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Item 1.01.
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Entry into a Material Definitive Agreement.
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Amendment to Merger Agreement
As previously reported on October 13, 2016,
Transgenomic, Inc. (“Transgenomic”), New Haven Labs Inc., a wholly-owned subsidiary of Transgenomic (“Merger
Sub”), and Precipio Diagnostics, LLC (“Precipio”) entered into an Agreement and Plan of Merger (the “Merger
Agreement”) pursuant to which Precipio will become a wholly-owned subsidiary of Transgenomic (the “Merger”),
on the terms and subject to the conditions set forth in the Merger Agreement. Following the Merger, Transgenomic will change its
name to Precipio, Inc. (“New Precipio”).
On February 2, 2017, Transgenomic, Merger
Sub and Precipio entered into a First Amendment to Agreement and Plan of Merger (the “Merger Agreement Amendment”)
which provided for, among other things, the following: (a) the authorization of a line of credit up to $250,000 provided by Precipio
to Transgenomic pursuant to an unsecured promissory note (as discussed below); (b) the revision of the exchange ratio set forth
in the Merger Agreement to provide that issued and outstanding common units of Precipio prior to the effective time of the Merger
will be converted into the right to receive an amount of shares of New Precipio common stock (“New Precipio common stock”)
equal to 80% of the issued and outstanding shares of New Precipio common stock (not taking into account the issuance of shares
of convertible preferred stock of New Precipio (“New Precipio preferred stock”) in the Merger or related private placement);
(c) the waiver as a condition to the closing of the Merger of the continual listing of the existing shares of Transgenomic’s
common stock on the NASDAQ Capital Market; (d) the extension of the deadline pursuant to which a “shelf” registration
statement on Form S-3 or other appropriate form is required to be filed by New Precipio with the Securities Exchange Commission
to June 1, 2017; (e) the authorization for certain indebtedness of New Precipio to remain outstanding as of the effective date
of the Merger; (f) the authorization of certain actions taken by each of Transgenomic and Precipio since the date the Merger Agreement;
and (g) the removal from the Merger Agreement of certain conditions to closing of the Merger.
When the Merger is completed, (i) the
outstanding common units of Precipio will be converted into the right to receive approximately 160.6 million shares of New Precipio
common stock, together with cash in lieu of fractional units, which will result in Precipio common unit holders owning approximately
53% of the issued and outstanding shares of New Precipio common stock on a fully diluted basis, taking into account the issuance
of shares of New Precipio preferred stock in the Merger and the related private placement as discussed below (the “fully
diluted New Precipio common stock”) and (ii) the outstanding preferred units of Precipio will be converted into the
right to receive approximately 24.1 million shares of New Precipio preferred stock with an aggregate face amount equal to $3 million
(based upon the purchase price of the new preferred stock of New Precipio in the new preferred stock financing), which will result
in the Precipio preferred unit holders owning approximately 8% of the fully diluted New Precipio common stock.
In connection with the Merger, at the effective
time of the Merger, in addition to the New Precipio preferred stock to be issued to holders of preferred units of Precipio, New
Precipio also will issue shares of New Precipio preferred stock and New Precipio common stock in a related private placement, whereby:
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Holders of certain secured indebtedness of Transgenomic will receive in exchange for such indebtedness, approximately 24.1
million shares of New Precipio preferred stock in an amount equal to $3 million, which represents approximately 8% of the fully
diluted New Precipio common stock, and approximately 9.8 million shares of New Precipio common stock, which represents approximately
3% of the fully diluted New Precipio common stock; and
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New Precipio will issue for cash up to approximately 56.2 million shares of New Precipio preferred stock for $7 million to
investors in a private placement, which represents approximately 18% of the fully diluted New Precipio common stock.
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The foregoing
description of the Merger Agreement Amendment does not purport to be complete and is qualified in its entirety by reference to
the full text of the Merger Agreement Amendment, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated
herein by reference.
Amendment to Loan Agreement
On February 2, 2017, Transgenomic entered
into the Termination and Tenth Amendment (the “Loan Agreement Amendment”) to its Loan and Security Agreement, dated
March 13, 2013, with Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto
(collectively, the “Lenders”), as amended, for a revolving line of credit and a term loan (as so amended, the “Loan
Agreement”). The Loan Agreement Amendment, among other things, (i) provides that the Lenders will waive specified events
of default under the terms of the Loan Agreement until the effective time of the Merger (or the termination of the Merger Agreement
in accordance with its terms), (ii) provides for the conversion of all outstanding indebtedness owed to the Lenders under the Loan
Agreement (the “Outstanding Indebtedness”) into shares of Transgenomic common stock and preferred stock (collectively,
the “Conversion Shares”) effective as of the closing date of the Merger and (iii) the termination of the Loan Documents
(as defined in the Loan Agreement) and the termination and release of all security interests and liens of the Lenders in the Collateral
(as defined in the Loan Agreement) in each case immediately following the conversion of the Outstanding Indebtedness into Conversion
Shares.
The effectiveness of certain provisions
in the Loan Agreement Amendment, including provisions relating to conversion of the Conversion Shares and termination of the Loan
Documents, is conditioned on, among other things, the consummation of the Merger, and, in the event that the Merger is not consummated,
these provisions in the Loan Agreement Amendment will terminate.
As noted above, in connection with the Loan
Agreement Amendment, the Lenders have agreed to convert the outstanding principal and accrued interest under the Loan Agreement
into (i) approximately 9.8 million shares of New Precipio common stock immediately prior to the effectiveness of the Merger at
a price equal to $0.50 per share and (ii) 24.1 million shares of New Precipio preferred stock. As of December 31, 2016, the outstanding
amount owed under the Loan Agreement was $7.243 million of principal and $556,642 of accrued interest. The issuance of the Conversion
Shares is subject to the approval of the Transgenomic stockholders in accordance with NASDAQ Capital Market listing rules.
The Lenders are affiliates of Third Security,
LLC, whose affiliates hold more than 10% of the outstanding voting stock of Transgenomic. Additionally, Doit L. Koppler II, a director
of the Company, is affiliated with Third Security, LLC and its affiliates.
The foregoing description of the Loan Agreement
Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan Agreement
Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Promissory Note
As noted above, in connection with the Merger,
Precipio and Transgenomic entered into a promissory note (the “Note”), dated February 2, 2017, pursuant to which Precipio
agreed to offer a line of credit to Transgenomic up to a principal sum of $250,000. All outstanding amounts under the Note accrue
interest at a rate of 10% per annum and are due and payable upon the earlier to occur of (a) the date that is 90 days following
the date of the Note or (b) the closing of the Merger (the “Maturity Date”). Any amounts outstanding under the Note
on the earliest of (x) the occurrence of an Event of Default (as defined in the Note) and the passage of any applicable cure period
or (y) ten days after the Maturity Date, to the extent permitted by applicable law, will accrue interest at a rate of 12% per annum,
compounded daily.
The foregoing description of the Note does
not purport to be complete and is qualified in its entirety by reference to the full text of the Note, which is filed as Exhibit
10.2 to this Current Report on Form 8-K and incorporated herein by reference.