, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Exercise Shares. The Holder shall, subject to the following proviso, have the right to pursue any remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Companys failure to timely deliver Exercise Shares upon exercise of this Warrant as required pursuant to the terms hereof; provided , however , that notwithstanding anything to the contrary in this Warrant or in the Settlement Agreements, if the Company is for any reason unable to deliver Exercise Shares upon exercise of this Warrant as required pursuant to the terms hereof, the Company shall have no obligation to pay to the Holder any cash or other consideration or otherwise net cash settle this Warrant.
Except for cash in lieu of fractional shares as provided in Section 5 , this Warrant may not be settled by the Company for cash to the Holder in lieu of Common Stock.
2.2 Net Exercise . If during the Exercise Period the fair market value of one share of the Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash or by check, the Holder may, at its election, effect a net exercise of this Warrant, in which event, if so effected, the Holder shall receive Exercise Shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company, together with the properly endorsed Notice of Exercise, in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:
|X =||Y (A B)|
X = the number of Exercise Shares to be issued to the Holder;
Y = the number of Exercise Shares with respect to which this Warrant is being exercised;
A = the Fair Market Value (as defined below) of one share of the Companys Common Stock (at the date of such calculation); and
B = Exercise Price (as adjusted to the date of such calculation).
For purposes of this Warrant, the Fair Market Value of one share of Common Stock shall mean (i) the average of the closing sales prices for the shares of Common Stock on The NASDAQ Global Market or other Eligible Market where the Common Stock is listed or traded as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales prices of such security) (collectively, Bloomberg ) for the ten (10) consecutive trading days immediately prior to the Exercise Date, or (ii) if an Eligible Market is not the principal Trading Market for the shares of Common Stock, the average of the reported sales prices reported by Bloomberg on the principal Trading Market for the Common Stock during the same period, or, if there is no sales price for such period, the last sales price reported by Bloomberg for such period, or (iii) if neither of the foregoing applies, the last sales price of such security in the over-the-counter market on the pink sheets or bulletin board for such security as reported by Bloomberg, or if no sales price is so reported for such security, the last bid price of such security as reported by Bloomberg or (iv) if fair market value cannot be calculated as of such date on any of the foregoing bases, the fair market value shall be as determined by the Board of Directors of the Company in the exercise of its good faith judgment.
2.3 Issuance Of New Warrants . Upon any partial exercise of this Warrant, the Company, at its expense, will forthwith and, in any event within five business days, issue and deliver to the Holder a new warrant or warrants of like tenor, registered in the name of the Holder, exercisable, in the aggregate, for the balance of the number of shares of Common Stock remaining available for purchase under this Warrant.
2.4 Payment Of Taxes And Expenses . The Company shall pay any recording, filing, stamp or similar tax which may be payable in respect of any transfer involved in the issuance of, and the preparation and delivery of certificates (if applicable) representing, (i) any Exercise Shares purchased upon exercise of this Warrant and/or (ii) new or replacement warrants in the Holders name or the name of any transferee of all or any portion of this Warrant; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance, delivery or registration of any certificates for Exercise Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Exercise Shares upon exercise hereof.
3. Covenants of the Company .
3.1 Covenants as to Exercise Shares . The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, the Company will use its commercially reasonable efforts to take such corporate action in compliance with applicable law as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.
3.2 Notices of Record Date and Certain Other Events . In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, the Company shall mail to the Holder, at least fifteen (15) days prior to the date on which any such record is to be taken for the purpose of such dividend or distribution, a notice specifying such date. In the event of any voluntary dissolution, liquidation or winding up of the Company, the Company shall mail to the Holder, at least fifteen (15) days prior to the date of the occurrence of any such event, a notice specifying such date. In the event the Company authorizes or approves, enters into any agreement contemplating, or solicits stockholder approval for any Fundamental Transaction, as defined in Section 6 herein, the Company shall mail to the Holder, at least fifteen (15) days prior to the date of the closing of such event, a notice specifying such date. Notwithstanding the foregoing, the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.
4. Adjustment of Exercise Price and Shares . The Exercise Price and number of Exercise Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 4 .
(A) If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock 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 clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.
(B) If the Company, at any time while this Warrant is outstanding, distributes to holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, Distributed Property ), then in each such case the Holder shall be entitled upon exercise of this Warrant for the purchase of any or all of the Exercise Shares, to receive the amount of Distributed Property which would have been payable to the Holder had such Holder been the holder of such Exercise Shares on the record date for the determination of stockholders entitled to such Distributed Property. The Company will at all times set aside in escrow and keep available for distribution to such holder upon exercise of this Warrant a portion of the Distributed Property to satisfy the distribution to which such Holder is entitled pursuant to the preceding sentence.
(C) Upon the occurrence of each adjustment pursuant to this Section 4 , the Company at its expense will, at the written request of the Holder, promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Exercise Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Companys transfer agent.
5. Fractional Shares . No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise 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 (a) 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 an Exercise Share by such fraction and (b) the number of Exercise Shares to be issued will be rounded down to the nearest whole share.
6. Fundamental Transactions . This Warrant shall terminate upon a Fundamental Transaction. The Company shall provide written notice to the Holder of a Fundamental Transaction at least ten days prior to the consummation thereof. Such notice shall contain the terms of such Fundamental Transaction.
7. No Stockholder Rights . Other than as provided in Section 3.2 or otherwise herein, this Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.
