Exhibit 10.16


 


EXCHANGE AGREEMENT


 


This Exchange Agreement
(this “Agreement”) is dated as of _______, 2014, by and among SIGNAL GENETICS LLC, a Delaware limited
liability company (the “Company”), LeBow Alpha LLLP, a
Delaware limited liability limited partnership (“Alpha”), LeBow Gamma
Limited Partnership, a Delaware limited partnership (“Gamma”), BSL
Capital, Inc., a Nevada corporation (“BSL” and, together with Alpha, Gamma and BSL, the “Lenders”),
and BENNETT S. LEBOW, an individual (“LeBow” and, together with the Lenders, the “LeBow Parties”).


 


WHEREAS, on December
31, 2013, the Company issued an Amended and Restated Secured Demand Promissory Note (the “Note”) in the amount
of $25,000,000 to Alpha, which bears interest at an annual interest rate of 8.0%, which Note includes all of the principal and
interest then owed to Alpha and the other Lenders;


 


WHEREAS, as of [•],
2014, the total amount of indebtedness under the Note (including principal and accrued but unpaid interest) is $[•]
(the “Note Amount”);


 


WHEREAS, Alpha holds
10,000 Class B Units of Myeloma Health LLC, a subsidiary of the Company (the “Myeloma Units”);


 


WHEREAS, the Company
intends to convert (the “Conversion”) from a Delaware limited liability company to a Delaware corporation (the
“Corporation”) immediately prior to its initial public offering (“IPO”);


 


WHEREAS, the Company
intends that, for U.S. federal income tax purposes, the Conversion and the IPO shall collectively qualify as an integrated transaction
described in Internal Revenue Code Section 351, followed immediately by a liquidation of the Company;


 


WHEREAS, in connection
with the Conversion and the IPO, the Lenders have agreed to exchange $[•] of the Note Amount (the “Exchange
Amount”) for a number of Class C units (the “Class C Units”) of the Company to be issued to Alpha
(the “Class C Exchange”), which number of Class C Units shall be equal to the Exchange Amount divided by the
initial public offering price of the shares of common stock, par value $0.01 per share, of the Corporation (the “Common
Stock”) to be offered and sold in the IPO, and which Class C Units shall automatically convert into an equal number of
shares of Common Stock (the “Shares”), of the Corporation at the time of the Conversion, and immediately prior
to the IPO;


 


WHEREAS, in connection
with the Conversion and the IPO, Alpha has also agreed to withdraw as a member of Myeloma Health LLC and to relinquish all of its
right, title and interest in and to the Myeloma Units, such that following such relinquishment the Corporation will be the sole
member of Myeloma Health LLC; and


 


WHEREAS, it is
the intention of the Company that, for U.S. federal income tax purposes, the Class C Exchange shall be treated as the Company
satisfying the [Note Amount/Exchange Amount] with an amount of money equal to the fair market value of the Class C Units
issued pursuant to this Agreement, as described in Section 108(e)(8) of the Internal Revenue Code of 1986, as amended (the
“Code”).


  




    	 



    	 



    

 


NOW, THEREFORE, in
consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


 


1.            ISSUE
AND EXCHANGE OF SECURITIES.


 


1.1           Authorization
of Class C Units. Prior to the Closing (as defined below), the Company shall have amended and restated its current Amended
and Restated Limited Liability Company Agreement, as amended (the “Operating Agreement, and as further amended and
restated as contemplated herein, the “New Operating Agreement”) to authorize a new class of units of the Company
to be designated the “Class C Units” and shall have authorized the Class C Exchange and the Conversion, pursuant to
which the Class C Units shall be automatically converted into the Shares.


 


1.2           Exchange
and Issuance of Class C Units. The LeBow Parties agree to exchange the Exchange Amount for the Class C Units to be issued to
Alpha and the Company agrees to issue to Alpha the Class C Units in exchange for the Exchange Amount.


 


2.            CLOSING;
DELIVERY.


 


2.1           Closing.
The Class C Units shall be issued to Alpha immediately after the pricing of the IPO and immediately prior to the execution of the
Underwriting Agreement as part of the Class C Exchange and immediately thereafter exchanged for the Shares upon the Conversion
on the date hereof (the “Closing”).


 


2.2           Cancellation
and Conversion; Delivery. At the Closing, the Lenders shall deliver to the Company the Note, which shall be cancelled and all
obligations thereunder shall be released and discharged, and the Company shall deliver the Shares to Alpha and, at the Company’s
discretion, either (i) a new Secured Demand Promissory Note for a principal amount equal to the difference between the Note Amount
and the Exchange Amount (the “Debt Balance Amount”) or (ii) preferred stock of the Corporation, par value $0.01
per share, with a liquidation preference equal to the Debt Balance Amount (the “Preferred Stock”).


