Exhibit 10.3

 

GENERAL SECURITY AGREEMENT

 

GENERAL SECURITY AGREEMENT dated May 14, 2019, by and between Precipio, Inc., a
Delaware corporation, with headquarters located at 4 Science Park, New Haven, CT
06511 (the “Debtor”), and the investors set forth on Schedule A hereof
 (collectively, the “Secured Party”).

 

Debtor hereby agrees in favor of Secured Party as follows:

 

1.In consideration for loans made or to be made to Debtor evidenced by the 8%
Senior Secured Convertible Promissory Notes of Debtor in the principal amounts
set forth on Schedule A hereto, payable to the order of Secured Party (such 8%
Senior Secured Convertible Promissory Notes, as amended, modified, supplemented,
replaced or substituted from time to time, being herein referred to as the
“Notes”), Debtor hereby grants to Secured Party a continuing security interest
in, lien upon and a right of setoff against, and Debtor hereby assigns to
Secured Party, all of Debtor’s right, title and interest in and to the
Collateral described in Section 2, to secure the full and prompt payment,
performance and observance of all present and future indebtedness, obligations,
liabilities and agreements of any kind of Debtor to Secured Party arising under
or in connection with the Notes, which is existing now or hereafter (all of the
foregoing being herein referred to as the “Obligations”). 

 

2.The Collateral is described on Schedule B annexed hereto as part hereof and on
any separate schedule(s) identified as Collateral at any time or from time to
time furnished by Debtor to Secured Party (all of which are hereby deemed part
of this Security Agreement) and includes claims of Debtor against third parties
for loss or damage to or destruction of any Collateral.  The Debtor hereby
grants a first priority security interest in such Collateral. 

 

3. The Debtor has entered into an Assistance Agreement dated 8 January 2018 with
the State of Connecticut Department of Economics and Community Development
pursuant to which the Debtor received certain loans and granted certain liens on
the Debtor’s collateral. The Debtor and the State of Connecticut Department of
Economics and Community Development shall provide the Secured Party with a
subordination agreement pursuant to which the rights of the State of Connecticut
Department of Economics and Community Development shall be subordinated to the
rights of the Secured Party so long as this Agreement is in effect.

 

4. The Debtor has entered into a Debt Settlement Agreement dated October 31,
2017with certain vendors of the Debtor and the Collateral Services LLC acting as
the collateral agent to the vendors. Pursuant to the terms of the Debt
Settlement Agreement the Debtor agreed and promised to  pay to each of the
vendors the settlement amounts set out therein 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 The Debtor,
each of the vendors and Collateral Services LLC shall provide the Secured Party
with subordination agreement pursuant to which the rights of the vendors shall
be subordinated to the rights of the Secured Party so long as this Agreement is
in effect. For the avoidance of doubt, the Secured Party hereby confirms that
any scheduled installment payments as required by the Debt Settlement

 

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Agreement shall be permitted to be made by the Debtor to each of the vendors as
long as no Default exists and no Event of Default would arise as a result of
such scheduled payments.  

 