8. Transfer of Warrant . Subject to applicable laws and any restrictions on transfer set forth in the Settlement Agreement, this Warrant and all rights hereunder are transferable, by the Holder in person or by duly authorized attorney, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by Holder. The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company and its counsel. Any purported transfer of all or any portion of this Warrant in violation of the provisions of this Warrant shall be null and void.
9. Lost, Stolen, Mutilated or Destroyed Warrant . If this Warrant is lost, stolen, mutilated or destroyed, the Company may, 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. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone.
10. Notices, Etc . 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 facsimile to the facsimile number specified in writing by the recipient or by email if sent during normal business hours of the recipient on a Trading Day, if not, then on the next Trading Day, (c) the next Trading Day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent to the Company at the address listed on the signature page hereto and to Holder at the applicable address set forth on the applicable signature page to the Settlement Agreement or at such other address as the Company or Holder may designate by ten (10) days advance written notice to the other parties hereto.
11. Acceptance . Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.
12. Governing Law . This Warrant and all rights, obligations and liabilities hereunder shall be governed by, and construed in accordance with, the internal laws of the State of California, without giving effect to the principles of conflicts of law that would require the application of the laws of any other jurisdiction.
13. Amendment or Waiver . Any term of this Warrant may be amended or waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Company and the Holder. No waivers of any term, condition or provision of this Warrant, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
I N W ITNESS W HEREOF , the Company has caused this Warrant to be executed by its duly authorized officer as of the Date of Issuance set out above.
|Name: Ilan Danieli|
|Title: President and Chief Executive Officer|
S IGNATURE P AGE T O
NOTICE OF EXERCISE
TO: PRECIPIO, INC.
(1) The undersigned hereby elects to purchase shares of the common stock, par value $0.01 the Common Stock ), of Precipio, Inc. (the Company ) pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
[ ] The undersigned hereby elects to purchase shares of Common Stock of the Company pursuant to the terms of the net exercise provisions set forth in Section 2.2 of the attached Warrant, and shall tender payment of all applicable transfer taxes, if any.
(2) Please issue the certificate for shares of Common Stock in the name of:
SS# or EIN:
City, State Zip Code:
(3) If such number of shares shall not be all the shares purchasable upon the exercise of the Warrants evidenced by this Warrant, a new warrant certificate for the balance of such Warrants remaining unexercised shall be registered in the name of and delivered to:
SS# or EIN:
City, State Zip Code:
DEBT SETTLEMENT AGREEMENT
This Debt Settlement Agreement ( Agreement ) is effective as of October 31, 2017 and is executed and entered into by and among Precipio, Inc. (the Company ), the creditors of the Company now or hereafter signatory hereto (the Vendors ) and Collateral Services LLC.
WHEREAS , each Vendor has provided certain goods and/or services (the Services ) to the Company;
WHEREAS , as of the date hereof, each Vendor is owed (each such amount, an Outstanding Amount ) for such Services provided by such Vendor which have not been paid;
WHEREAS , as of the date hereof, no Vendor has received payment for any Outstanding Amount; and
WHEREAS , the Vendors and the Company have agreed that the Company shall pay the Vendors the amounts set forth herein in accordance with the terms of this Agreement in full satisfaction of such Services.
NOW THEREFORE , acknowledging that the above recitals are true and correct and incorporating as if fully set forth herein, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. SETTLEMENT . The parties hereto agree as follows:
(a) In full satisfaction of each Vendors Services, the Company covenants, agrees and promises to (a) pay to each Vendor, the amount set forth on such Vendors signature page hereto opposite the heading Settlement Amount (each such amount, a Settlement Amount ), and (b) issue to each Vendor, if applicable, a warrant in the form attached hereto as Exhibit A (each such warrant, a Warrant ) to purchase the number of shares of common stock of the Company set forth on such Vendors signature page hereto opposite the heading Warrant Amount.
(b) Each Settlement Amount shall be payable in forty-eight (48) equal monthly installments no later than the last day of each month beginning with the month ending July 31, 2018 and ending with the month ending June 30, 2022.
(c) For the avoidance of doubt, no payment in respect of any Outstanding Amount, Services or Settlement Amount shall be required until July 31, 2018.
(d) The Company may prepay the Settlement Amounts, on a pro rata basis, at any time. Any such prepayment shall be applied to the remaining monthly installments in respect of such Settlement Amount in reverse order of maturity.
(e) Upon payment in full of a Settlement Amount in accordance with the payment schedule set forth above, all claims by the Company against the applicable Vendor and by such Vendor against the Company shall be waived and released and the Company shall have no further obligation to such Vendor.
2. SECURITY . The Settlement Amounts shall be supported by a security interest granted to Collateral Services LLC, acting as collateral agent for the benefit of the Vendors (in such capacity, the Collateral Agent ), pursuant to a Security Agreement entered into on the date hereof by and between the Company and the Collateral Agent substantially in the form attached hereto as Exhibit B (the Security Agreement ).
3. WITHDRAWAL/RESERVATION OF RIGHT . The terms of this Agreement notwithstanding, following the occurrence of an Event of Default (as defined below), the Vendors shall have the right to, upon written notice to the Company within five (5) business days after such Event of Default, withdraw from this Agreement and shall be entitled to pursue, on an unsecured basis, an amount equal to the difference of (a) the full amount of the Outstanding Amount of such Vendor minus (b) the sum of (i) any portion of such Vendors Settlement Amount previously paid by the Company plus (ii) the number of warrant shares times (A) the closing price of the Companys common stock on the trading day prior to the Event of Default minus (B) $7.50.
