EXHIBIT 10.2

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

 

This security is subject to the Subordination Agreement, dated as of DECEMBER
31, 2014, among THIRD SECURITY SENIOR STAFF 2008 LLC, as senior agent, THE
PARTIES LISTED ON SCHEDULE A THERETO, EACH AS A SUBORDINATED CREDITOR, AND
TRANSGENOMIC, INC., UNDER which the DEBTOR’S obligations hereunder are
subordinated in the manner set forth therein to the prior payment of certain
obligations to the Senior CREDITORS (as defined therein) and are subject to the
terms and provisions set forth therein.

 

$_____________

___________________

 

TRANSGENOMIC, INC.

UNSECURED CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED, Transgenomic, Inc., a Delaware corporation (the “Company”),
promises to pay to the order of ____________________ (“Holder”) the principal
amount of _____________ ($______) together with interest thereon calculated from
the date hereof in accordance with the provisions of this Unsecured Convertible
Promissory Note (this “Note”). This Note is issued pursuant to the Convertible
Note Purchase Agreement dated as of the date hereof by and between the Company
and Holder (the “Note Purchase Agreement”). Capitalized terms used and not
otherwise defined herein shall have the meanings given to such terms in the Note
Purchase Agreement.

 

1.                  Interest. Simple interest shall accrue on the unpaid
principal balance of this Note from the date hereof at an annual rate equal to
the lesser of: (i) 6% and (ii) the maximum rate permitted by applicable law.
Interest from the date hereof shall be computed on the basis of a 365/365-day
year for the actual number of days elapsed. All interest on this Note shall be
due and payable as set forth herein.

 

 

 

 

 

2.                  Payment.

 

(a)                Principal. If not otherwise repaid pursuant to Section 2(e)
below or converted pursuant to Section 3 below, the outstanding principal amount
of this Note shall be due and payable on the first to occur of (i) December 31,
2016 or (ii) the consummation of the sale of all or substantially all of the
stock or assets of the Company or a consolidation or merger of the Company with
or into any other entity or entities in which the stockholders of the Company
immediately prior to such transaction own less than fifty percent (50%) of the
voting power or capital stock of the surviving entity (any such date, the
“Maturity Date”).

 

(b)               Interest. The accrued and unpaid interest on this Note shall
be due and payable immediately upon the conversion of this Note in accordance
with the terms of Section 3 below, and shall be paid solely in shares of the
Common Stock of the Company, par value $0.01 per share (“Common Stock”).

 

(c)                Upon Default. Upon the occurrence or existence of any Event
of Default (as defined below), Holder may, by written notice to the Company,
declare the then-outstanding principal and accrued interest under this Note to
be immediately due and payable without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived.

 

(d)               Manner of Payment. All payments shall be made in lawful money
of the United States of America at the address for notice to Holder provided in
Section 7 below (or such other address as requested in writing by Holder in
accordance with Section 7 below). Payment shall be credited first to the accrued
interest then due and payable and the remainder applied to principal.

 

(e)                Prepayment. Prior to the Maturity Date and upon at least five
calendar days advance written notice to Holder, the Company may prepay this Note
plus accrued and unpaid interest, in whole or in part, without any premium or
penalty; provided that, upon receipt by Holder of notice of prepayment by the
Company, and prior to any such prepayment by the Company, Holder may elect to
convert any or all of the outstanding and unpaid principal amount of this Note
into shares of Common Stock in accordance with Section 3 below; and, provided
further, that Holder provides notice to the Company of its election to so
convert within three business days of receipt of the Company’s notice of
prepayment. Any prepayment shall be credited first to the accrued interest then
due and payable and the remainder applied to principal.

 

(f)                Subordination Agreement. Notwithstanding anything herein to
the contrary, this Note, and the Company’s obligations hereunder, shall be
subject in all respects to the terms of the Subordination Agreement.

 

3.                  Conversion. This Note shall be convertible into validly
issued, fully paid and non-assessable shares of Common Stock, on the terms and
conditions set forth in this Section 3.

 

(a)                Conversion Right.

