Exhibit 10.2

 

THIS SECURITY HAS NOT 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 OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

Principal Amount: $[                   ] Original Issue Date: April 13, 2017

  

TRANSGENOMIC, INC.

 

4% PROMISSORY NOTE

DUE JULY 12, 2017

 

THIS 4% PROMISSORY NOTE is one of a series of duly authorized and validly issued
4% Promissory Notes of Transgenomic, Inc., a Delaware corporation, (the
“Company”), having its principal place of business at 12325 Emmet Street, Omaha,
NE 68164, designated as its 4% Promissory Notes due 2017 (this note, the “Note”
and, collectively with the other notes of such series, the “Notes”).

 

FOR VALUE RECEIVED, the Company promises to pay to [                           
] or its registered assigns (the “Holder”), or shall have paid pursuant to the
terms hereunder, the principal sum of [         ] Thousand dollars
($             ) on the earlier of (i) July 12, 2017, or (ii) the closing of a
Qualified Offering (the “Maturity Date”), or such earlier date as this Note is
required or permitted to be repaid as provided hereunder, and to pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Note in accordance with the provisions hereof. Any cash payment of this
Note shall be deemed to be an Optional Redemption and the Redemption Amount
shall be paid in accordance with the terms and conditions of Section 6(b)
herein. 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, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement and (b) the
following terms shall have the following meanings:

 

 1 

 

 

“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.

 

“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 the Notes and
the Securities issued together with the Notes), (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, (d) a replacement at one
time or within a one year period of more than one-half of the members of the
Board of Directors which is not approved by a majority of those individuals who
are members of the Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on any date
whose nomination to the Board of Directors was approved by a majority of the
members of the Board of Directors who are members on the date hereof), or (e)
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 (d) above provided that the consummation of the Proposed Transactions
(as such term is defined in the Purchase Agreement) shall not be deemed to be
“Change of Control Transaction”.

 

“Event of Default” shall have the meaning set forth in Section 6(a).

 

“Fundamental Transaction” shall have the meaning set forth in Section 6(a).

 

“Indebtedness” shall have the meaning ascribed to such term in the Purchase
Agreement.

 

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“Late Fees” shall have the meaning set forth in Section 2(d).

 

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

 

“Note Register” shall have the meaning set forth in Section 2(c).

 

“Optional Redemption” shall have the meaning set forth in Section 4(a).

 

“Optional Redemption Date” shall have the meaning set forth in Section 4(a).

 

“Optional Redemption Notice” shall have the meaning set forth in Section 4(a).

 

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

 

“Optional Redemption Period” shall have the meaning set forth in Section 4(a).

 

“Original Issue Date” means the date of the first issuance of the Notes,
regardless of any transfers of any Note and regardless of the number of
instruments which may be issued to evidence such Notes.

 

“Purchase Agreement” means the Securities Purchase Agreement, dated as of April
13, 2017, among the Company and the Holder and the other persons signatory
thereto, as amended, modified or supplemented from time to time in accordance
with its terms.

 

“Qualified Offering” means an underwritten public offering in the United States
of the Company’s equity securities.

 

“Redemption Amount” means the sum of 120% of (a) the then outstanding principal
amount of the Note, (b) accrued but unpaid interest, and (c) all liquidated
damages and other amounts due in respect of the Note.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

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

 

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.

 

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Section 3. Registration of Transfers and Exchanges.

 

(a)       Different Denominations. This Note is exchangeable for an equal
aggregate principal amount of Notes of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be payable
for such registration of transfer or exchange.

 

(b)       Investment Representations. This Note has been issued subject to
certain investment representations of the original Holder set forth in the
Purchase Agreement and may be transferred or exchanged only in compliance with
the Purchase Agreement and applicable federal and state securities laws and
regulations.

 

(c)       Reliance on Note Register. Prior to due presentment for transfer to
the Company of this Note, the Company and any agent of the Company may treat the
Person in whose name this Note is duly registered on the Note Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Note is overdue, and neither the Company nor
any such agent shall be affected by notice to the contrary.

 

Section 4. Redemption.

 

(a)       Optional Redemption at Election of Company. Subject to the provisions
of this Section 6(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 18% per annum or 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 Optional 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 Optional Redemption
Amount that remains unpaid.