 


2.3           Myeloma
Units. At the Closing, Alpha shall deliver to the Company any certificate(s) representing the Myeloma Units.


 


3.            REPRESENTATIONS
AND WARRANTIES OF THE LEBOW PARTIES. Each of the LeBow Parties makes the following representations and warranties as of the
date hereof:


 


3.1           Requisite
Power and Authority. Each of the LeBow Parties has all of the necessary power, authority and capacity under all applicable
provisions of law to execute and deliver this Agreement and to carry out its provisions. All actions on the part of the LeBow Parties
required for the lawful execution and delivery of this Agreement have been or will be effectively taken prior to the Closing. Upon
its execution and delivery, this Agreement will be a valid and binding obligation of the LeBow Parties, enforceable in accordance
with its terms.


  




    	 



    	 



    

 


 


3.2           Investment
Representations. The LeBow Parties understand that neither the Class C Units to be issued in the Class C Exchange nor the Shares
into which the Class C Units shall be automatically converted at the time of the Conversion nor any Preferred Stock that may be
issued to Alpha hereunder in exchange for the Debt Balance Amount (collectively referred to hereinafter interchangeably as the
“Securities”), have been registered under the Securities Act of 1933, as amended (the “Act”).
The LeBow Parties also understand that the Securities are being offered and exchanged pursuant to an exemption from registration
contained in the Act based in part upon his representations provided in this Agreement. The LeBow Parties hereby represent and
warrant as follows:


 


3.2.1           Acquisition
Entirely for Own Account. Alpha is acquiring the Securities for its own account, for investment only, not as nominee or agent,
and not with a view to the resale or distribution of any part thereof, and Alpha has no present intention of selling, granting
any participation in, or otherwise distributing the same. By executing this Agreement, the LeBow Parties further represents that
they do not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to
such person or to any third person, with respect to any of the Securities.


 


3.2.2           Disclosure
of Information. The LeBow Parties have received all of the information they consider necessary or appropriate for deciding
whether to exchange the Exchange Amount in consideration for the Securities. The LeBow Parties further represent that they have
had an opportunity to discuss the Company’s business, management and financial affairs (including without limitation its
currently anticipated requirement for capital) with the Company and to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Securities and have concluded that such terms and conditions are fair to the LeBow
Parties.


 


3.2.3           Ability
to Bear Economic Risk. The LeBow Parties have such knowledge and experience in financial and business matters that he is capable
of evaluating the merits and risks of an investment in the Company (and the Corporation following the Conversion) and has the capacity
to protect his own interests in connection with the transactions contemplated in this Agreement. In determining whether to make
the Class C Exchange, the LeBow Parties have relied solely on their own knowledge and understanding of the Company and its business
based upon his own due diligence investigations and the information furnished by the Company to him. The LeBow Parties understands
that Alpha must bear the economic risk of the Class C Exchange indefinitely unless the Securities are registered pursuant to the
Act, or an exemption from registration is available. The LeBow Parties understand that the Company has no present intention of
registering the Securities. The LeBow Parties also understand that there is no assurance that any exemption from registration under
the Act will be available and that, even if available, such exemption may not allow Alpha to transfer all or any portion of the
Securities under the circumstances, in the amounts or at the times Alpha might propose. Further, the LeBow Parties are not aware
of any publication or any advertisement in connection with the transactions contemplated in this Agreement.


  




    	 



    	 



    

  


3.2.4           Restricted
Securities. The LeBow Parties understand that the Securities may not be sold, transferred, or otherwise disposed of without
registration under the Act, or an exemption therefrom, and that in the absence of an effective registration statement covering
the offer and sale of the Securities or an available exemption from registration under the Act, the Securities must be held indefinitely.
In particular, the LeBow Parties are aware of the provisions of Rule 144 promulgated under the Act and that the Securities may
not be sold pursuant to Rule 144 unless all of the conditions of that Rule are met. Among the conditions for use of Rule 144 may
be the availability of certain current information to the public about the Company.


 


3.2.5           Accredited
Investor. Alpha is an “accredited investor” as such term is defined in Rule 501 of Regulation D under the Act.


 


3.2.6           Counsel.
The LeBow Parties acknowledge that they have had the opportunity to review this Agreement, and the transactions contemplated by
this Agreement, with their own legal counsel. The LeBow Parties are relying solely on such counsel and not on any statements or
representations of the Company or its agents for legal advice with respect to this investment or the transactions contemplated
by this Agreement.


