Exhibit 10.4

 

Principal Amount: $561,500.00 Original Issue Date: April 13, 2017

 

PRECIPIO DIAGNOSTICS, LLC
SUBORDINATED PROMISSORY NOTE
DUE JULY 12, 2017

 

FOR VALUE RECEIVED, the Precipio Diagnostic, LLC a Delaware limited liability
company having its principal place of business at 4 Science Park, New Haven, CT
06511 promises to pay to Transgenomic, Inc., a Delaware corporation, (the
“Company”), having its principal place of business at 12325 Emmet Street, Omaha,
NE 68164 or its registered assigns (the “Holder”), or shall have paid pursuant
to the terms hereunder, the principal sum of Five Hundred Sixty-One Thousand
Five Hundred dollars ($561,500.00) or such lesser amount as may be outstanding
under this Subordinated Promissory Note (the “Note”) on the earlier of (i) the
Maturity Date (as defined below) or (ii) July 12, 2017 (such earlier date, the
“Repayment Date”). Any Redemption Amount payable shall be paid on this Note as
set forth in Section 3. The Company acknowledges the receipt of $250,000.00
prior to the date hereof, which amount is included in the original principal
amount of this Note. This Note is subject to the following additional
provisions:

 

Section 1. Definitions. For the purposes hereof, in addition to the terms
defined elsewhere in this Note, the following terms shall have the following
meanings:

 

“Bankruptcy Event” means any of the following events: (a) the Company or any
Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) thereof commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof, (b) there is commenced against
the Company or any Significant Subsidiary thereof any such case or proceeding
that is not dismissed within 60 days after commencement, (c) the Company or any
Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order
of relief or other order approving any such case or proceeding is entered, (d)
the Company or any Significant Subsidiary thereof suffers any appointment of any
custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment, (e) the
Company or any Significant Subsidiary thereof makes a general assignment for the
benefit of creditors, or (f) the Company expressly indicates its consent to,
approval of or acquiescence in any of the foregoing or takes any corporate or
other action for the purpose of effecting any of the foregoing.

 

“Business Day” means any day except any Saturday, any Sunday, any day which is a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

 1 

 

 

“Change of Control Transaction” means the occurrence after the date hereof of
any of (a) an acquisition by an individual or legal entity or “group” (as
described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective
control (whether through legal or beneficial ownership of capital stock of the
Company, by contract or otherwise) of in excess of 50% of the voting securities
of the Company (other than by means of conversion or exercise of this Note and
the Securities issued together with this Note), (b) the Company merges into or
consolidates with any other Person, or any Person merges into or consolidates
with the Company and, after giving effect to such transaction, the stockholders
of the Company immediately prior to such transaction own less than 50% of the
aggregate voting power of the Company or the successor entity of such
transaction, (c) the Company sells or transfers all or substantially all of its
assets to another Person and the stockholders of the Company immediately prior
to such transaction own less than 50% of the aggregate voting power of the
acquiring entity immediately after the transaction, or (d) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through (c) above that
is not contingent upon the payment in full of this Note.

 

“Event of Default” shall have the meaning set forth in Section 5(a).

 

“Maturity Date” means the any date on which the Transgenomic Notes shall become
due and payable (whether on the Maturity Date or by acceleration or otherwise)
other than as a result of (i) a Qualified Offering (as defined in the
Transgenomic Notes), or (ii) any “Event of Default” (as defined in the
Transgenomic Notes) or other acceleration of the Transgenomic Notes resulting
from gross negligence, willful misconduct, bad faith, fraud or intentional
misrepresentation on the part of the Holder, its affiliates or any of their
respective officers, directors, employees, partners, controlling persons,
advisors, attorneys, agents or representatives. Any Maturity Date arising in
connection with an actual or deemed “Optional Redemption” (as defined in the
Transgenomic Notes) of the Transgenomic Note shall be deemed an Optional
Redemption hereunder and the Redemption Amount shall be paid in accordance with
the terms and conditions of Section 3(b) herein.

 

“New York Courts” shall have the meaning set forth in Section 7(d).

 

“Optional Redemption” shall have the meaning set forth in Section 3(a).

 

“Optional Redemption Date” shall have the meaning set forth in Section 3(a).

 

“Optional Redemption Notice” shall have the meaning set forth in Section 3(a).

 

“Optional Redemption Notice Date” shall have the meaning set forth in Section
3(a).

 

“Optional Redemption Period” shall have the meaning set forth in Section 3(a).