4. DEFAULT . Each of the following shall constitute an Event of Default hereunder:
(a) The Companys failure to pay any installment of a Settlement Amount when due as required by Section 1 hereof which remains uncured after the twenty-day period following receipt of written notice of such failure by the Company.
(b) The Companys breach of any material covenant set out in the Security Agreement.
(c) The Company shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief for itself under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors, or the Company shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of the Company or of all or any part of the Companys assets, or the Company shall make any general assignment for the benefit of creditors, or shall admit in writing the Companys inability to pay its debts generally as they become due.
(d) A court of competent jurisdiction shall enter an order, judgment or decree approving a petition filed against the Company seeking any reorganization, dissolution or similar relief under any present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors, and such order, judgment or decree shall remain unvacated and unstayed for an aggregate of sixty (60) days (whether or not consecutive) from the first date of entry thereof; or any trustee, receiver or liquidator of the Company shall be appointed without the consent or acquiescence of the Company and such appointment shall remain unvacated and unstayed for an aggregate of sixty (60) days (whether or not consecutive).
(e) If at any time any representation or warranty made by the Company in this Agreement or in the Security Agreement shall be incorrect or misleading in any material respect.
5. WARRANTIES .
(a) Each party executing this Agreement represents and warrants that both it and the person signing on behalf of such party are duly authorized to execute the same, and that this Agreement constitutes the legal, valid and binding obligation of such party, enforceable against such party according to its terms.
(b) Each Vendor represents and warrants that it is the sole and exclusive legal and beneficial owner of its Outstanding Amount, free and clear of any security interests, agreements, restrictions, claims, liens, pledges, assessments and encumbrances of any kind or nature , and has the unrestricted power to settle such Outstanding Amount.
(c) Each Vendor (i) understands that neither its Warrant nor the common stock underlying its Warrant has been registered under the Securities Act of 1933, as amended (the Securities Act ), nor have either been registered pursuant to the provisions of the securities laws or other laws of any other applicable jurisdictions, in reliance on exemptions for private offerings contained in the laws of such jurisdictions, (ii) is an accredited investor as defined by the rules and regulations of the U.S. Securities and Exchange Commission pursuant to the Securities Act, (iii) is acquiring its Warrant for its own account for the purpose of investment, and not with a view to any resale or other distribution thereof in violation of the Securities Act, (iv) is a sophisticated investor with such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in its Warrant and that it is able to and must bear the economic risk of the investment in such Warrant for an indefinite period of time because such Warrant has not been registered under the Securities Act, and therefore cannot be offered or sold unless such Warrant is subsequently registered under the Securities Act or an exemption from such registration is available, (v) has had the opportunity to ask questions and obtain answers from management of the Company and has received information which such Vendor has reasonably requested, and (vi) understands the risks of an investment in the Companys securities, which risks are described in the Companys public securities filings.
6. COMPLETE AGREEMENT . This Agreement, together with the Security Agreement, is the complete agreement between the parties with respect to the settlement contemplated herein and supersedes all prior agreements and understandings with respect thereto. This Agreement may only be modified by a writing signed by the Company and the Vendors then holding more than fifty percent (50%) of the outstanding Settlement Amounts then outstanding (such Vendors, the Required Vendors ); provided that no such modification shall reduce or forgive the Settlement Amount payable to a Vendor or change the provisions of this Section 6 without the consent of each Vendor directly and adversely affected thereby.
7. NOTICES . All notices, requests, demands and other communications provided for hereunder shall be in writing (including e-mail communication) and mailed, sent via e-mail or delivered:
(a) If to the Company, at 4 Science Park, 3rd Floor, New Haven, Connecticut 06511, Attention: Ilan Danieli, e-mail: email@example.com or at such other address as shall be designated by the Company in a written notice to the other parties complying as to delivery with the terms of this Section 7, with a copy, which shall not constitute notice, to Goodwin Procter LLP, 620 Eighth Avenue, New York, New York 10018, Attention: Stephen Davis, e-mail: firstname.lastname@example.org.
(b) If to a Vendor, either (i) at the address set forth on such Vendors signature page hereto or at such other address as to which such Vendor may inform the other parties in writing in compliance with the terms of this Section 7 , (ii) to the Collateral Agent, who shall promptly forward such communication to the applicable Vendor in accordance with the preceding clause (i).
(c) If to Collateral Agent, at 515 Rockaway Avenue, Valley Stream, New York 11581, Attention: Barbara R. Mittman, e-mail: email@example.com, or at such other address as shall be designated by the Collateral Agent in a written notice to the other parties in compliance with the terms of this Section 7.
8. ACKNOWLEDGMENT . Each party hereto acknowledges that it has reviewed this Agreement in its entirety, has consulted such legal, tax or other advisors as it deems appropriate and understands and agrees to each of the provisions of this Agreement and further acknowledges that it has entered into this Agreement voluntarily.
9. APPLICABLE LAW; VENUE; NO JURY TRIAL . This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof for resolution of any dispute regarding, arising from, or in any way relating to this Agreement or the negotiations which gave rise to this Agreement. By executing this Agreement the parties hereto agree to waive any defense or argument based on lack of personal jurisdiction, inconvenient forum, or any other objection or argument against the exercise of jurisdiction by the State of New York over the issues and parties in this matter. 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, the Security Agreement or the transactions contemplated hereby or thereby.