 

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(i)Initial Voluntary Conversion. Subject to the provisions of Section 3(f)
below, commencing as of January 1, 2015, Holder shall be entitled to convert, on
a one-time basis, up to 50% of the outstanding and unpaid principal amount,
including all accrued and unpaid interest with respect to such portion of the
principal amount, into validly issued, fully paid and non-assessable shares of
Common Stock in accordance with Section 3(d) below, at the applicable Conversion
Rate (as defined below).

 

(ii)Second Voluntary Conversion. Subject to the provisions of Section 3(f)
below, commencing as of February 15, 2015, Holder shall be entitled to convert,
on a one-time basis, any or all of the outstanding and unpaid principal amount,
including all accrued and unpaid interest with respect to such portion of the
principal amount, into validly issued, fully paid and non-assessable shares of
Common Stock in accordance with Section 3(d) below, at the applicable Conversion
Rate (as defined below).

 

(b)               Conversion Rate. The number of shares of Common Stock issuable
upon conversion of any outstanding and unpaid principal amount pursuant to
Section 3(a) above shall be determined by dividing (x) such Conversion Amount by
(y) the applicable Conversion Price (the “Conversion Rate”); provided that, in
no event shall shares of Common Stock issuable upon a conversion in accordance
with this Section 3 be issued at a price per share of Common Stock less than
$1.20 per share (subject to adjustment for any stock split, dividend or other
distribution, adjustment, recapitalization or similar event).

 

(i)“Conversion Amount” means the portion of the principal amount to be
converted, redeemed or otherwise with respect to which this determination is
being made, plus all accrued and unpaid interest with respect to such portion of
the principal amount.

 

(ii)“Conversion Price” means:

 

(1)With respect to the first 50% of the outstanding and unpaid principal amount,
including all accrued and unpaid interest with respect to such portion of the
principal amount, being converted, the lesser of the (A) average closing price
of the Common Stock on The NASDAQ Stock Market LLC (“NASDAQ”) (or, if NASDAQ is
not the principal trading market for the Common Stock, then on the principal
securities exchange or securities market on which the Common Stock is then
traded) for the 20 consecutive trading days immediately preceding the Conversion
Date (as defined below), and (B) $2.20 (subject to adjustment for any stock
split, dividend or other distribution, adjustment, recapitalization or similar
event).

 

 

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(2)With respect to the second 50% of the outstanding and unpaid principal
amount, including all accrued and unpaid interest with respect to such portion
of the principal amount, being converted, the product obtained by multiplying
(A) 85% by (B) the average closing price of the Common Stock on NASDAQ (or, if
NASDAQ is not the principal trading market for the Common Stock, then on the
principal securities exchange or securities market on which the Common Stock is
then traded) for the 15 consecutive trading days immediately preceding the
Conversion Date (as defined below).

 

(c)                Conversion Matters. The Company shall not issue any fraction
of a share of Common Stock upon any conversion. If the issuance would result in
the issuance of a fraction of a share of Common Stock, the Company shall round
such fraction of a share of Common Stock up to the nearest whole share. The
Company shall pay any and all transfer, stamp, issuance and similar taxes that
may be payable with respect to the issuance and delivery of Common Stock upon
conversion of any outstanding and unpaid principal amount. Holder understands
that such shares of Common Stock issuable upon conversion of this Note may be
required to bear a restrictive legend pursuant to the Securities Act of 1933, as
amended (the “Securities Act”), in which case such shares of Common Stock shall
be issuable in certificated form. For clarification purposes, the Company shall
not be required to deliver unlegended shares hereunder for any reason whatsoever
until such time as such shares are sold pursuant to Rule 144 of the Securities
Act or pursuant to an effective Registration Statement on Form S-1 or S-3 and,
notwithstanding anything to the contrary herein, may issue certificated shares
bearing the restrictive legend pursuant to the Securities Act.