 

“Redemption Amount” means the product of (a) the lesser of 120% or such lesser
premium as the Holder may pay in respect of the Transgenomic Notes, multiplied
by (b) the sum of (i) the then outstanding principal amount of this Note, (ii)
accrued but unpaid interest, and (iii) all other liquidated damages (excluding
the Redemption Amount) and other amounts due in respect of this Note.

 

 2 

 

 

“Trading Day” means a day on which the principal Trading Market is open for
trading.

 

“Trading Market” means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE
MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global
Select Market, the New York Stock Exchange or the OTC Bulletin Board (or any
successors to any of the foregoing).

 

“Transgenomic Notes” means the 4% Convertible Promissory Notes due July 12,
2017, dated as of the date of this Note, issued by the Holder in favor of the
investors listed on Schedule 1 hereto in the original aggregate principal amount
of $1,250,000.

 

Section 2.  Interest. The Company shall pay interest to the Holder on the
aggregate principal amount of this Note at the rate of 4% per annum.

 

Section 3.  Redemption.

 

(a)       Optional Redemption at Election of Company. Subject to the provisions
of this Section 3(a), at any time prior to the Maturity Date, the Company may
deliver a notice to the Holder (an “Optional Redemption Notice” and the date
such notice is deemed delivered hereunder, the “Optional Redemption Notice
Date”) of its irrevocable election to redeem some or all of the then outstanding
principal amount of this Note for cash in an amount equal to the Redemption
Amount on the 3rd Trading Day following the Optional Redemption Notice Date
(such date, the “Optional Redemption Date”, such three-Trading Day period, the
“Optional Redemption Period” and such redemption, the “Optional Redemption”).

 

(b)       Optional Redemption Procedure. The payment of cash pursuant to an
Optional Redemption shall be payable on the Optional Redemption Date. If any
portion of the payment pursuant to an Optional Redemption shall not be paid by
the Company by the applicable due date, interest shall accrue thereon at an
interest rate equal to the lesser of (i) 18% per annum, (ii) the rate actually
payable by the Holder in respect of the “Redemption Amount” (as defined in the
Transgenomic Notes) or (iii) the maximum rate permitted by applicable law until
such amount is paid in full. Notwithstanding anything herein contained to the
contrary, if any portion of the Redemption Amount remains unpaid after such
date, the Holder may elect, by written notice to the Company given at any time
thereafter, to invalidate such Optional Redemption, ab initio with respect to
any amount of the Redemption Amount that remains unpaid.

 

(c)       Transgenomic Notes. In the event that the Holder becomes obligated to
pay the “Redemption Amount” (as defined in the Transgenomic Notes) on the
Transgenomic Notes for any reason (other than any such payment resulting from or
arising in connection with (i) any circumstance constituting a violation of
Section 4(b) or (ii) any gross negligence, willful misconduct, bad faith, fraud
or intentional misrepresentation on the part of the Holder, its affiliates or
any of their respective officers, directors, employees, partners, controlling
persons, advisors, attorneys, agents or representatives) on or prior to July 12,
2017, then the Company agrees to pay the Redemption Amount on this Note on such
date as the Holder actually pays the “Redemption Amount” (as defined in the
Transgenomic Notes). Notwithstanding anything herein to the contrary or the
surrender of this Note upon payment in full thereof, the Company’s obligation to
pay the Redemption Amount shall survive the payment in full of this Note until
the later of July 12, 2017 or, if any obligation to pay the Redemption Amount
arises under this Section 3(c) on or prior to such date, the Company pays the
Redemption Amount.

 

 3 

 

 

Section 4.  Negative Covenants.

 

(a)        As long as an aggregate principal amount of $50,000 of this Note
remains outstanding, unless the Holder shall have otherwise given prior written
consent, the Company shall not, and shall not permit any of the Subsidiaries to,
directly or indirectly:

 

(i)       amend its charter documents, including, without limitation, its
certificate of incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;

 

(ii)       pay cash dividends or distributions on any equity securities of the
Company;

 

(iii)      incur, guarantee or assume any material indebtedness (excluding for
the avoidance of doubt, the indebtedness evidenced by this Note, and other
indebtedness of the Company in existence on the date hereof, trade payables or
expenses in the ordinary course of business with debt incurred for working
capital), which is expressly subordinate in a form acceptable to the Holder to
the rights of the Holder and for which no payments may be made at any time when
this Note remains outstanding;

 

(iv)     redeem, repurchase or declare or pay any cash dividend or distribution
on any of its capital stock;

