Document:

Secured Convertible Term Note

 Exhibit 10.2 
  
 THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO TRANSGENOMIC, INC. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 SECURED CONVERTIBLE TERM NOTE 
  
 FOR VALUE RECEIVED, TRANSGENOMIC, INC., a Delaware corporation (the “Borrower”), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o
Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the “Holder”) or its registered assigns or successors in interest, on order, the sum of
Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000), together with any accrued and unpaid interest hereon, on February 19, 2007 (the “Maturity Date”) if not sooner paid. 
  
 Capitalized terms used herein without definition shall have the meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of the date hereof between the Borrower and the Holder (the “Purchase Agreement”). 
  
 The following terms shall apply to this Note: 
  
 ARTICLE I 
 INTEREST &
AMORTIZATION 
  
 1.1 Interest Rate and Payment. (a)
Subject to Sections 4.10 and 5.6 hereof, interest payable on this Note shall accrue at a rate per annum (the “Interest Rate”) equal to the “prime rate” published in The Wall Street Journal from time to time, plus two (2%).
The prime rate shall be increased or decreased as the case may be for each increase or decrease in the prime rate in an amount equal to such increase or decrease in the prime rate; each change to be effective as of the day of the change in such
rate. The Interest Rate shall not be less than six percent (6.00%) unless the Company shall be in compliance with Section 2.2 hereof. If the company has satisfied the requirements of Section 2.2 hereof, the Interest Rate will be subject to
adjustment as set forth in Section 1.1(b). In no event, however, shall the Interest Rate be less than zero percent (0.00%). Interest shall be payable monthly in arrears commencing on April 1, 2004, on the first day of each consecutive calendar month
thereafter (each, a “Repayment Date”), and on the Maturity Date, whether by acceleration or otherwise. 
  

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 1.1 (b) On the last business day of each month hereafter until the Maturity Date (each a
“Determination Date”), the Interest Rate shall be adjusted: if (i) the Company shall have registered the shares of the Company’s common stock underlying the conversion of the Note and that certain warrant issued to Holder on a
registration statement declared effective by the SEC, and (ii) the volume weighted average price of the Common Stock as reported by Bloomberg, L.P. on the principal market for the ten (10) trading days immediately preceding a Determination Date
exceeds the then applicable Fixed Conversion Price, the Interest Rate for the succeeding calendar month shall automatically be (i) reduced by 100 basis points (1.00 b. p.) for each incremental twenty five percent (25%) increase in the market price
of the Common Stock above the then applicable Fixed Conversion Price and (ii) ) reset by 100 basis points (1.00 b. p.) for each incremental twenty five percent (25%) decrease in the market price of the Common Stock above the then applicable Fixed
Conversion Price, provided, however that in no event shall the Interest Rate exceed the Interest Rate on the date hereof.  
  
 1.2 Minimum Monthly Principal Payments. Amortizing payments of the aggregate principal amount outstanding under this Note at any time (the
“Principal Amount”) shall begin on June 1, 2004 and shall recur on the first calendar day of each succeeding month thereafter until the Maturity Date (each, an “Amortization Date”) as set forth in the table below:

  

							
	 Date

	  	Principal Amount

	  	Date

	  	Principal Amount

	 6/1/04
	  	$50,000	  	9/1/05	  	$75,000
	 71/04
	  	$50,000	  	10/1/05	  	$75,000
	 8/1/04
	  	$50,000	  	11/1/05	  	$75,000
	 9/1/04
	  	$50,000	  	12/1/05	  	$75,000
	 10/1/04
	  	$50,000	  	1/1/06	  	$75,000
	 11/1/04
	  	$50,000	  	2/1/06	  	$75,000
	 12/1/04
	  	$50,000	  	3/1/06	  	$75,000
	 1/1/05
	  	$50,000	  	4/1/06	  	$75,000
	 2/1/05
	  	$50,000	  	5/1/06	  	$75,000
	 3/1/05
	  	$75,000	  	6/1/06	  	$75,000
	 4/1/05
	  	$75,000	  	7/1/06	  	$75,000
	 5/1/05
	  	$75,000	  	8/1/06	  	$75,000
	 6/1/05
	  	$75,000	  	9/1/06	  	$75,000
	 7/1/05
	  	$75,000	  	10/1/06	  	$75,000
	 8/1/05
	  	$75,000	  	11/1/06	  	$75,000
	 	  	 	  	12/1/06	  	$75,000
	 	  	 	  	1/1/07	  	$75,000
	 	  	 	  	2/1/07	  	$75,000
	 	  	 	  	3/1/07	  	$500,000

  

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 Subject to Section 3 below, beginning on the first Amortization Date, the Borrower shall make monthly
payments to the Holder on each Repayment Date, each in the amount set forth above, together with any accrued and unpaid interest to date on such portion of the Principal Amount plus any and all other amounts which are then owing under this Note but
have not been paid (collectively, the “Monthly Amount”). 
  