10. NO ADVICE . Each party enters into this Agreement freely and voluntarily, and not upon any advice, statement or representation made by any other party hereto, by any agent or attorney of any other party hereto, or by any person in any way connected with any party hereto.
11. BINDING EFFECT; NO ASSIGNMENT . Each party has carefully read and fully understand the terms of this Agreement and voluntarily execute this Agreement. This Agreement shall be binding upon the parties hereto and shall inure to the benefit of the parties and their respective successors in interest. Notwithstanding the foregoing, the Company may not assign any of its rights or obligations hereunder without the written consent of the Required Vendors and no Vendor may assign its rights or obligations hereunder without the written
consent of the Company; any assignment or attempted assignment by any party hereto without the requisite consent shall be null and void. Notwithstanding the foregoing, the Company may assign its rights and obligations hereunder in connection with a sale of the business, whether through a merger, consolidation, transfer of all or substantially all of its assets, or in a similar transaction.
12. SEVERABILITY . If any clause or provision of this Agreement is determined to be illegal, invalid or unenforceable under any present or future law by the final judgment of a court of competent jurisdiction, the remainder of this Agreement will not be affected thereby. It is the intention of the parties that if any such provision is held to be invalid, illegal or unenforceable, there will be added in lieu thereof a provision as similar in terms to such provision as is possible, and that such added provision will be legal, valid and enforceable.
13. CONSTRUCTION . This Agreement shall be deemed to be the product of the joint drafting of the parties hereto and shall not be construed against any party. In the event an ambiguity or question of intent or interpretation arises, no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
14. COUNTERPARTS . This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.
15. NO THIRD PARTY BENEFICIARIES . This Agreement shall not confer any rights or remedies upon any person or entity other than the parties hereto.
16. AGENCY . The Collateral Agent shall have the rights, responsibilities and immunities set forth in Exhibit C hereto, the terms of which are incorporated by reference into this Agreement.
[ SIGNATURE PAGES FOLLOW ]
IN WITNESS WHEREOF , the parties hereto have duly executed this Agreement as of the day and year first above written.
|By:||/s/ Ilan Danieli|
|Name: Ilan Danieli|
|Title: President and Chief Executive Officer|
S IGNATURE P AGE T O
S ETTLEMENT A GREEMENT
|COLLATERAL SERVICES LLC|
|By:||/s/ Barbara R. Mittman|
|Name: Barbara R. Mittman|
|Title: Managing Member|
S IGNATURE P AGE TO
S ETTLEMENT A GREEMENT
|Name of Signatory:|
|Address for Notices:|
S IGNATURE P AGE TO
S ETTLEMENT A GREEMENT
E XHIBIT A
Form of Warrant
E XHIBIT B
E XHIBIT C
1. APPOINTMENT . The Vendors hereby designate Collateral Services LLC as collateral agent to act as specified herein and in this Agreement. Each Vendor shall be deemed to authorize the Collateral Agent to take such action on its behalf under the provisions of the Agreement or the Security Agreement and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder by or through its agents or employees.
2. NATURE OF DUTIES . The Collateral Agent shall have no duties or responsibilities except those expressly set forth in the Agreement and the Security Agreement. Neither the Collateral Agent nor any of its partners, members, shareholders, officers, directors, employees or agents shall be liable to the Vendors 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, bad faith or willful misconduct as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement or the Security Agreement a fiduciary relationship in respect of the Company or any Vendor; nothing in the Agreement or the Security Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of the Agreement or the Security Agreement except as expressly set forth herein and therein.
3. LACK OF RELIANCE ON THE COLLATERAL AGENT . Independently and without reliance upon the Collateral Agent, each Vendor, 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 the Companys obligations to such Vendor, the transactions contemplated by this Agreement and the Security Agreement, 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 (as defined in the Security Agreement) from time to time, and the Collateral Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Vendor 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 Collateral Agent shall not be responsible to the Company or any Vendor for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing of other persons delivered by the Collateral Agent in connection herewith, or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, priority or sufficiency of the Agreement, the Security Agreement, or for the financial condition of the Company 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 the Security Agreement, or the financial condition of the Company, or the value of any of the Collateral, or the existence or possible existence of any default or Event of Default under this Agreement.
4. CERTAIN RIGHTS OF THE COLLATERAL AGENT . The Collateral Agent shall have the right to take any action with respect to the Collateral, on behalf of all of the Vendors upon the written election of the Required Vendors. The Collateral Agent shall request written instructions from the Required Vendors with respect to any act or action (including failure to act, but excluding matters of a purely administrative nature) in connection with the Agreement or the Security Agreement; if such instructions are not provided despite the Collateral Agents request therefor, the Collateral Agent shall refrain from such act or taking such action; provided that (X) if such action is taken absent such written instruction, the Collateral Agent shall not be entitled to any indemnification from the Vendors in respect of actions to be taken by the Collateral Agent, and (Y) if such action is not taken as a result of the failure to provide such written instruction, the Collateral Agent shall not incur liability to any Vendor by reason of so refraining. Without limiting the foregoing, (a) no Vendor shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the terms of this Agreement or the Security Agreement, and the Company shall have no right to question or challenge the authority of, or the instructions given to, the Collateral Agent by the Required Vendors pursuant to the foregoing and (b) the Collateral Agent shall not be required to take any action which the Collateral Agent believes (i) could reasonably be expected to expose it to personal liability or (ii) is contrary to this Agreement, the Security Agreement or applicable law.