 

(v)      sell, lease, license, assign, transfer, spin-off, split-off, close,
convey or otherwise dispose of any assets or rights of the Company or any
Subsidiary owned or hereafter acquired whether in a single transaction or a
series of related transactions, other than (i) sales, leases, licenses,
assignments, transfers, conveyances and other dispositions of such assets or
rights by the Company and its Subsidiaries in the ordinary course of business
consistent with its past practice for fair consideration, or (ii) sales of
inventory and product in the ordinary course of business consistent with past
practice for fair consideration;

 

(vi)     fail to take all action reasonably necessary or reasonably advisable to
maintain such intellectual property rights of the Company and/or any of its
Subsidiaries as are necessary or material to the conduct of the business of the
Company in full force and effect; or

 

(vii)    enter into any agreement with respect to any of the foregoing that is
not contingent upon the payment in full of this Note.

 

 4 

 

 

(b)       As long as any portion of this Note remains outstanding, unless the
Company shall have otherwise given prior written consent, the Holder shall not,
and shall not permit any of the Subsidiaries to, directly or indirectly, (i)
amend, waive, supplement, or otherwise modify the Transgenomic Notes (including
by way of amending defined terms used but not defined therein where such terms
are ultimately defined) other than to reduce the “Redemption Premium” (as
defined in the Transgenomic Notes) payable in respect thereof, or (ii) effect
any voluntary prepayment or redemption (excluding, for the avoidance of doubt,
any deemed redemption), in whole or in part, of the Transgenomic Notes.

 

Section 5.  Events of Default.

 

(a)       “Event of Default” means, wherever used herein, any of the following
events (whatever the reason for such event and whether such event shall be
voluntary or involuntary or effected by operation of law or pursuant to any
judgment, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body) occurring after the date of this Note:

 

(i)       any default in the payment of (A) the principal amount of this Note or
(B) interest, liquidated damages and other amounts owing to the Holder on any
Note, as and when the same shall become due and payable (whether on the Maturity
Date or by acceleration or otherwise) which default, solely in the case of an
interest payment or other default under clause (B) above, is not cured within
five Trading Days;

 

(ii)       the Company shall fail to observe or perform in any material respect
any other covenant or agreement contained in this Note which failure is not
cured, if possible to cure, within the earlier to occur of (A) five Trading Days
after notice of such failure sent by the Holder or by any other Holder to the
Company and (B) 10 Trading Days after the Company has become aware of such
failure;

 

(iii)     the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy Event;

 

(iv)     the Company or any Subsidiary shall default on any of its obligations
under any mortgage, credit agreement or other credit facility, indenture
agreement, factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any indebtedness for
borrowed money or money due under any long term leasing or factoring arrangement
that (a) involves an obligation greater than $350,000, whether such indebtedness
now exists or shall hereafter be created, and (b) results in such indebtedness
being declared due and payable prior to the date on which it would otherwise
become due and payable;

 

 5 

 

 

 

(v)      the Company shall be a party to any Change of Control Transaction or
shall agree to sell or dispose of all or in excess of 50% of its assets in one
transaction or a series of related transactions (whether or not such sale would
constitute a Change of Control Transaction) that is not contingent upon the
payment in full of this Note; or

 

(vi)     any monetary judgment, writ or similar final process shall be entered
or filed against the Company, any subsidiary or any of their respective property
or other assets for more than $350,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 60 calendar
days.

 

(b)       Remedies Upon Event of Default. If any Event of Default occurs, the
outstanding principal amount of this Note, plus accrued but unpaid interest,
plus all interest that would have been earned through the Maturity Date if such
interest has not yet accrued, liquidated damages and other amounts owing in
respect thereof through the date of acceleration, shall become, at the Holder’s
election, immediately due and payable in cash. Commencing five days after the
occurrence of any Event of Default that results in the eventual acceleration of
this Note, the interest rate on this Note shall accrue at an interest rate equal
to the lesser of 18% per annum or the maximum rate permitted under applicable
law. Upon the payment in full of this Note, the Holder shall promptly surrender
this Note to or as directed by the Company. In connection with such acceleration
described herein, the Holder need not provide, and the Company hereby waives,
any presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by Holder at any
time prior to payment hereunder and the Holder shall have all rights as a holder
of this Note until such time, if any, as the Holder receives full payment
pursuant to this Section 5(b). No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.