 ARTICLE II 
 CONVERSION REPAYMENT OPTION 
  
 2.1 (a) Payment of Monthly Amount in Cash or Common Stock. Subject to
the terms hereof, the Holder shall have the sole option to determine whether to elect to accept payment of the Monthly Amount on each Repayment Date either in cash or in shares of Common Stock (as defined in the Purchase Agreement), or a combination
of both. Each month by the tenth (10th) business day prior to each Amortization Date (the “Notice
Date”), the Holder shall deliver to Borrower a written notice in the form of Exhibit B attached hereto electing to convert the Monthly Amount payable on the next Repayment Date in either cash or Common Stock, or a combination of both (each,
a “Repayment Election Notice”) . If a Repayment Election Notice is not delivered by the Holder on or before the applicable Notice Date for such Repayment Date, then the Borrower shall pay the Monthly Amount due on such Repayment
Date in cash. Any portion of the Monthly Amount paid in cash on a Repayment Date, shall be paid to the Holder an amount equal to 102% of the principal portion of the Monthly Amount due and owing to Holder on the Repayment Date. If the Holder
converts all or a portion of the Monthly Amount in shares of Common Stock, the number of such shares to be issued by the Borrower to the Holder on such Repayment Date shall be the number determined by dividing (x) the portion of the Monthly Amount
to be paid in shares of Common Stock, by (y) the then applicable Fixed Conversion Price. For purposes hereof, the initial “Fixed Conversion Price” means $2.61 . 
  

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 (b) Monthly Amount Conversion Guidelines. Subject to Sections 2.1(a), 2.2, and 3.2 hereof, the
Holder shall elect to convert all or a portion of the Monthly Amount due on each Repayment Date in shares of Common Stock if the closing price of the Common Stock as reported by Bloomberg, L.P. on the Principal Market (as defined in Section 4.7
hereof) for the ten (10) trading days preceding such Repayment Date was greater than 110% of the Fixed Conversion Price. Any part of the Monthly Amount due on a Repayment Date that the Holder has not elected to convert into shares of Common Stock
shall be paid by the Borrower in cash on such Repayment Date. Any part of the Monthly Amount due on such Repayment Date which the Holder has elected to convert into shares of Common Stock but which must be paid in cash (as a result of the closing
price of the Common Stock on one or more of the ten (10) trading days preceding the applicable Repayment Date was less than 110% of the Fixed Conversion Price) shall be paid in cash at the rate of 103% of the Monthly Amount otherwise due on the
Repayment Date within three (3) business days of the applicable Repayment Date. 
  
 2.2 No Effective Registration. Notwithstanding anything to the contrary herein, none of the Borrower’s obligations to the Holder may be converted into Common Stock unless (i) an effective current
Registration Statement (as defined in the Registration Rights Agreement) covering the shares of Common Stock to be issued in connection with satisfaction of such obligations exists, (ii) no Event of Default hereunder exists and is continuing, unless
such Event of Default is cured within any applicable cure period or is otherwise waived in writing by the Holder in whole or in part at the Holder’s option (iii) an exemption from registration of the Common Stock is available to pursuant to
Rule 144 of the Securities Act. 
  
 Any amounts converted by the
Holder pursuant to this Section 2.2 shall be deemed to constitute payments of outstanding principal applying to Monthly Amounts for the remaining Repayment Dates in chronological order. 
  
 2.4 Optional Redemption in Cash. The Borrower will have the option of prepaying this Note (“Optional
Redemption”) by paying to the Holder a sum of money equal to one hundred five percent (105%) of the principal amount of this Note together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the
Holder arising under this Note, the Security Agreement, or any Ancillary Agreement (as defined in the Security Agreement) (the “Redemption Amount”) outstanding on the day written notice of redemption (the “Notice of
Redemption”) is given to the Holder. The Notice of Redemption shall specify the date for such Optional Redemption (the “Redemption Payment Date”) which date shall be seven (7) days after the date of the Notice of Redemption
(the “Redemption Period”). A Notice of Redemption shall not be effective with respect to any portion of this Note for which the Holder has a pending election to convert pursuant to Section 3.1, or for conversions elected to be made
by the Holder pursuant to Section 3.1 during the Redemption Period. The Redemption Amount shall be determined as if such Holder’s conversion elections had been completed immediately prior to the date of the Notice of 
  

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 Redemption. On the Redemption Payment Date, the Redemption Amount must be paid in good funds to the Holder. In the event
the Borrower fails to pay the Redemption Amount on the Redemption Payment Date, then such Redemption Notice will be null and void. 
  
 ARTICLE III 
 CONVERSION RIGHTS

  
 3.1. Holder’s Conversion Rights. The Holder
shall have the right, but not the obligation, to convert all or any portion of the then aggregate outstanding principal amount of this Note, together with interest and fees due hereon, into shares of Common Stock subject to the terms and conditions
set forth in this Article III. The Holder may exercise such right by delivery to the Borrower of a written notice of conversion not less than one (1) day prior to the date upon which such conversion shall occur. The date upon which such conversion
shall occur is (the “Conversion Date”). 
  
 3.2
Conversion Limitation. Notwithstanding anything contained herein to the contrary, the Holder shall not be entitled to convert pursuant to the terms of this Note an amount that would be convertible into that number of Conversion Shares which
would exceed the difference between the number of shares of Common Stock beneficially owned by such Holder or issuable upon exercise of warrants held by such Holder and 4.99% of the outstanding shares of Common Stock of the Borrower. For the
purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The Holder may void the Conversion Share limitation described in this
Section 3.2 upon 75 days prior notice to the Borrower or without any notice requirement upon an Event of Default. 
  