 

(d)               Mechanics of Conversion. To convert any Conversion Amount into
shares of Common Stock on any date (a “Conversion Date”), Holder shall deliver
to the Company (whether via facsimile or otherwise), at least one trading day
prior to the Conversion Date, a copy of an executed notice stating Holder’s
election to convert this Note into shares of Common Stock in accordance with the
terms hereof (the “Conversion Notice”). On or before the first trading day
following the date of receipt of a Conversion Notice, the Company shall transmit
by facsimile an acknowledgment of confirmation of receipt of such Conversion
Notice to Holder and the Company’s transfer agent. Not later than three trading
days after such Conversion Date (the “Share Delivery Date”), the Company shall
deliver, or cause to be delivered, to Holder a certificate or certificates
representing the number of Conversion Shares being acquired upon the conversion
of this Note. If this Note is physically surrendered for conversion and the
outstanding principal amount of this Note is greater than the principal portion
of the Conversion Amount being converted, then the Company shall as soon as
practicable and in no event later than three business days after receipt of this
Note and at its own expense, issue and deliver to Holder (or its designee) a new
Note representing the outstanding principal amount not converted. The person or
persons entitled to receive the shares of Common Stock issuable upon a
conversion of this Note shall be treated for all purposes as the record holder
or holders of such shares of Common Stock on the Conversion Date.

 

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(e)                Failure to Delivery Certificates. If, in the case of any
Conversion Notice, such certificate or certificates are not delivered to or as
directed by Holder by the Share Delivery Date, Holder shall be entitled to elect
by written notice to the Company at any time on or before its receipt of such
certificate or certificates, to rescind such Conversion Notice, in which event
the Company shall promptly return to Holder the original Note delivered to the
Company, if applicable, and Holder shall promptly return to the Company the
Common Stock certificates issued to Holder pursuant to the rescinded Conversion
Notice.

 

(f)                Limitations on Conversion. Notwithstanding anything to the
contrary set forth in this Note, the Company shall not effect the conversion of
this Note, and Holder shall not have the right to convert this Note pursuant to
the terms and conditions hereof and any such conversion shall be null and void
and treated as if never made, to the extent that after giving effect to such
conversion, Holder, together with any Attribution Parties (as defined below) to
Holder, collectively would beneficially own in excess of 9.99% (the “Maximum
Percentage”) of the shares of Common Stock outstanding immediately after giving
effect to such conversion. For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by Holder and other
Attribution Parties to Holder shall include the number of shares of Common Stock
held by Holder and all other Attribution Parties to Holder, plus the number of
shares of Common Stock issuable upon conversion of this Note with respect to
which the determination of such sentence is being made, but shall exclude shares
of Common Stock which would be issuable upon (i) conversion of the remaining,
non-converted portion of this Note beneficially owned by Holder or any other
Attribution Parties to Holder and (ii) exercise or conversion of the unexercised
or non-converted portion of any other securities of the Company (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) beneficially owned by Holder or any other Attribution Party to Holder
subject to a limitation on conversion or exercise analogous to the limitation
contained in this Section 3(f). For purposes of this Section 3(f), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act. For purposes of determining the number of outstanding shares of Common
Stock Holder may acquire upon the conversion of this Note without exceeding the
Maximum Percentage, Holder may rely on the number of outstanding shares of
Common Stock as reflected in (A) the Company’s most recent Annual Report on Form
10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public
filing with the Securities and Exchange Commission, as the case may be, (B) a
more recent public announcement by the Company, or (C) any other written notice
by the Company or its transfer agent, if any, setting forth the number of shares
of Common Stock outstanding (the “Reported Outstanding Share Number”). If the
Company receives a Conversion Notice from Holder at a time when the actual
number of outstanding shares of Common Stock is less than the Reported
Outstanding Share Number, the Company shall notify Holder in writing of the
number of shares of Common Stock then outstanding and, to the extent that such
Conversion Notice would otherwise cause Holder’s beneficial ownership, as
determined pursuant to this Section 3(f), to exceed the Maximum Percentage,
Holder must notify the Company of a reduced number of shares of Common Stock to
be purchased pursuant to such Conversion Notice. For any reason at any time,
upon the written or oral request of Holder, the Company shall, within one
business day, confirm orally and in writing or by electronic mail to Holder the
number of shares of Common Stock then outstanding. In any case, the number of
outstanding shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including any portion
of this Note, by Holder and any other Attribution Party since the date as of
which the Reported Outstanding Share Number was reported. In the event that the
issuance of shares of Common Stock to Holder upon conversion of any portion of
this Note results in Holder and the other Attribution Parties to Holder being
deemed to beneficially own, in the aggregate, more than the Maximum Percentage
of the number of outstanding shares of Common Stock (as determined under Section
13(d) of the Exchange Act), the number of shares so issued by which Holder’s and
the other Attribution Parties to Holder’s aggregate beneficial ownership exceeds
the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and
shall be cancelled ab initio, and Holder shall not have the power to vote or to
transfer the Excess Shares. For purposes of clarity, the shares of Common Stock
issuable upon conversion of this Note in excess of the Maximum Percentage shall
not be deemed to be beneficially owned by Holder for any purpose including for
purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. No prior
inability to convert any portion of this Note pursuant to this paragraph shall
have any effect on the applicability of the provisions of this paragraph with
respect to any subsequent determination of convertibility. The provisions of
this paragraph shall be construed and implemented in a manner otherwise than in
strict conformity with the terms of this Section 3(f) to the extent necessary to
correct this paragraph (or any portion of this paragraph) which may be defective
or inconsistent with the intended beneficial ownership limitation contained in
this Section 3(f) or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitation contained in this
paragraph may not be waived and shall apply to each successor holder of this
Note.