5. RELIANCE . The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any written notice, statement, certificate or other document (whether transmitted physically or by e-mail) signed, sent or made by the proper person or entity, and, with respect to all legal matters pertaining to this Agreement, the Security Agreement and its duties hereunder and thereunder. Anything to the contrary notwithstanding, the Collateral Agent shall have no obligation whatsoever to any Vendor to assure that the Collateral exists or is owned by the Company or is cared for, protected or insured or that the liens granted pursuant to the Agreement have been properly or sufficiently or lawfully created, or enforced or are entitled to any particular priority.
6. PERMITTED SUBORDINATION AND RELEASE . The Required Vendors may instruct the Collateral Agent to agree to release in whole or in part or to subordinate any Collateral to any claim or other actual or proposed security interest and may enter into any agreement with the Company to evidence such subordination.
7. INDEMNIFICATION . To the extent that the Collateral Agent is not reimbursed and indemnified by the Company as, and to the extent, provided for in this Agreement or the Security Agreement, the Vendors will jointly and severally reimburse and indemnify the Collateral Agent, in proportion to their initial Settlement Amounts, 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 Collateral Agent in performing its duties hereunder or under this Agreement or the Security Agreement, or in any way relating to or arising out of this Agreement or the Security Agreement, 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 Collateral Agents own gross negligence, bad faith or willful misconduct. Prior to taking any action hereunder as Collateral Agent, the Collateral Agent may require each Vendor to deposit with it sufficient sums as it determines in good faith is necessary to protect the Collateral Agent for costs and expenses associated with taking such action.
8. EXCULPATION . The Collateral Agent and its officers, employees, attorneys and agents, shall not incur any liability whatsoever for the holding or delivery of documents or the taking of any other action in accordance with the terms and provisions of this Agreement (other than the filings of Uniform Commercial Code financing statements), for any mistake or error in judgment, for compliance with any applicable law or any attachment, order or other directive of any court or other authority (irrespective of any conflicting term or provision of this Agreement), or for any act or omission of any other person engaged by the Collateral Agent in connection with this Agreement, unless occasioned by the exculpated persons own gross negligence, bad faith, willful misconduct or material breach of the terms of this Agreement and or the Security Agreement; and each party hereto hereby waives any and all claims and actions whatsoever against the Collateral Agent and its officers, employees, attorneys and agents, arising out of or related directly or indirectly to any or all of such foregoing exculpated acts, omissions and circumstances.
9. SEGREGATED FUNDS . Any funds held by the Collateral Agent hereunder need not be segregated from other funds except to the extent required by law. The Collateral Agent shall be under no liability for interest on any funds received by it hereunder.
10. RIGHTS AND REMEDIES NOT WAIVED . No act, omission or delay by the Collateral Agent shall constitute a waiver of the Collateral Agents rights and remedies hereunder or otherwise. No single or partial waiver by the Collateral Agent of any default hereunder or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion.
11. FEES . Upon the execution of this agreement, the Company will pay the Collateral Agent a fee of $2,500 and thereafter the sum of $2,500 per month on the first of each month for agreeing to act as the Collateral Agent hereunder and for reading and becoming familiar with the documents. All payments due to the Collateral Agent under this Agreement including reimbursements must be paid when billed. Payments required pursuant to this Agreement shall be secured under the Security Agreement and shall rank pari passu to the Vendors interests in the Settlement Amounts in right of payment and security. The Collateral Agent is hereby authorized to deduct any sums due the Collateral Agent from Collateral in the Collateral Agents possession.
12. OTHER ACTIVITIES . The Collateral Agent may generally engage in any kind of business with any party hereto or any subsidiary, representative, agent or affiliate thereof as if it had not entered into this Agreement; the Collateral Agent and its affiliates and their officers, directors, employees, and agents (including legal counsel) may now or hereafter be engaged in one or more other transactions with any party hereto or act as trustee, agent or representative of any party hereto (collectively, the Other Activities ) not the subject of this Agreement or the Security Agreement; without limiting the forgoing, Collateral Agent and its affiliates and their officers, directors, employees, and agents (including legal counsel) shall not be responsible to account to any party hereto for such other activities.
13. RESIGNATION BY THE COLLATERAL AGENT .
(a) The Collateral 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 Company and the Vendors.
(b) Upon any such notice of resignation, the Required Vendors, shall appoint a successor Collateral Agent hereunder.
(c) If a successor to the Collateral Agent shall not have been so appointed within said 30-day period, the Required Vendors shall hold the rights and obligations of the collateral agent hereunder until such time, if any, as the Vendors appoint a new collateral as provided above.
(d) Such resignation shall take effect upon the earlier of (i) the appointment of a successor agent pursuant to Sections 13(b) and 13(c) of this Exhibit C, or (ii) the effective date of such resignation. The Collateral Agent shall continue to serve until the effective date of the resignation or until its successor accepts the appointment, but shall not be obligated to take any action hereunder.
(e) The Collateral Agent may deposit any Collateral with the Supreme Court of the State of New York for New York County or any such other court in New York State that accepts such Collateral.