 3.3 Mechanics of Holder’s Conversion. (a) In the event that the Holder elects to convert this Note into Common Stock, the Holder shall give
notice of such election by delivering an executed and completed notice of conversion (“Notice of Conversion”) to the Borrower and such Notice of Conversion shall provide a breakdown in reasonable detail of the Principal Amount,
accrued interest and fees being converted. On each Conversion Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Borrower within two (2) business days after the Conversion Date. Each date on which a Notice of Conversion is delivered or telecopied to the Borrower in accordance with the
provisions hereof shall be deemed a Conversion Date (the “Conversion Date”). A form of Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit A. 
  
 (b) Pursuant to the terms of the Notice of Conversion, the Borrower will issue instructions to the transfer agent
accompanied by an opinion of counsel within one (1) business day of the date of the delivery to Borrower of the Notice of Conversion and shall cause the transfer agent to transmit the certificates representing the Conversion Shares to the Holder by
crediting the account of the 
  

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 Holder’s designated broker with the Depository Trust Corporation (“DTC”) through its Deposit
Withdrawal Agent Commission (“DWAC”) system within three (3) business days after receipt by the Borrower of the Notice of Conversion (the “Delivery Date”). In the case of the exercise of the conversion rights set
forth herein the conversion privilege shall be deemed to have been exercised and the Conversion Shares issuable upon such conversion shall be deemed to have been issued upon the date of receipt by the Borrower of the Notice of Conversion. The Holder
shall be treated for all purposes as the record holder of such Common Stock, unless the Holder provides the Borrower written instructions to the contrary. 
  
 3.4 Conversion Mechanics. 
  
 (a) The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing that portion of the principal and
interest and fees to be converted, if any, by the then applicable Fixed Conversion Price. In the event of any conversions of outstanding principal amount under this Note in part pursuant to this Article III, such conversions shall be deemed to
constitute conversions of outstanding principal amount applying to Monthly Amounts for the remaining Repayment Dates in chronological order. 
  
 (b) The Fixed Conversion Price and number and kind of shares or other securities to be issued upon conversion is subject to adjustment from time to time
upon the occurrence of certain events, as follows: 
  
 A.
Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Fixed
Conversion Price or the Conversion Price, as the case may be, shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which
the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. 
  
 B. During the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a
sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. The Borrower
agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares
of Common Stock upon the conversion of this Note. 
  
 C. Share
Issuances. Subject to the provisions of this Section 3.4, if the Borrower shall at any time prior to the conversion or repayment in full of the Principal Amount issue any shares of Common Stock to a person other than the Holder (except (i)
pursuant to Subsections A or B above; 
  

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 (ii) pursuant to options, warrants, or other obligations to issue shares outstanding on the date hereof as disclosed to
Holder in writing; or (iii) pursuant to options that may be issued under any employee incentive stock option and/or any qualified stock option plan adopted by the Borrower) for a consideration per share (the “Offer Price”) less than the
Fixed Conversion Price in effect at the time of such issuance, then the Fixed Conversion Price shall be immediately reset to such lower Offer Price pursuant to the formula below: 
  
 If the Corporation issues any additional shares pursuant to Section 3.4 above then, and thereafter successively upon each
such issue, the Fixed Conversion Price shall be adjusted by multiplying the then applicable Fixed Conversion Price by the following fraction: 
  

			
	 	  	                     A +
B                  

	 	  	 (A + B) + [((C – D) x B) / C]

  
 A =
Actual shares outstanding prior to such offering 
  
 B = Actual shares sold in the offering 
  
 C = Fixed Conversion Price 
  
 D =
Offering price] 
  
 D. Reclassification, etc. If the
Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid Principal Amount and accrued interest thereon, shall
thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification
or other change. 
  
 3.5 Issuance of New Note. Upon any
partial conversion of this Note, a new Note containing the same date and provisions of this Note shall, at the request of the Holder, be issued by the Borrower to the Holder for the principal balance of this Note and interest which shall not have
been converted or paid. The Borrower will pay no costs, fees or any other consideration to the Holder for the production and issuance of a new Note. 
  
 ARTICLE IV 
 EVENTS OF DEFAULT

  
 Upon the occurrence and continuance of an Event of Default
beyond any applicable grace period, the Holder may make all sums of principal, interest and other fees then remaining unpaid 
  

 7 

 hereon and all other amounts payable hereunder due and payable within five (5) days after written notice from Holder to
Borrower (each occurrence being a “Default Notice Period”). In the event of such an acceleration, the amount due and owing to the Holder shall be 120% of the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any). If, with respect to any Event of Default other than a payment default described in Section 4.1 below, within the Default Notice Period the Borrower cures the Event of Default, the Event of Default will be deemed to no longer exist
and any rights and remedies of Holder pertaining to such Event of Default will be of no further force or effect. 
  
 The occurrence of any of the following events is an “Event of Default”: 
  
 4.1 Failure to Pay Principal, Interest or other Fees. The Borrower fails to pay when due any installment of
principal, interest or other fees hereon in accordance herewith, or the Borrower fails to pay when due any amount due under any other promissory note issued by Borrower. 
  
 4.2 Breach of Covenant. The Borrower breaches any material covenant or other term or condition of this Note or the
Purchase Agreement in any material respect and such breach, if subject to cure, continues for a period of thirty (30) days after the occurrence thereof. 
  