 

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For purposes of this Section 3(f), “Attribution Parties” means, with respect to
any given Holder, collectively, the following persons and entities: (i) any
investment vehicle, including, any funds, feeder funds or managed accounts,
currently, or from time to time after the date hereof, directly or indirectly
managed or advised by Holder’s investment manager or any of its affiliates or
principals, (ii) any direct or indirect affiliates of Holder or any of the
foregoing, (iii) any person acting or who could be deemed to be acting as a
Group (as that term is used in Section 13(d) of the Exchange Act and as defined
in Rule 13d-5 thereunder) together with Holder or any of the foregoing, and (iv)
any other persons whose beneficial ownership of the Common Stock would or could
be aggregated with Holder’s and the other Attribution Parties for purposes of
Section 13(d) of the Exchange Act. For clarity, the purpose of the foregoing is
to subject collectively Holder and all other Attribution Parties to the Maximum
Percentage.

 

4.                  Events of Default. Notwithstanding the foregoing, upon the
occurrence or existence of any of the following events, Holder may, by written
notice to the Company, declare the then-outstanding principal and accrued
interest under this Note to be immediately due and payable without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived (each, an “Event of Default”): (i) the Company commences a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any federal or state bankruptcy
laws; (ii) the Company makes a general assignment for the benefit of the
Company’s creditors; (iii) the Company files, or a third party files against the
Company, a petition in bankruptcy or any petition for relief under the federal
or state bankruptcy laws and (in the case of an involuntary petition) such
petition is not dismissed or discharged within 90 days of such filing; (iv) the
Company applies for or consents to the appointment of a receiver, trustee or
similar person to take possession of all or a substantial part of the property
or assets of the Company or a receiver, trustee or similar person is appointed
and not discharged within 90 days; (v) the Company fails to timely make any
payment (whether principal, interest or otherwise) under this Note within ten
days of when due, whether upon demand or otherwise; or (vi) the Company files a
certificate of dissolution under applicable state law, otherwise liquidates,
dissolves or winds-up the Company, or commences or has commenced against it any
action or proceeding for the dissolution, winding-up or liquidation of the
Company, or takes any corporate action in furtherance thereof. The Company shall
promptly notify Holder in writing of any Event of Default or the occurrence of
any event that is reasonably likely to result in an Event of Default.