5.Debtor hereby warrants, represents, covenants and agrees (as of the date
hereof and so long as any Obligation remains outstanding) that:  (a) the chief
executive office and other places of business of Debtor, the books and records
relating to the Collateral (except for such records as are in the possession or
control of Secured Party) and the Collateral are located at 4 Science Park, New
Haven, CT 06511 and Debtor will not change any of the same, or merge or
consolidate with any person or change its name or conduct its business under any
trade, assumed or fictitious name, without prior written notice to and consent
of Secured Party (and in the case of location of Collateral, will from time to
time notify Secured Party of the locations thereof); (b) the Collateral is and
will be used in the business of Debtor; (c) the Collateral is now, and at all
times will be, owned by Debtor free and clear of all liens, security interests,
claims and encumbrances; (d) Debtor will not abandon or assign, sell, lease,
transfer or otherwise dispose of, other than in the ordinary course of Debtor’s
business, nor will Debtor suffer or permit any of the same to occur with respect
to, any Collateral, without prior written notice to and consent of a designated
representative of the Secured Party; (e) Debtor will make payment or will
provide for the payment, when due, of all taxes, assessments or contributions or
other public or private charges which have been or may be levied or assessed
against Debtor, whether with respect to the Collateral, to any wages or salaries
paid by Debtor, or otherwise, will deliver to Secured Party, on demand,
certificates or other evidence satisfactory to Secured Party attesting thereto
and shall cause Debtor’s subsidiaries to take any such action as described under
this section 3(e); (f) Debtor will use the Collateral for lawful purposes only,
with all reasonable care and caution and in conformity in all material respects
with all applicable laws, ordinances and regulations; (g) Debtor will, at
Debtor’s sole cost and expense, keep the Collateral in good order, repair,
running condition and in substantially the same condition as on the date hereof,
reasonable wear and tear excepted, and Debtor will not, without the prior
written consent of Secured Party, alter or remove any identifying symbol or
number upon any of the Collateral; (h) Secured Party shall at all times have
free access to and right of inspection of any Collateral and any papers,
instruments and records pertaining thereto (and the right to make extracts from
and to receive from Debtor originals or true copies of such records, papers and
instruments upon request therefor) and Debtor hereby grants to Secured Party a
security interest in all such records, papers and instruments to secure the
payment, performance and observance of the Obligations; (i) the Collateral is
now and shall remain personal or intangible property, and Debtor will not permit
any other types of Collateral to become a fixture without prior written notice
to and consent of Secured Party and without first making all arrangements, and
delivering, or causing to be delivered, to Secured Party all instruments and
documents, including, without limitation, waivers and subordination agreements
by any landlords or mortgagees, requested by and satisfactory to Secured Party
to preserve and protect the primary security interest granted herein against all
persons; (j) Debtor will, at its sole cost and expense, perform all acts and
execute all documents requested by Secured Party from time to time to evidence,
perfect, maintain or enforce Secured Party’ second priority security interest
granted herein or otherwise in furtherance of the provisions of this Security
Agreement; (k) at any time and from time to time, Debtor shall, at its sole cost
and expense, execute and deliver to Secured Party such financing statements
pursuant to the Uniform Commercial Code (“UCC”), applications

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for certificate of title and other papers, documents or instruments as may
reasonably be requested by Secured Party in connection with this Security
Agreement, and to the extent permitted by applicable law, Debtor hereby
authorizes Secured Party to execute and file at any time and from time to time
one or more financing statements or copies thereof or of this Security Agreement
with respect to the Collateral signed only by Secured Party, and Debtor agrees
to pay any recording tax or similar tax arising in connection with the filing of
any such financing statement and further agrees to pay any additional recording
or similar tax which is incurred in connection therewith; (l) Debtor assumes all
responsibility and liability arising from the Collateral; (m) in their
discretion, Secured Party may, at any time and from time to time, upon the
occurrence and during the continuance of a Default (as hereinafter defined),
demand, sue for, collect or receive any money or property at any time payable or
receivable on account of or in exchange for, or make any compromise or
settlement deemed desirable by Secured Party with respect to, any Collateral,
and/or extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, or release, any of the Obligations and/or the
Collateral, or any obligor, maker, endorser, acceptor, surety or guarantor of,
or any Party to, any of the Obligations or the Collateral, all without notice to
or consent by Debtor and without otherwise discharging or affecting the
Obligations, the Collateral or the second priority security interest granted
herein; (n) in their discretion, Secured Party may, at any time and from time to
time, for the account of Debtor, pay any amount or do any act required of Debtor
hereunder and which Debtor fails to do or pay, and any such payment shall be
deemed an advance by Secured Party to Debtor payable on demand together with
interest at the highest rate then payable on any of the Obligations; (o) Debtor
will promptly pay Secured Party for any and all sums, costs, and expenses which
Secured Party may pay or incur pursuant to the provisions of this Security
Agreement or in perfecting, defending, protecting or enforcing this Security
Agreement or the security interest granted herein or in enforcing payment of the
Obligations or otherwise in connection with the provisions hereof, including but
not limited to all search, filing and recording fees, taxes, fees and expenses
for the service and filing of papers, premium on bonds and undertakings, fees of
marshals, sheriffs, custodians, auctioneers, court costs, collection charges,
travel expenses, and reasonable attorneys’ fees, all of which together with
interest at the highest rate then payable on any of the Obligations, shall be
part of the Obligations and be payable on demand; (p) upon the occurrence and
during the continuance of a Default, any proceeds of the Collateral received by
Debtor shall not be commingled with other property of Debtor, but shall be
segregated, held by Debtor in trust for Secured Party, and immediately delivered
to Secured Party in the form received, duly endorsed in blank where appropriate
to effectuate the provisions hereof, the same to be held by Secured Party as
additional Collateral hereunder or, at Secured Party’ option, to be applied to
payment of the Obligations, whether or not due and in any order; (q) in their
sole discretion, Secured Party may, at any time and from time to time, assign,
transfer or deliver to any transferee of any Obligations, any Collateral,
whereupon Secured Party shall be fully discharged from all responsibility and
the transferee shall be vested with all powers and rights of Secured Party
hereunder with respect thereto, but Secured Party shall retain all rights and
powers with respect to any Collateral not assigned, transferred or delivered;
and (r) upon request of Secured Party, at any time and from time to time, Debtor
shall, at its cost and expense, execute and deliver to Secured Party reports as
to the Collateral listing all items thereof, describing the condition of same
and setting forth the value thereof (lower of cost or market) all in form and
substance reasonably satisfactory to Secured