 4.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein, in the Purchase Agreement, or in
any Related Document (as defined in the Purchase Agreement) shall be materially false or misleading. 
  
 4.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed. 
  
 4.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against the Borrower or any of its property or other
assets for more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of ninety (90) days. 
  
 4.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against the Borrower. 
  
 4.7 Stop Trade. An SEC stop trade order or Principal Market trading suspension of the Common Stock shall be in effect for 5 consecutive days or 5 days during a period of 10 consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the Borrower shall not have been able to cure such trading suspension within 30 days of the notice thereof or list the Common Stock on another Principal Market within 60
days of such notice. The “Principal Market” for the Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, or New York Stock Exchange (whichever of the
foregoing is at the time the principal trading exchange or market for the Common Stock, or any securities exchange or other securities market on which the Common Stock is then being listed or traded. 
  

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 4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower’s failure to timely
deliver Common Stock to the Holder pursuant to and in the form required by this Note, and Section 9 of the Purchase Agreement, if such failure to timely deliver Common Stock shall not be cured within two (2) days. If Borrower is required to issue a
replacement Note to Holder and Borrower shall fail to deliver such replacement Note within seven (7) Business Days. 
  
 4.9 Default Under Related Agreements. The occurrence and continuance of any Event of Default as defined in the Related Agreements. 
  
 DEFAULT RELATED PROVISIONS 
  
 4.10 Payment Grace Period. The Borrower shall have a five (5) business
day grace period to pay any monetary amounts due under this Note or the Purchase Agreement or any Related Agreement, after which grace period a default interest rate of Interest Rate plus six percent (6%) per annum shall apply to the monetary
amounts due hereunder. 
  
 4.11 Conversion Privileges. The
conversion privileges set forth in Article III shall remain in full force and effect immediately from the date hereof and until this Note is paid in full. 
  
 4.12 Cumulative Remedies. The remedies under this Note shall be cumulative. 
  
 ARTICLE V 
 MISCELLANEOUS 
  
 5.1 Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 
  
 5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next business day, (c)
five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the Borrower at the address provided in the Purchase Agreement executed in connection herewith, and to the Holder at the address provided in the Purchase Agreement for such Holder, with a copy to John E.
Tucker, Esq., 825 Third Avenue, 14th Floor, New York, New York 10022, facsimile number (212) 541-4434, or at such
other address as the Borrower or the Holder may designate by ten days advance written notice to the other parties hereto. A Notice of Conversion shall be deemed given when made to the Borrower pursuant to the Purchase Agreement. 
  

 9 

 5.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout
this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented, and any successor instrument issued pursuant to Section 3.5 hereof, as it may be amended or supplemented.

  
 5.4 Assignability. This Note shall be binding upon the
Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be assigned by the Holder in accordance with the requirements of the Purchase Agreement. 
  
 5.5 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state
courts of New York or in the federal courts located in the state of New York. Both parties and the individual signing this Note on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to
recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other
provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to
Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court in favor of the Holder. 
  
 5.6 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess
of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed
by the Borrower to the Holder and thus refunded to the Borrower. 
  
 5.7 Security Interest. The holder of this Note has been granted a security interest in certain assets of the Borrower more fully described in a Security Agreement dated as of February 19, 2004. 
  
 5.8 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against
the other. 
  
 5.9 Cost of Collection. If default is made
in the payment of this Note, the borrower shall pay to Holder reasonable costs of collection, including reasonable attorney’s fees. 
  

 10 

 [Balance of page intentionally left blank; signature page follows.] 
  

 11 

 IN WITNESS WHEREOF, Borrower has caused this Convertible Term Note to be signed in its name
effective as of this 19th day of February, 2004. 
  

			
	TRANSGENOMIC, INC.
		
	 By:
	 	 /s/ Michael J. Draper

	 Name:
	 	 Michael J. Draper

	 Title:
	 	 CFO

  

	
	WITNESS:
	
	 /s/ Jerry Pearson

	

  

 12 

 EXHIBIT A 
  
 NOTICE OF CONVERSION 
  
 (To be executed by the Holder in order to convert all or part of the Note into Common Stock 
  
 [Name and Address of Holder] 
  
 The Undersigned hereby elects to convert $             of the principal due on [specify applicable
Repayment Date] under the Convertible Term Note issued by TRANSGENOMIC, INC. dated February      , 2004 by delivery of Shares of Common Stock of TRANSGENOMIC, INC. on and subject to the conditions set forth in Article
III of such Note. 
  
 1.        Date of
Conversion
                                        
                 
  
 2.        Shares To Be Delivered:
                                        
         
  

			
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

  

 13 

 EXHIBIT B 
  
 CONVERSIONELECTION NOTICE 
  
 (To be executed by the Holder in order to convert all or part of a Monthly Amount into Common Stock) 
  
 [Name and Address of Holder] 
  
 Holder hereby elects to convert $             of the Monthly Amount due on [specify applicable
Repayment Date] under the Convertible Term Note issued by TRANSGENOMIC, INC. dated             , 200     by delivery of Shares of Common Stock of
TRANSGENOMIC, INC. on and subject to the conditions set forth in Article III of such Note. 
  