 

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5.                  Transfer; Successors and Assigns. The terms and conditions
of this Note shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Notwithstanding the foregoing, Holder may
not assign, pledge, or otherwise transfer this Note without the prior written
consent of the Company, except for whole or partial transfers to affiliates of
Holder (including, but not limited to, Holders’ respective partners, members,
stockholders, directors or executive officers) and family members of Holder
(and/or to trusts for the benefit of such family members), for which an opinion
of counsel shall not be required; provided that such transfer does not violate
applicable securities laws. Subject to the preceding sentence, this Note may be
transferred only upon surrender of the original Note for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to Holder. Thereupon, a new note for the same
principal amount and interest (and reflecting accrued interest) will be issued
to, and registered in the name of, the transferee. Notwithstanding the
foregoing, this Note has been issued subject to certain investment
representations of the original Holder set forth in the Note Purchase Agreement
and may be transferred or exchanged only in compliance with the Purchase
Agreement and applicable federal and state securities laws and regulations.
Interest and principal are payable only to the registered holder of this Note,
and such payment shall constitute full discharge of the Company’s obligation to
pay such interest and principal. Prior to presentation of this Note for
registration of transfer, the Company shall treat the registered holder hereof
as the owner and holder of this Note for the purpose of receiving all payments
of principal and interest hereon and for all other purposes whatsoever, whether
or not this Note shall be overdue and the Company shall not be affected by
notice to the contrary.

 

6.                  Governing Law. This Note shall be enforced, governed and
construed in all respects in accordance with the laws of the State of New York,
as such laws are applied by the New York courts to agreements entered into and
to be performed in New York by and between residents of New York, and shall be
binding upon Holder, Holder’s heirs, estate, legal representatives, successors
and assigns and shall inure to the benefit of the Company, its successors and
assigns.

 

7.                  Notices. Any notice or other document required or permitted
to be given or delivered to Holder shall be in writing and sent (a) by fax if
the sender on the same day sends a confirming copy of such notice by an
internationally recognized overnight delivery service (charges prepaid) or (b)
by an internationally recognized overnight delivery service (with charges
prepaid):

  

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if to the Company, at

 

Transgenomic, Inc.

12325 Emmet Street
Omaha, NE 68164

Fax No.: (402) 452-5401

Attention: Chief Executive Officer

 

or such other address as it shall have specified to the Purchaser in writing,
with a copy (which shall not constitute notice) to:

Paul Hastings LLP

1117 S. California Avenue

Palo Alto, CA 94304
Fax: (650) 320-1904

Attention: Jeffrey T. Hartlin, Esq.

 

if to Holder, at such Holder’s address set forth on such Holder’s signature page
to the Note Purchase Agreement, or such other address as it shall have specified
to the Company in writing.

 

8.                  Lost Documents. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Note or any note exchanged for it, and an indemnity agreement reasonably
satisfactory to the Company (in case of loss, theft or destruction) or surrender
and cancellation of such note (in the case of mutilation), the Company, at its
own expense, will make and deliver in lieu of such note a new note of like tenor
and unpaid principal amount and dated as of the date to which interest has been
paid on the unpaid principal amount of the note in lieu of which such new note
is made and delivered.

 

9.                  Amendments and Waivers. Any term of this Note may be amended
or waived only with the written consent of the Company and Holder. Any amendment
or waiver effected in accordance with this Section 9 shall be binding upon the
Company and Holder. Any waiver by the Company or 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 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.

 

10.              Waiver. The Company waives presentment and demand for payment,
notice of dishonor, protest and notice of protest, notice of nonpayment and
notice of acceleration or intent of acceleration of this Note, and shall pay all
costs of collection when incurred, including, without limitation, reasonable
attorneys’ fees, costs and other expenses. The right to plead any and all
statutes of limitations as a defense to any demands hereunder is hereby waived
to the fullest extent permitted by law, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.

 

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11.              Severability. If any provision of this Note is held to be
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed modified to conform with such statute or rule of law.
Any provision hereof that may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provisions hereof.

 

12.              Attorneys’ Fees. In the event of default by the Company (or its
assignee) in the payment of principal or interest due on this Note, Holder shall
be entitled to receive and the Company (or its assignee) agrees to pay all costs
of collection incurred by Holder, including, without limitation, reasonable
attorney’s fees for consultation, suit and/or settlement.

 

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IN WITNESS WHEREOF, the Company has caused this Unsecured Convertible Promissory
Note to be signed in its name by an authorized officer as of the date first
written above.

 

TRANSGENOMIC, INC.

 

 

By:  __________________________________

Name: Paul Kinnon

Title: President and Chief Executive Officer