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Party. Whenever any act is referred to herein as being taken by the Secured
Party, it shall mean by the Agent appointed by all of the Lenders pursuant to
Section 6 hereof.

 

4.The term Default as used in this Security Agreement shall mean any Event of
Default, as such term is defined in the Notes.

 

5. Upon the occurrence and during the continuance of any Default, Secured Party
may, without notice to (except as herein set forth) or demand upon Debtor,
declare any Obligations immediately due and payable and Secured Party shall have
the following rights and remedies (to the extent permitted by applicable law) in
addition to all rights and remedies of a Secured Party under the UCC or of
Secured Party under the Obligations, all such rights and remedies being
cumulative, not exclusive and enforceable alternatively, successively or
concurrently:

 

(a)Secured Party may, at any time and from time to time, with or without
judicial process or the aid and assistance of others, (i) enter upon any
premises in which any Collateral may be located and, without resistance or
interference by Debtor, take possession of the Collateral, (ii) dispose of any
part or all of the Collateral on any such premises, (iii) require Debtor to
assemble and make available to Secured Party at the expense of Debtor any part
or all of the Collateral at any place and time designated by Secured Party which
is reasonably convenient to both parties, (iv) remove any part or all of the
Collateral from any such premises for the purpose of effecting sale or other
disposition thereof (and if any of the Collateral consists of motor vehicles,
Secured Party may use Debtor’s license plates), and (v) sell, resell, lease,
assign and deliver, grant options for or otherwise dispose of any part or all of
the Collateral in its then condition or following any commercially reasonable
preparation or processing, at public or private sale or proceedings or
otherwise, by one or more contracts, in one or more parcels, at the same or
different times, with or without having the Collateral at the place of sale or
other disposition, for cash and/or credit, and upon any terms, at such place(s)
and time(s) and to such person(s) as Secured Party deems best, all without
demand, notice or advertisement whatsoever except that where an applicable
statute requires reasonable notice of sale or other disposition Debtor hereby
agrees that the sending of ten days’ notice by overnight mail, postage prepaid,
to any address of Debtor set forth in this Security Agreement shall be deemed
reasonable notice thereof.  If any Collateral is sold by Secured Party upon
credit or for future delivery, Secured Party shall not be liable for the failure
of the purchaser to pay for same and in such event Secured Party may resell or
otherwise dispose of such Collateral.  Secured Party may buy any part or all of
the Collateral at any public sale and, if any part or all of the Collateral is
of a type customarily sold in a recognized market or is of the type which is the
subject of widely distributed standard price quotations, Secured Party may buy
such Collateral at private sale and in each case may make payment therefor by
any means, whether by credit against the Obligations or otherwise.  Secured
Party may apply the cash proceeds actually received from any sale or other
disposition to the reasonable expenses of retaking, holding, preparing for sale,
selling, leasing and the like, to reasonable attorneys’ fees and all legal,
travel and other expenses which may be incurred by Secured Party in attempting
to collect the Obligations, proceed against the Collateral or enforce this
Security Agreement or in the prosecution or defense of any action or proceeding
related to the Obligations, the Collateral or this Security Agreement; and then
to the