 1.        Fixed Conversion Price:
        $                         
  
 2.        Amount to be paid:
                $                        

  
 3.        Shares To Be Delivered (2
divided by 1):                                  
  
 4.        Cash payment to be made by Borrower :
        $                         
  

					
	 Date:            
	 	LAURUS MASTER FUND, LTD.
			
	 	 	 By:
	 	  

	 	 	 Name:
	 	  

	 	 	 Title:
	 	  

  

 14 

 AMENDMENT NO. 1 TO SECURED CONVERTIBLE TERM NOTE 
 OF 
 TRANSGENOMIC, INC. 
  
 April 15, 2004 
  
 Reference is made to that certain Secured Convertible Term Note dated as of February 19, 2004 made by TRANSGENOMIC, INC., a Delaware Borrower (the
“Borrower”) in favor LAURUS MASTER FUND, LTD., c/o Ironshore Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church Street, Grand Cayman, Cayman Islands (the “Laurus”“) in the original
principal amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) (the “Term Note”). Capitalized terms used herein without definition shall have the meanings ascribed to such terms in the Term Note. 
  
 WHEREAS, each of the Borrower and Laurus desires to make certain changes to
the Term Note to address the comments made by the National Association of Securities Dealer Automated Quotation System market where the common stock of the Borrower is listed for trading. 
  
 NOW, THEREFORE, in consideration of the above, and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows: 
  

	 	1.	 	Section 3.2 of the Term Note is hereby deleted in its entirety and replaced with the following: 

  
 “3.2 Conversion Limitation. Notwithstanding anything contained herein to the contrary, the
Holder shall not be entitled to convert pursuant to the terms of this Note an amount that would be convertible into that number of Conversion Shares which, when added to the number of shares of Common Stock otherwise beneficially owned by such
Holder including those issuable upon exercise of warrants held by such Holder would exceed 4.99% of the outstanding shares of Common Stock of the Borrower at the time of conversion. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The Conversion Shares limitation described in this Section 3.2 shall automatically become null and void without any notice to
Borrower upon the occurrence and during the continuance beyond any applicable grace period of an Event of Default, or upon 75 days prior notice to the Borrower. Notwithstanding anything contained herein to the contrary, the number of shares of
Common Stock issuable by the Borrower and acquirable by the Holder at a price below $2.65 per share pursuant to the terms of the Secured Convertible Term Note and/or Warrants issued by the Borrower to the Holder pursuant to that certain Securities
Purchase Agreement dated February 19, 2004 (the “February Transaction Documents”), shall not exceed an aggregate of 5,776,614 shares of the Borrower’s Common Stock, (subject to appropriate adjustment for stock splits, stock dividends,
or other similar 
  

 15 

 recapitalizations affecting the Common Stock) (the “Maximum Common Stock Issuance”),
unless the issuance of shares hereunder in excess of the Maximum Common Stock Issuance shall first be approved by the Borrower’s shareholders. If at any point in time and from time to time the number of shares of Common Stock issued pursuant to
the terms of the February Transaction Documents, together with the number of shares of Common Stock that would then be issuable by the Borrower to the Holder in the event of a conversion or exercise pursuant to the terms of the February Transaction
Documents, would exceed the Maximum Common Stock Issuance but for this Section, the Borrower shall promptly call a shareholders meeting to solicit shareholder approval for the issuance of the shares of Common Stock hereunder in excess of the Maximum
Common Stock Issuance.” 
  

	 	2.	 	The foregoing amendment shall be effective as of the date hereof. 

  

	 	3.	 	There are no other amendments to the Term Note. 

  

	 	4.	 	The Borrower hereby represents and warrants to Laurus that as of the date hereof all representations, warranties and covenants made by Borrower in connection with the Term Note are
true correct and complete and all of Borrower’s covenants requirements have been met. As of the date hereof, no Event of Default under any Related Agreements (as defined in the Securities Purchase Agreement) has occurred or is continuing.

  
 IN WITNESS WHEREOF, each of the Borrower
and Laurus has caused this Amendment No. 1 to Secured Convertible Term Note to be signed in its name this 15 th day of April, 2004. 
  

			
	TRANSGENOMIC, INC.
		
	 By:
	 	 /s/ Mitchell L. Murphy

	 	 	 Name: Mitchell L. Murphy

	 	 	 Title: VP, Secretary & Treasurer

	
	LAURUS MASTER FUND, LTD.
		
	 By
	 	 /s/ David Grin

	 Name: David Grin

	 Title:

  

 16Common Stock Purchase Warrant

 Exhibit 10.3 
  
 THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO TRANSGENOMIC, INC. THAT SUCH REGISTRATION IS NOT REQUIRED. 
  
 Right to Purchase 125,000 Shares of Common 
 Stock of Transgenomic, Inc. (subject to adjustment 
 as provided herein) 
  
 COMMON STOCK PURCHASE WARRANT 
  

			
	 No. 2003-1
	 	 Issue Date: February 19, 2004

  
 Transgenomic, Inc., a
corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the terms set forth below, to
purchase from the Company from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through seven (7) years after such date (the “Expiration Date”), up to 125,000 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), $.01 par value, of the Company, at the Exercise Price (as defined below). The number and character of such shares of Common Stock and the Exercise Price are subject to adjustment as
provided herein. 
  