14. RIGHTS WITH RESPECT TO COLLATERAL . Each Vendor agrees with all other Vendors and the Collateral 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 the Security Agreement), or take or institute any action against the Collateral Agent or any of the other Vendors in respect of the Collateral or its rights hereunder or under the Security Agreement (other than any such action arising from the breach by such person of this Agreement) and (ii) that such Vendor has no other secured rights with respect to the Collateral other than as set forth in this Agreement or Security Agreement. Upon the acceptance of any appointment as collateral 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 Collateral Agents resignation or removal hereunder as collateral agent, the provisions of the Agreement including this Exhibit C shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent.
This SECURITY AGREEMENT, dated as of October 31, 2017 (this Agreement ), is entered into by and between Precipio, Inc., a Delaware corporation (the Company ) and Collateral Services LLC, in its capacity as collateral agent for the Vendors (as defined below) (the Collateral Agent ).
W I T N E S S E T H:
WHEREAS, the certain vendors of the Company (the Vendors and, together with the Collateral Agent, the Secured Parties ) have entered into a Debt Settlement Agreement, dated on or about the date hereof (the Settlement Agreement ), with the Company and the Collateral Agent; and
WHEREAS, in order to induce the Vendors to enter into the Settlement Agreement, the Company has agreed to execute and deliver to the Collateral Agent this Agreement and to grant Collateral Agent, for the ratable benefit of the Secured Parties, a security interest in certain property of the Company to secure the prompt payment, performance and discharge in full of all of the Companys obligations under the Settlement Agreement.
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 .
(a) 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 8 or 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 8 or 9 of the UCC, as applicable.
(b) Capitalized terms used but not otherwise defined herein shall have the meanings attributed to them in the Settlement Agreement.
(c) The following terms shall have the meanings set forth below:
Collateral means all of the right, title and interest of the Company in, to and under all personal property and fixtures and interests in such personal property and fixtures, wherever located, and whether now existing or hereafter arising or acquired from time to time, including, without limitation:
(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 the Companys 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, agreements related to the Pledged Securities (as defined herein), licenses, distribution and other agreements, computer software (whether off-the-shelf, licensed from any third party or developed by the Company), computer software development rights, leases, franchises, customer lists, quality control procedures, grants and rights, goodwill, trademarks, service marks, trade styles, trade names, patents, patent applications, copyrights, 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, raw materials, timber cut or to be cut, oil, gas, hydrocarbons, and minerals extracted or to be extracted, 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;
provided that, notwithstanding the foregoing, the security interest created by this Agreement shall not extend to, and the term Collateral shall not include, any Excluded Property.
Excluded Property shall mean the following: (i) governmental licenses or state or local franchises, charters and authorizations and any other property and assets to the extent that the Collateral Agent may not validly possess a security interest therein under applicable laws (including, without limitation, rules and regulations of any governmental authority), or the pledge or creation of a security interest in which would require governmental consent, approval, license or authorization, other than to the extent such prohibition or limitation is rendered ineffective under the anti-assignment provisions of the UCC or other applicable law
notwithstanding such prohibition or limitation, (ii) any particular asset or right under contract, if the pledge thereof or the security interest therein is prohibited or restricted by applicable Law (including any requirement thereunder to obtain the consent of any Governmental Authority, regulatory authority or similar third party), other than to the extent such prohibition or restriction is rendered ineffective under the anti-assignment provisions of the UCC or other applicable law notwithstanding such prohibition or restriction, (iii) margin stock as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System of the United States of America as in effect from time to time, (iv) equity interests in any person other than wholly-owned subsidiaries of the Company to the extent (X) the organizational documents or other agreements with other holders of equity interests of such person do not permit or restrict the pledge of such equity interest or (Y) the pledge of such equity interests (including any exercise of remedies) would result in a change of control, repurchase obligation or other adverse consequence to any of the Company or such subsidiary, (v) any lease, license, contract, other agreement or document or any property subject to a purchase money security interest, capital lease obligations or similar arrangement, in each case to the extent that a grant of a security interest therein would require the consent of a third party (unless such consent has been received), violate or invalidate such lease, license, contract, other agreement or document or purchase money, capital lease or similar arrangement or create a right of termination in favor of any party thereto other than the Loan Parties after giving effect to the applicable anti-assignment provisions of the UCC or other applicable law, other than proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC or other law notwithstanding such prohibition, (vi) any intent-to-use trademark application prior to the filing of a Statement of Use or Amendment to Allege Use with respect thereto, to the extent, if any, that, and solely during the period, if any, in which the grant of a security interest therein would impair the validity or enforceability of such intent-to-use trademark application under applicable federal law, (vii) assets in circumstances where the cost, burden, difficulty or consequence of obtaining a security interest or perfection thereof in such assets, including, without limitation, the cost of title insurance, surveys or flood insurance (if necessary), would be excessive in light of the practical benefit to the Secured Parties afforded thereby as reasonably determined by the Company in consultation with the Required Vendors; provided that Excluded Property shall not include any proceeds of any Excluded Property referred to in the foregoing clauses (i) through (vii) (unless such proceeds would constitute Excluded Property referred to in clauses (i) through (vii)).
Obligations means, collectively, the obligations of the Company to pay the Settlement Amounts as provided for in the Settlement Agreement, and indemnification and expense reimbursement obligations provided for in the Settlement Agreement and this Agreement.
Security Interest and Security Interests has the meaning set forth in Section 2 .