 

Section 6.  Usury. It is the intent of the Company and the Holder to comply at
all times with applicable usury laws. If at any time such laws would render
usurious any amounts called for under this Note, then it is the express
intention of the Company and the Holder that such excess amount be immediately
credited on the principal balance of this Note (or, if this Note has been fully
paid, refunded by the Holder to the Company, and the Company shall accept such
refund), and the provisions hereof be immediately deemed to be reformed and the
amounts thereafter collectible hereunder reduced to comply with the then
applicable laws, without the necessity of the execution of any further
documents, but so as to permit the recovery of the fullest amount otherwise
called for hereunder.

 

 6 

 

 

Section 7. Miscellaneous.

 

(a)       Notices. Any and all notices or other communications or deliveries to
be provided by the Holder hereunder shall be in writing and delivered
personally, by e-mail, or sent by a nationally recognized overnight courier
service, addressed to the Company, at the address set forth above, or such other
e-mail address or mailing address as the Company may specify for such purposes
on its signature page hereto or otherwise by notice to the Holder delivered in
accordance with this Section 7(a). Any and all notices or other communications
or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by e-mail, or sent by a nationally recognized overnight
courier service addressed to the Holder at the address of the Holder address set
forth above, or such other e-mail address or mailing address as the Company may
specify for such purposes on its signature page hereto or otherwise by notice to
the Holder delivered in accordance with this Section 7(a). Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the second Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service or (ii) upon the sender’s
receipt of an acknowledgement from the intended recipient (such as by the
“return receipt requested” function, as available, return e-mail, or other
written acknowledgement), if sent by e-mail.

 

(b)       Absolute Obligation. Except as expressly provided herein, no provision
of this Note shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Note at the time, place, and rate, and
in the coin or currency, herein prescribed. This Note is a direct debt
obligation of the Company.

 

(c)       Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new note for the principal
amount of this Note so mutilated, lost, stolen or destroyed, but only upon
receipt of evidence of such loss, theft or destruction of such Note, and of the
ownership hereof, reasonably satisfactory to the Company.

 

(d)       Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York,
without regard to the principles of conflict of laws thereof. Each party agrees
that all legal proceedings concerning the interpretation, enforcement and
defense of the transactions contemplated by any of the Transaction Documents
(whether brought against a party hereto or its respective Affiliates, directors,
officers, shareholder, employees or agents) shall be commenced in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the “New
York Courts”). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of such New York Courts, or such New York Courts are
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Note and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by applicable law. Each
party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Note or the transactions contemplated hereby.
If any party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorney’s fees and other costs and
expenses incurred in the investigation, preparation and prosecution of such
action or proceeding.

 

 7 

 

 

(e)       Amendments; Waiver. No provision of this Note may be waived, modified,
supplemented or amended except in a written instrument signed, in the case of an
amendment, by each of the Company and the Holder or, in the case of a waiver, by
the party against whom enforcement of any such waived provision is sought. Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Note. The failure of
the Company or the Holder to insist upon strict adherence to any term of this
Note on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Note on any other occasion.

 

(f)       Severability. If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any Person or circumstance, it shall nevertheless
remain applicable to all other Persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum rate of interest permitted
under applicable law. The Company covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law or other law which would prohibit or forgive the Company from paying
all or any portion of the principal of or interest on this Note as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Note, and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefits or advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the Holder,
but will suffer and permit the execution of every such as though no such law has
been enacted.

 

(g)       Successors and Assigns. The terms and conditions of this Note shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties. The Company may not assign this note or delegate any
of its obligations hereunder without the written consent of the Holder. The
Holder may not assign this Note and its rights hereunder at any time without
consent of the Company.

 

 8 

 

 

 

(h)       Next Business Day. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.

 

(i)       Headings. The headings contained herein are for convenience only, do
not constitute a part of this Note and shall not be deemed to limit or affect
any of the provisions hereof.

 

*********************

 

[signature pages follow]

 

 

 

IN WITNESS WHEREOF, the Company has caused this Subordinated Promissory Note to
be duly executed by a duly authorized officer as of the date first above
indicated.

 

  PRECIPIO DIAGNOSTICS, LLC         By: /s/ Ilan Danieli     Name: Ilan Danieli
    Title:   CEO

 

  E-Mail for delivery of Notices:    

 

ACCEPTED AND AGREED:

 

  TRANSGENOMIC, INC.         By: /s/ Robert M. Patzig     Name: Robert M. Patzig
    Title:   Chairman of the Board

 

  E-Mail for delivery of Notices:    

 

Signature Page to

Subordinated Promissory Note