 As used herein the following terms, unless
the context otherwise requires, have the following respective meanings: 
  
 (a) The term “Company” shall include Transgenomic, Inc. and any corporation which shall succeed or assume the obligations of Transgenomic, Inc. hereunder. 
  
 (b) The term “Common Stock” includes (a) the Company’s Common
Stock, par value $.01 per share, and (b) any other securities into which or for which any of the securities described in (a) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

  
 (c) The term “Other Securities” refers to any stock
(other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise. 

 (d) The term “Exercise Price” shall be as follows: 
  
 a. 125,000 shares at $3.11 per share; 
  
 2. Exercise of Warrant. 
  
 2.1 Number of Shares Issuable upon Exercise. From and after the date
hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this Warrant in whole or in part, by delivery of an original or fax copy of the exercise notice attached hereto as Exhibit A (the
“Exercise Notice”), shares of Common Stock of the Company, subject to adjustment pursuant to Section 4. 
  
 2.2 Fair Market Value. Fair Market Value of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

  
 (a) If the Company’s Common Stock is traded on an
exchange or is quoted on the National or SmallCap Market of The Nasdaq Stock Market, Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

  
 (b) If the Company’s Common Stock is not traded on an
exchange or on the Nasdaq but is traded on the NASD OTC Bulletin Board or BBX Exchange, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date. 
  
 (c) Except as provided in clause (d) below, if the Company’s Common
Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a
panel of persons qualified by education and training to pass on the matter to be decided. 
  
 (d) If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be
payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter,
assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant are outstanding at the Determination Date. 
  
 3. Procedure for Exercise. 
  

3.1 Delivery of Stock Certificates, etc. on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant
shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. As soon as practicable after the
exercise of this Warrant in full or in part, and in any event within 3 business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the
Holder, or as 
  

 2 

 such Holder (upon payment by such holder of any applicable transfer taxes) may direct in compliance with applicable
securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise. 
  
 3.2 Exercise. 
  
 (a) Payment may be made either in (i) cash or by certified or official bank check payable to the order of the Company equal to the applicable aggregate
Exercise Price, (ii) by delivery of the Warrant, Common Stock and/or Common Stock receivable upon exercise of the Warrant in accordance with Section (b) below, or (iii) by a combination of any of the foregoing methods, for the number of Common
Shares specified in such form (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the holder per the terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein. 
  

(b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the Exercise Price (at
the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this
Warrant at the principal office of the Company together with the properly endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula: 
  
 X=Y (A-B) 
             A 
  

	Where	 	X = the number of shares of Common Stock to be issued to the Holder 

  

	 	Y=	 	the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date
of such calculation) 

  

	 	A=	 	the Fair Market Value of one share of the Company’s Common Stock (at the date of such calculation) 

  

	 	B=	 	Exercise Price (as adjusted to the date of such calculation) 

  
 4. Effect of Reorganization, etc.; Adjustment of Exercise Price. 
  
 4.1 Reorganization, Consolidation, Merger, etc. In case at any time or from time to time, the Company shall (a)
effect a reorganization, (b) consolidate with or merge into any other person, or (c) transfer all or substantially all of its properties or assets to any other 
  

 3 

 person under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate provision shall be made by the Company whereby the Holder of this Warrant, on the exercise hereof as provided in Section 1 at any time after the consummation of such
reorganization, consolidation or merger or the effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock (or Other Securities) issuable on such exercise prior to such consummation or such effective date, the
stock and other securities and property (including cash) to which such Holder would have been entitled upon such consummation or in connection with such dissolution, as the case may be, if such Holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Section 4. 
  
 4.2 Dissolution. In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense
deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of the Warrant after the effective date of such dissolution pursuant to Section 3.1 to a bank or trust company
having its principal office in New York, NY, as trustee for the Holder of the Warrant. 
  
 4.3 Continuation of Terms. Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 4, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or
assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 5. In the event this Warrant does not continue in full force and effect after the consummation of the transactions
described in this Section 4, then only in such event will the Company’s securities and property (including cash, where applicable) receivable by the holders of the Warrant be delivered to the Trustee as contemplated by Section 4.2. 

 
 5. Extraordinary Events Regarding Common Stock. 
  
 5.1 Reclassification, etc. If the Company at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Warrant shall thereafter be deemed to evidence the right to be issued an adjusted number of such securities and
kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. 
  
 5.2 Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater
or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Exercise Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased
in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such
event. 
  

 4 

 5.3 Share Issuances. Subject to the provisions of this Section, if the Company shall at any time
issue any shares of Common Stock to a person other than the Holder (except (a) pursuant to Sections 5.1 or 5.2 above; (b) pursuant to options, warrants, or other obligations to issue shares outstanding on the date hereof as disclosed to Holder in
writing; or (c) pursuant to options that may be issued under any employee incentive stock option and/or any qualified stock option plan adopted by the Company) for a consideration per share (the “Offer Price”) less than the Exercise Price
in effect at the time of such issuance, then the Exercise Price shall be immediately reset pursuant to the formula below. For purposes hereof, the issuance of any security of the Company convertible into or exercisable or exchangeable for Common
Stock shall result in an adjustment to the Exercise Price at the time of issuance of such securities. If the Company issues any additional shares pursuant to this Section then, and thereafter successively upon each such issue, the Exercise Price
shall be adjusted by multiplying the then applicable Exercise Price by the following fraction: 
  
 A + B 
 (A + B) + [((C—D) x B) / C] 
  
 A = Actual shares outstanding prior to such offering 
 B = Actual shares sold in the offering 
 C = Exercise Price 
 D = Offering price 
  
 5.4 Computation of Consideration. For purposes of any computation respecting consideration received pursuant to Section 5.3 above, the following
shall apply: 
  
 (a) In the case of the issuance of shares of
Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise
in connection therewith; 
  
 (b) In the case of the issuance of
shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof); and 
  
 (c) Upon any such
exercise, the aggregate consideration received for such securities shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company
upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (a) and (b) of this Section 5.4). 
  