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Obligations in such order and as to principal or interest as Secured Party may
desire; and Debtor shall remain liable and will pay Secured Party on demand any
deficiency remaining, together with interest thereon at the highest rate then
payable on the Obligations and the balance of any expenses unpaid, with any
surplus to be paid to Debtor, subject to any duty of Secured Party imposed by
law to the holder of any subordinate security interest in the Collateral known
to Secured Party.

 

(b)Secured Party may, at any time and from time to time, as appropriate, after
the occurrence and during the continuance of a Default set off and apply to the
payment of the Obligations, any Collateral in or coming into the possession of
Secured Party or their agents, without notice to Debtor and in such manner as
Secured Party may in their discretion determine.

 

6.Secured Party may designate and appoint a collateral agent (“Agent”), as
attorney-in-fact of Debtor, irrevocably and with power of substitution, with
authority to:  endorse the name of Debtor on any notes, acceptances, checks,
drafts, money orders, instruments or other evidences of Collateral that may come
into Secured Party’s possession; sign the name of Debtor on any invoices,
documents, assignments; execute proofs of claim and loss; execute endorsements,
assignments or other instruments of conveyance or transfer; adjust and
compromise any claims under insurance policies or otherwise; execute releases;
and do all other acts and things necessary or advisable in the sole discretion
of Secured Party to carry out and enforce this Security Agreement or the
Obligations.  Neither Secured Party nor any designee or agent thereof shall be
liable for any acts of commission or omission done in good faith, for any error
of judgment or for any mistake of fact or law.  This power of attorney being
coupled with an interest is irrevocable while any Obligations shall remain
unpaid.

 

7.With respect to the enforcement of Secured Party’s rights under this Security
Agreement, Debtor hereby releases Secured Party and Agent from any claims,
causes of action and demands at any time arising out of or with respect to this
Security Agreement, the Obligations, the Collateral and its use and/or any
actions taken or omitted to be taken by Secured Party or Agent in good faith
with respect thereto, and Debtor hereby agrees to hold Secured Party and Agent
harmless from and with respect to any and all such claims, causes of action and
demands.

 

8.Secured Party’s prior recourse to any Collateral shall not constitute a
condition of any demand, suit or proceeding for payment or collection of the
Obligations nor shall any demand, suit or proceeding for payment or collection
of the Obligations constitute a condition of any recourse by Secured Party to
the Collateral.  Any suit or proceeding by Secured Party to recover any of the
Obligations shall not be deemed a waiver of, or bar against, subsequent
proceedings by Secured Party with respect to any other Obligations and/or with
respect to the Collateral.  No act, omission or delay by Secured Party shall
constitute a waiver of their rights and remedies hereunder or otherwise.  No
single or partial waiver by Secured Party of any covenant, warranty,
representation, Default or right or remedy which they may have shall operate as
a waiver of any other covenant, warranty, representation, Default, right or
remedy or of the same covenant, warranty, representation, Default, right or
remedy on a future occasion.  Debtor hereby waives presentment, notice of
dishonor and protest of all instruments included in or evidencing any

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Obligations or Collateral, and all other notices and demands whatsoever (except
as expressly provided herein).

 

9.Debtor hereby agrees to pay, on demand, all out-of-pocket expenses incurred by
Secured Party in connection with the enforcement of the Note, this Security
Agreement, and the Obligations and in connection with any amendment, including,
without limitation, the fees and disbursements of counsel to Secured Party.

 

10.In the event of any litigation with respect to any matter connected with this
Security Agreement, the Obligations, the Collateral or the Note, Debtor hereby
waives the right to a trial by jury and all rights of setoff.  Debtor hereby
waives personal service of any process in connection with any such action or
proceeding and agrees that the service thereof may be made by certified or
registered mail directed to Debtor at any address of Debtor set forth in this
Security Agreement.  Debtor so served shall appear or answer to such process
within thirty days after the mailing thereof.  Should Debtor so served fail to
appear or answer within said thirty-day period, Debtor shall be deemed in
default and judgment may be entered by Secured Party against Debtor for the
amount or such other relief as may be demanded in any process so served.  In the
alternative, Secured Party may in their discretion effect service upon Debtor in
any other form or manner permitted by law.