 

Section 5. Negative Covenants. Except with respect to the transaction
contemplated by the Proposed Transactions, as long as any portion of this Note
remains outstanding and Notes with an aggregate principal amount of $100,000,
remain outstanding, unless the Holder of at least 66% in principal amount of the
then outstanding Notes shall have otherwise given prior written consent, the
Company shall not, and shall not permit any of the Subsidiaries to, directly or
indirectly:

 

(a)       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;

 

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

 

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(c)         enter into any transaction with any Affiliate of the Company which
would be required to be disclosed in any public filing with the Commission,
unless such transaction is expressly approved by a majority of the disinterested
directors of the Company (even if less than a quorum otherwise required for
board approval);

 

(d)         incur, guarantee or assume any Indebtedness, other than the
Indebtedness evidenced by this Note and the other Notes, except for 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
Purchasers to the rights of the Purchasers and for which no payments may be made
at any time when Notes remain outstanding;

 

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

 

(f)         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, (ii) sales of
inventory and product in the ordinary course of business consistent with past
practice for fair consideration, and (iii) a sale or disposition of assets to a
third party that has been approved by the independent members of the Board of
Directors;

 

(g)         fail to take all action necessary or advisable to maintain all of
the Intellectual Property Rights (as defined in the Purchase Agreement) of the
Company and/or any of its Subsidiaries that are necessary or material to the
conduct of the business of the Company in full force and effect except in
connection with the sale or disposition of assets to a third party that has been
approved by the independent members of the Board of Directors; or

 

(h)         enter into any agreement with respect to any of the foregoing.

 

Section 6. 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 any 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 a Conversion
Date or 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;

 

 5 

 

 

(ii)        the Company shall fail to observe or perform in any material respect
any other covenant or agreement contained in the Notes, 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)       a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall have been
declared under any of the Transaction Documents;

 

(iv)      any representation or warranty made in this Note, any other
Transaction Documents, or certificate made or delivered to the Holder pursuant
to the Transaction Documents shall be untrue or incorrect as of the date when
made or deemed made except where such untrue or incorrect statement could not
reasonably be expected to have a Material Adverse Effect (as defined in the
Securities Purchase Agreement);

 

(v)        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;

 

(vi)       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 $500,000, 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;

 

(vii)      the Company shall be a party to any Change of Control Transaction or
Fundamental 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). For
purposes hereof, a “Fundamental Transaction” shall mean, except as contemplated
in the Proposed Transactions (as such term is defined in the Purchase
Agreement), if, at any time while this Note is outstanding, (i) the Company,
directly or indirectly, in one or more related transactions effects any merger
or consolidation of the Company with or into another Person and the Company is
not the surviving entity, (ii) the Company, directly or indirectly, effects any
sale, lease, license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of related
transactions, (iii) any, direct or indirect, purchase offer, tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holder of Common Stock are permitted to sell, tender or exchange their
shares for other securities, cash or property and has been accepted by the
holder of 50% or more of the outstanding Common Stock, (iv) the Company,
directly or indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the Common Stock or any
compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, (v) the
Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of
Common Stock held by the other Person or other Persons making or party to, or
associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination); or

 

 6 

 

 

(viii)     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 $500,000, 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 at the Redemption Amount.
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 the Redemption
Amount, 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 the Note until such time, if
any, as the Holder receives full payment pursuant to this Section 6(b). No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.

 

Section 7. Miscellaneous.

 

(i)         Notices. Any and all notices or other communications or deliveries
to be provided by the Holder hereunder, including, without limitation, any
Notice of Conversion, shall be in writing and delivered personally, by
facsimile, or sent by a nationally recognized overnight courier service,
addressed to the Company, at the address set forth above, or such other
facsimile number or address as the Company may specify for such purposes by
notice to the Holder delivered in accordance with this Section 9(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 facsimile, or sent by
a nationally recognized overnight courier service addressed to the Holder at the
facsimile number or address of the Holder appearing on the books of the Company,
or if no such facsimile number or address appears on the books of the Company,
at the principal place of business of the Holder, as set forth in the Purchase
Agreement. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
set forth on the signature pages attached hereto prior to 4:00 p.m. (New York
City time) on any date, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth on the signature pages attached hereto on a day that
is not a Trading Day or later than 4:00 p.m. (New York City time) on any Trading
Day, (iii) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (iv) upon actual receipt by
the party to whom such notice is required to be given.

 

 7 

 

 

(ii)        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. This Note ranks pari passu with all other Notes now
or hereafter issued under the terms set forth herein.

 

(iii)       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.

 

(iv)       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.

 

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(v)        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.

 

(vi)       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.

 

(vii)      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. The Company may not assign this note or delegate any of
its obligations hereunder without the written consent of the Holder. The Holder
may assign this Note and its rights hereunder at any time without consent of
Company.

 

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(viii)     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.

 

(ix)        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)

 

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

 

  TRANSGENOMIC, INC.     By:   Robert M. Patzig   Chairman of the Board    
Email address for delivery of Notices:   pkinnon@transgenomic.com