 6. In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution
on outstanding Common Stock, (b) subdivide its 
  

 5 

 outstanding shares of Common Stock, (c) combine its outstanding shares of the Common Stock into a smaller number of
shares of the Common Stock or (d) issue any shares of Common Stock to a Person other than the Holder (other than (i) pursuant to Subsections (a), (b) or (c) above or (ii) pursuant to options, warrants or other obligations to issue shares outstanding
on the date hereof or (iii) any shares issued for incentive stock options or NonQualified stock options in each case under the Company’s Employee Stock Option Plan) for a consideration per share or having an exercise, conversion or exchange
price less than the Exercise Price in effect at the time of such issuance, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Exercise Price then in effect. The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares
of Common Stock that the holder of this Warrant shall thereafter, on the exercise hereof as provided in Section 1, be entitled to receive shall be increased to a number determined by multiplying the number of shares of Common Stock that would
otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is
the Exercise Price in effect on the date of such exercise. 
  
 7.
Certificate as to Adjustments. In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of the Warrant, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the
number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the holder of the Warrant and any Warrant agent of the Company (appointed pursuant to Section 11
hereof). 
  
 8. Reservation of Stock, etc. Issuable on Exercise
of Warrant. The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of the Warrant.

  
 9. Assignment; Exchange of Warrant. Subject to
compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) with respect to any or all of the Shares. On the surrender for exchange of this
Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably 
  

 6 

 satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without
limitation, a legal opinion from the Transferor’s counsel that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense) but with payment by the Transferor of any applicable transfer
taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in
the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor. 
  
 10. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor. 
  
 11. Registration Rights. The Holder of this Warrant has been granted certain registration rights by the Company.
These registration rights are set forth in a Registration Rights Agreement entered into by the Company and Purchaser of the Company’s Convertible Note (the “Note”) at or prior to the issue date of this Warrant. 
  
 12. Maximum Exercise. The Holder shall not be entitled to exercise
this Warrant on an exercise date, in connection with that number of shares of Common Stock which, when added to (i) the number of shares of Common Stock otherwise beneficially owned by the Holder and its affiliates on an exercise date, and (ii) the
number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this proviso is being made on an exercise date, would result in beneficial ownership by the Holder and its affiliates of more than
4.99% of the outstanding shares of Common Stock of the Company on such date. For the purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate exercises which would result in the issuance of more than 4.99%. The restriction described in this paragraph may be
revoked upon 75 days prior notice from the Holder to the Company and is automatically null and void upon an Event of Default under the Note. 
  
 13. Warrant Agent. The Company may, by written notice to the each holder of the Warrant, appoint an agent for the purpose of issuing Common Stock
(or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by such agent. 
  
 14. Transfer on the Company’s Books. Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary. 
  

 7 

 15. Notices, etc. All notices and other communications from the Company to the Holder of this
Warrant shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by such holder or, until any such Holder furnishes to the Company an address, then to, and at
the address of, the last Holder of this Warrant who has so furnished an address to the Company. 
  
 16. Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors of the Company. 
  
 17. Miscellaneous. This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be governed by and construed in accordance with the laws of State of New York without regard to principles of conflicts of laws. Any action brought concerning the transactions contemplated by
this Warrant shall be brought only in the state courts of New York or in the federal courts located in the state of New York; provided, however, that the Holder may choose to waive this provision and bring an action outside the state of New York.
The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees
and costs. In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant. The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. The Company
acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of
this Warrant to favor any party against the other party. 
  
 IN
WITNESS WHEREOF, the Company has executed this Warrant under seal as of the date first written above. 
  

			
	TRANSGENOMIC, INC.
		
	 By:
	 	         /s/ Michael J. Draper

	 	 	 Name: Michael J. Draper

	 	 	 Title: CFO

  

	
	 Witness:

	
	 /s/ Jerry Pearson

	

  

 8 

 Exhibit A 
  

FORM OF SUBSCRIPTION 
  
 (To be signed only on exercise of Warrant) 
  
 TO: Transgenomic, Inc. 
  
 The undersigned, pursuant to the provisions set forth in the attached Warrant (No.            ), hereby irrevocably elects to purchase (check applicable
box): 
  
                      shares of the Common Stock covered by such Warrant; or 
  
          the maximum number of shares of
Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2. 
  
 The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in such Warrant, which is
$            . Such payment takes the form of (check applicable box or boxes): 
  
          $             in lawful money of the United
States; and/or 
  
      the cancellation of such
portion of the attached Warrant as is exercisable for a total of              shares of Common Stock (using a Fair Market Value of
$             per share for purposes of this calculation); and/or 
  
      the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2, to
exercise this Warrant with respect to the maximum number of shares of Common Stock purchaseable pursuant to the cashless exercise procedure set forth in Section 2. 
  