 

11.Upon the payment in full of the Notes and satisfaction of all Obligations in
accordance with the Notes or the occurrence of the event described in the third
paragraph of Section 1 hereof, the security interest granted hereby in the
Collateral shall terminate and all rights to the Collateral under this Agreement
shall revert to Debtor.  Upon any such termination, the Secured Party shall
execute and deliver UCC–3 financing statement releases or other documents of
release reasonably requested by Debtor.

 

12.Secured Party may assign their rights and obligation hereunder to any
Affiliate of Secured Party provided that such Affiliate assumes all of the
liabilities or obligations of Secured Party hereunder.  For purposes of this
section, “Affiliate” of any person means any other person or entity which,
directly or indirectly, controls or is controlled by that person, or is under
common control with that person or entity.  “Control” (including, with
correlative meaning, the terms “controlled by” and “under common control with”),
as used with respect to any person or entity, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise. 

 

13.All terms herein shall have the meanings as defined in the UCC, unless the
context otherwise requires.  No provision hereof shall be modified, altered,
waived, released, terminated or limited except by a written instrument expressly
referring to this Security Agreement and to such provision, and executed by the
Party to be charged.  The execution and delivery of this Security Agreement has
been authorized by the Board of Directors of Debtor and by any necessary vote or
consent of members of Debtor.  This Security Agreement and all Obligations shall
be binding upon the successors and assigns of Debtor and shall, together with
the rights and remedies

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of Secured Party hereunder, inure to the benefit of Secured Party, their
executors, administrators, successors, permitted endorsees and permitted
assigns.  This Security Agreement and the Obligations shall be governed in all
respects by the laws of the State of New York applicable to contracts executed
and to be performed in such state.  If any term of this Security Agreement shall
be held to be invalid, illegal or unenforceable, the validity of all other terms
hereof shall in no way be affected thereby.  Secured Party is authorized to
annex hereto any schedules referred to herein.  Debtor acknowledges receipt of a
copy of this Security Agreement.

 

14.All notices and other communications under this Agreement shall be in writing
and shall be deemed given when delivered personally, by e-mail, by overnight
mail or delivery service or mailed by certified mail, return receipt requested,
to the parties.

 

IN WITNESS WHEREOF, the undersigned have executed or caused this security
agreement to be executed on the date first above set forth.

 

 

COMPANY:

 

 

PRECIPIO, INC.

 

 

 

 

 

By:________________________________

 

     Name:

     Title:

 

 

 

 

 

 

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Secured Party:

 

M2B FUNDING CORP.

 

 

By:________________________________

    Name:

     Title:

 

ALPHA CAPITAL ANSTALT

 

 

By:________________________________

    Name:

     Title:

 

OSHER CAPITAL PARTNERS LLC

 

 

By:________________________________

    Name:

     Title:

 

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SCHEDULE A

 

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SCHEDULE B

 

 

As used in this Agreement, the term “Collateral” means, collectively, wherever
located, whether now owned or hereafter acquired or now existing or hereafter
acquired or created, all right, title and interest of the Company in and to all
of its assets, including, without limitation: (i) accounts, chattel paper,
deposit accounts, documents, general intangibles (including, but not limited to
intellectual property, payment intangibles, software, licenses, franchises and
customer information), goods (including, but not limited to equipment, fixtures
and inventory), instruments, investment property, letter-of-credit rights,
money, other personal property, software, any commercial tort claims; (ii) to
the extent not referred to in clause (i) of this sentence, all (A) supporting
obligations and incidental property rights incident to, arising or accruing
pursuant to or otherwise relating to any of the things referred to in clause (i)
of this sentence, whether arising or accruing from any action taken by the
Company or the Collateral Agent or otherwise, (B) proceeds of any of the items
referred to in clauses (i) and (ii)(A) of this sentence and (C) books and
records relating to any of the items  referred to in clauses (i) and (ii)(A) and
(B) of this sentence. 

 

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