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 enter into the Settlement Agreement and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, the Company 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 (each a Security Interest and, collectively, the Security Interests ).
3. Financing Statement Only . For the avoidance of doubt, notwithstanding anything to the contrarty herein, the Security Interests granted herein shall be perfected only by the filing of appropriate UCC-1 financing statements, and no other perfection action shall be required or permitted hereunder unless and until the Required Vendors shall have requested otherwise in writing upon and during the occurrence of an Event of Default.
4. Representations and Warranties .
(a) Each party executing this Agreement represents and warrants that both it and the person signing on behalf of such party are duly authorized to execute the same, and that this Agreement constitutes the legal, valid and binding obligation of such party, enforceable against such party according to 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) As of the date hereof, the Company represents and warrants to the Secured Parties as follows:
(i) The chief executive office and place of business of the Company where its books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) as of the date hereof is forth on Schedule 4(b)(i) attached hereto.
(ii) This Agreement creates in favor of the Secured Parties a valid security interest in the Collateral.
(iii) The Company was organized and remains organized solely under the laws of the State of Delaware; as of the date hereof the Companys organizational identification number is 2723702.
(iv) (i) the Company has no trade names except as set forth on Schedule 4(b)(iv) attached hereto, (ii) the Company has not used any name other than that stated in the preamble hereto or as set forth on Schedule 4(b)(iv) for the preceding five years, and (iii) no entity has merged with or into the Company or been acquired by the Company within the past five years except as set forth on Schedule 4(b)(iv) .
5. Covenants of the Company . The Company covenants, until the termination of this Agreement in accordance with its terms, covenants and agrees with, the Secured Parties as follows:
(a) Each Debtor shall at all times maintain its books of account and records relating to the Collateral at its principal place of business set forth on Schedule 4(b) attached hereto and may not relocate such books of account and records (except in the ordinary course of sales) or relocate its chief executive office to a new location unless, in any such case, it delivers to the Collateral Agent at least 15 days prior to such relocation written notice of such relocation and the new location thereof (which must be within the United States).
(b) The Company hereby authorizes the Collateral 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 reasonably deemed proper by it.
(c) Upon reasonable request of the Collateral Agent (acting upon the direction of the Required Vendors), the Company will sign and deliver to the Collateral Agent at any time or from time to time one or more financing statements pursuant to the UCC in form reasonably satisfactory to the Collateral Agent and will pay the cost of filing the same in all public offices wherever filing is, or is reasonably deemed by the Collateral Agent to be, necessary to effect the rights and obligations provided for herein. Without limiting the generality of the foregoing, the Company shall be responsible for all fees, taxes and other amounts necessary to maintain the Security Interests as required hereunder.
(d) The Company shall maintain with financially sound and reputable insurers, insurance 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
(e) Upon and during the continuance of an Event of Default, following the written request of the Required Vendors, the Company shall promptly execute and deliver to the Collateral Agent such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Required Vendors may from time to time request in writing and may in their reasonable discretion deem necessary to perfect, protect or enforce the Security Interests.
(f) Upon and during the continuance of an Event of Default, following the written request of the Required Vendors, the Company shall permit the Collateral 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 Collateral Agent from time to time.
(g) The Company shall at all times preserve and keep in full force and effect its existence and good standing.
(h) The Company will not change its name, type of organization, jurisdiction of organization, organizational identification number (if it has one), legal or corporate structure, or add any new fictitious name unless it provides at least 15 days prior written notice to the Collateral Agent of such change.
(i) To the extent that any Collateral is in the possession of any third party, the Company shall, upon and during the continuance of an Event of Default, at the written request of the Required Vendors, shall join with the Collateral Agent in notifying such third party of the Secured Parties security interest in such Collateral and shall use commercially reasonable efforts to obtain an acknowledgement and agreement from such third party with respect to the Collateral, in form and substance reasonably satisfactory to the Required Vendors.
6. Duty to Hold In Trust . Upon and during the continuance of an Event of Default, following the written request of the Required Vendors, the Company shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interests, 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 Collateral Agent for distribution to the Secured Parties, pro-rata in proportion to their respective then-currently outstanding Obligations for application to the satisfaction of the Obligations.
7. Rights and Remedies Upon Default .
(a) Upon and during the continuance of any Event of Default, the Collateral Agent shall have the right to exercise, upon the written direction of the Required Vendors, all of the remedies conferred hereunder and under the Settlement Agreement, and the Collateral Agent shall have all the rights and remedies of a secured party under the UCC.
(b) The Collateral 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 Collateral Agent may but is under no obligation to do so (other than as and to the extent provided for in the Settlement Agreement) acting upon the written direction of the Required Vendors, sell the Collateral without giving any warranties and may specifically disclaim such warranties.
8. 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 then to satisfaction of the Obligations pro rata among the Secured Parties (based on then-outstanding Settlement Amounts at the time of any such determination), after which the Secured Parties shall pay to the Company 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 Company will be liable for the deficiency. To the extent permitted by applicable law, the Company waives all claims, damages and demands against the Collateral Agent arising out of the repossession, removal, retention or sale of the Collateral at the direction of the Required Vendors, unless due solely to the gross negligence, bad faith or willful misconduct of the Collateral Agent as determined by a final judgment (not subject to further appeal) of a court of competent jurisdiction.