 The undersigned requests that the certificates for such shares be issued in the name of, and delivered to
                                        
     whose address is
                                        
                 
  
                                       
          . 
  
 The
undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended
(the “Securities Act”) or pursuant to an exemption from registration under the Securities Act. 
  

			
	 Dated:                        
	 	  

	 	 	 (Signature must conform to name of holder as
 specified on the face of the Warrant)

		
	 	 	  

	 	 	 (Address)

  

 9 

 Exhibit B 
  

FORM OF TRANSFEROR ENDORSEMENT 
 (To be
signed only on transfer of Warrant) 
  
 For value received, the
undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of Transgenomic,
Inc. to which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its
respective right on the books of Transgenomic, Inc. with full power of substitution in the premises. 
  

					
	 Transferees

	 	 Percentage Transferred

	 	 Number Transferrred

  

			
	 Dated:            
	 	

	 	 	(Signature must conform to name of holder as specified on the face of the Warrant)

  

			
	Signed in the presence of:	 	 
	  

	 	  

	(Name)	 	(address)
	 ACCEPTED AND AGREED:
 [TRANSFEREE]
	 	  

	 	 	(address)
	  

	 	 
	(Name)	 	 

  

 10 

 AMENDMENT NO. 1 TO COMMON STOCK PURCHASE WARRANT 
 OF 
 TRANSGENOMIC, INC. 
  
 April 15, 2004 
  
 Reference is hereby made to that certain warrant of Transgenomic, Inc., a corporation organized under the laws of the State of Delaware (the
“Borrower”), dated February 19, 2004 and issued to Laurus Master Fund, Ltd. (the “Holder”), to purchase up to 125,000 fully paid and nonassessable shares of common stock, $.01 par value per share of the Borrower (the
“Warrant”). Capitalized terms used but not defined herein shall have the meanings given them in the Warrant. 
  
 WHEREAS, the Borrower and Holder desire to make certain changes to the Warrant to address the comments made by the National Association of Securities
Dealer Automated Quotation System market where the common stock of the Borrower is listed for trading. 
  
 NOW, THEREFORE, in consideration of the above, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows:. 
  
 Section 12 of the
Warrant is hereby deleted in its entirety and replaced with the following: 
  
 “12. Maximum Exercise. Notwithstanding anything contained herein to the contrary, the Holder shall not be entitled to exercise this Warrant on the exercise date, in connection with that number of shares of
Common Stock which, when added to the number of shares of Common Stock otherwise beneficially owned by such Holder including those issuable upon exercise of warrants held by such Holder would exceed 4.99% of the outstanding shares of Common Stock of
the Company at the time of conversion. For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The limitation described in
this Section 12 shall automatically become null and void without any notice to Company upon the occurrence and during the continuance beyond any applicable grace period of an Event of Default, or upon 75 days prior notice to the Company.
Notwithstanding anything contained herein to the contrary, the number of shares of Common Stock issuable by the Company and acquirable by the Holder at a price below $2.65 per share pursuant to the terms of the Secured Convertible Term Note and/or
Warrants issued by the Company to the Holder pursuant to that certain Securities Purchase Agreement dated February 19, 2004 (the “February Transaction Documents”), shall not exceed an aggregate of 5,776,614 shares of the Company’s
Common Stock, (subject to appropriate adjustment for stock splits, stock dividends, or other similar recapitalizations affecting the Common Stock) (the “Maximum Common Stock Issuance”), unless the issuance of shares hereunder in
excess of the Maximum Common Stock Issuance shall first be approved by the Company’s shareholders. If at any point in time and from time to time the number of shares of Common Stock issued pursuant to the terms of the February Transaction
Documents, together with the number of shares of Common Stock that would then be issuable by the 
  

 11 

 Company to the Holder in the event of a conversion or exercise pursuant to the terms of the February Transaction
Documents, would exceed the Maximum Common Stock Issuance but for this Section, the Company shall promptly call a shareholders meeting to solicit shareholder approval for the issuance of the shares of Common Stock hereunder in excess of the Maximum
Common Stock Issuance.” 
  

	 	2.	 	The foregoing amendment shall be effective as of the date hereof. 

  

	 	3.	 	There are no other amendments to the Warrant. 

  

	 	4.	 	The Borrower hereby represents and warrants to Holder that as of the date hereof all representations, warranties and covenants made by Borrower in connection with the Warrant are
true correct and complete and all of Borrower’s covenant requirements have been met. As of the date hereof, no Event of Default under any Related Agreement (as defined in the Securities Purchase Agreement) has occurred or is continuing.

  
 IN WITNESS WHEREOF, each of the Borrower
and Holder has caused this Amendment No. 1 to Warrant to be signed in its name this 15 th day of April, 2004. 
  

			
	TRANSGENOMIC, INC.
		
	 By:
	 	 /s/ Mitchell L. Murphy

	 Name:
	 	 Mitchell L. Murphy

	 Title:
	 	 VP, Secretary & Treasurer

	
	LAURUS MASTER FUND, LTD.
		
	 By:
	 	 /s/ David Grin

	 Name:
	 	 David Grin

	 Title:
	 	 

  

 12

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