 


3.2.7           Tax
Advisors. The LeBow Parties have reviewed with their own tax advisors the U.S. federal, state, local and foreign tax consequences
of this investment and the transactions contemplated by this Agreement. With respect to such matters, the LeBow Parties rely solely
on such advisors and not on any statements or representations of the Company or any of its agents, written or oral. The LeBow Parties
understand that they (and not the Company) shall be responsible for their own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.


 


3.3           Representations
Related to Myeloma Units. Alpha represents and warrants that the Myeloma Units are owned solely by it, free and clear of any
and all liens, encumbrances, pledges, mortgages, hypothecations, assignments, preferences, covenants, conditional sales, leases,
security interests, claims, charges, assessments, options, rights of first refusal, transfer or voting restrictions or any other
restrictions of any kind or nature whatsoever. The Myeloma Units constitute 100% of the economic or other interests in Myeloma
Health LLC owned by Alpha or in which Alpha has any interest.


 


4.            REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company makes the following representations and warranties as of the date hereof:


  




    	 



    	 



    

  


4.1           Organization
and Standing. The Company is a limited liability company duly formed, validly existing and in good standing under the laws
of the State of Delaware. The Company and each direct or indirect subsidiary of the Company has all requisite power and authority
to carry out their respective businesses as presently conducted and proposed to be conducted.


 


4.2           Authorization.
The execution, delivery and performance of this Agreement by the Company have been duly authorized by all requisite action and
this Agreement constitutes the legal, valid and binding obligation of the Company enforceable in accordance with its terms.


 


4.3           Compliance.
The Company is not in violation or default of any term of its Certificate of Formation or its Operating Agreement. The execution,
delivery, and performance of and compliance with this Agreement, and the issuance and exchange of the Securities pursuant hereto
will not, with or without the passage of time or giving of notice, result in any violation of, or be in conflict with or constitute
a default under any term of the Certificate of Formation, the Operating Agreement or the New Operating Agreement, or result in
the creation or imposition of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of the Company.


 


4.4           Capitalization.
All of the outstanding units of the Company have been duly authorized, validly issued and fully paid and are not subject to any
preemptive right, right of first refusal or similar right on the part of the Company or any other person and all such capital stock
has been (or will have been) offered, issued and sold in all material respects in accordance with all applicable laws. The Securities,
when issued in accordance with the terms of this Agreement, shall be duly authorized, validly issued, fully paid and non-assessable.


 


5.            MISCELLANEOUS.


 


5.1           Legend.
Any certificate representing the Securities shall bear an appropriate legend indicating that such Securities are “restricted
securities” for purposes of the Securities Act of 1933, as amended, and subject to restrictions on transfer.


 


5.2           Survival
of Warranties. The warranties and representations of the Company and LeBow Parties made herein shall survive the execution
and delivery of this Agreement and the closing of the transaction contemplated hereby and shall in no way be affected by any investigation
or lack of investigation of the subject matter thereof made by or on behalf of LeBow Parties or the Company.


 


5.3           Amendment
and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by
each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing
and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure,
breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring
before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from
this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or
privilege.


  




    	 



    	 



    

  


5.4           Notice.
All notices, requests, consents, claims, demands, waivers and other communications required or permitted by this Agreement shall
be in writing and shall be deemed to have been given: (a) when delivered by hand; (b) when received by the addressee if sent by
overnight courier; (c) on the date sent by facsimile or e-mail if sent during normal business hours of the recipient, and on the
next business day if sent after normal business hours of the recipient; or (d) forty-eight (48) hours after being deposited in
the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s
address as set forth on the signature pages hereto, or as subsequently modified by written notice.


 


5.5           Severability.
If one or more provisions of this Agreement are held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed from this Agreement, and the balance of this Agreement
shall be enforceable in accordance with its terms.


 


5.6           Governing
Law. All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement
shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any
choice or conflict of law provision or rule.


 


5.7           Successors
and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.


 


5.8           Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute
one instrument. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall
be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.


 


  


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IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the day and the year first written.


 


	 	SIGNAL GENETICS LLC
	 	 
	 	By:	 
	 	Name:            Samuel D. Riccitelli
	 	Title:              President and CEO
	 	 
	 	 
	 	BENNETT S. LEBOW
	 	 
	 	LeBow Alpha LLLP
	 	 
	 	By:	 
	 	Name: Bennett S. LeBow
	 	 
	 	LeBow Gamma Limited

 Partnership
	 	 
	 	By:	 
	 	Name: Bennett S. LeBow
	 	 
	 	BSL Capital, Inc.
	 	 
	 	By:	 
	 	Name: Bennett S. LeBow




 


[Signal Genetics LLC Exchange Agreement]