9. Responsibility for Collateral . The Company assumes 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) the Collateral Agent (i) has no 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, nor (ii) has any obligation to clean-up or otherwise prepare the Collateral for sale, and (b) the Company shall remain obligated and liable under each contract or agreement included in the Collateral to be observed or performed by the Company thereunder. The Collateral Agent shall not 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 Collateral Agent of any payment relating to any of the Collateral, nor shall the Collateral Agent be obligated in any manner to perform any of the obligations of the Company under or pursuant to any such contract or agreement, to make inquiry as to the nature or sufficiency of any payment received by the Collateral Agent 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 Collateral Agent or to which the Collateral Agent or may be entitled at any time or times.
10. Security Interests Absolute . All rights of the Secured Parties and all obligations of the Company hereunder, shall be absolute and unconditional, irrespective of: (a) 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 Settlement Agreement or this Agreement, (b) any exchange, release or non-perfection of any of the Collateral, (c) any action by the Collateral Agent, acting upon the written direction of the Required Vendors, 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 a discharge of all or any part of the Security Interests granted hereby. 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, the Companys obligations hereunder shall be reinstated.
11. Term of Agreement . This Agreement and the Security Interest shall terminate on the date on which all Obligations (other than contingent indemnification obligations for which no claim has been asserted) have been paid or discharged or as provided in the Settlement Agreement.
12. Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be made in accordance with Section 7 of the Settlement Agreement.
13. Miscellaneous .
(a) No course of dealing between the Company and the Collateral Agent, nor any failure to exercise, nor any delay in exercising, on the part of the Collateral Agent, any right, power or privilege hereunder or under the Settlement Agreement 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 Collateral Agent with respect to the Collateral, whether established hereby or by the Settlement Agreement, this Agreement or by law shall be cumulative and may be exercised singly or concurrently.
(c) This Agreement, together with the Settlement Agreement, is the complete agreement between the parties with respect to the settlement contemplated herein and supersedes all prior agreements and understandings with respect thereto. This Agreement may only be modified by a writing signed by the Company and the Collateral Agent (acting upon the written direction of the Required Vendors).
(d) If any clause or provision of this Agreement is determined to be illegal, invalid or unenforceable under any present or future law by the final judgment of a court of competent jurisdiction, the remainder of this Agreement will not be affected thereby. It is the intention of the parties that if any such provision is held to be invalid, illegal or unenforceable, there will be added in lieu thereof a provision as similar in terms to such provision as is possible, and that such added provision will be legal, valid and enforceable.
(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) The Company may not assign any of its rights or obligations hereunder without the written consent of the Collateral Agent, acting upon the written direction of the Required Vendors and the Collateral Agent may not assign its rights or obligations hereunder other than in connection with its resignation as Collateral Agent pursuant to Section 13 of Exhibit C to the Settlement Agreement; any assignment or attempted assignment by any party hereto without the requisite consent shall be null and void. Notwithstanding the foregoing, the Company may assign its rights and obligations hereunder in connection with a sale of the business, whether through a merger, consolidation, transfer of all or substantially all of its assets, or in a similar transaction.
(g) This Agreement shall be construed and interpreted in accordance with the laws of the State of New York, and each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof for resolution of any dispute regarding, arising from, or in any way relating to this Agreement or the negotiations which gave rise to this Agreement. By executing this Agreement the parties hereto agree to waive any defense or argument based on lack of personal jurisdiction, inconvenient forum, or any other objection or argument against the exercise of jurisdiction by the State of New York over the issues and parties in this matter. 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, the Settlement Agreement or the transactions contemplated hereby or thereby.
(h) This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.
(i) The Company shall indemnify, reimburse and hold harmless the Collateral Agent and its 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 by the Company in any way related to or arising from or alleged to arise from this Agreement, the Settlement Agreement or the Collateral, except any such losses, claims, liabilities, damages, penalties, suits, costs and expenses which result from the gross negligence, bad faith 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 Settlement Agreement or any other agreement, instrument or other document executed or delivered in connection herewith or therewith.
(j) Nothing in this Agreement shall be construed to subject Collateral Agent to liability as a partner in the Company or any if its direct or indirect subsidiaries that is a partnership or as a member in the Company or any of its direct or indirect subsidiaries that is a limited liability company, nor shall Collateral Agent be deemed to have assumed any obligations under any partnership agreement or limited liability company agreement, as applicable, of the Company or any if its direct or indirect subsidiaries or otherwise, unless and until the Collateral Agent exercises its right to be substituted for the Company as a partner or member, as applicable, pursuant hereto.
(k) 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 direct or indirect wholly-owned subsidiary of the Company or compliance with any provisions of any of the Organizational Documents, the Company hereby grants such consent and approval and waives 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.
|By:||/s/ Ilan Danieli|
|Name: Ilan Danieli|
|Title: Chief Executive Officer|
S IGNATURE P AGE TO
S ECURITY A GREEMENT
COLLATERAL SERVICES LLC
|By:||/s/ Barbara Mittman|
|Name: Barbara R. Mittman|
|Its: Managing Member|
S IGNATURE P AGE TO
S ECURITY A GREEMENT
4 Science Park
New Haven, CT 06511
On June 29, 2017 the Company changed its name from Transgenomic, Inc. to Precipio, Inc.
On June 29, 2017 New Haven Labs Inc. (Merger Sub) a wholly-owned subsidiary of the Company merged with and into Precipio Diagnostics, LLC, with Precipio Diagnostics surviving the Merger as a wholly-owned subsidiary of the Company.