Document:

Unassociated Document

     

    Exhibit 10.2

    

      NONCOMPETITION
AND NONSOLICITATION AGREEMENT

       

      This
Noncompetition and Nonsolicitation Agreement (this “Agreement”)
is made and entered into as of December 29, 2010 (the “Agreement
Date”), by and among
PGxHealth, LLC, a Delaware limited liability company
(“Seller”), Clinical
Data, Inc., a Delaware
corporation (“Seller
Parent”), and Transgenomic,
Inc., a Delaware
corporation (“Buyer”).  Capitalized terms
used and not otherwise defined in this Agreement shall have the meanings given
to them in the Purchase Agreement (as defined below).

       

      RECITALS

       

      Whereas, Seller, Seller Parent
and Buyer have entered into that certain Asset Purchase Agreement, dated as of
November 29, 2010, as amended by that certain Amendment to Asset Purchase
Agreement, dated December 29, 2010, by and among Seller, Seller Parent and
Buyer  (together, the “Purchase
Agreement”);

       

      Whereas, in connection with and
as a condition to Buyer’s obligation to consummate the acquisition of the Assets
from Seller and Seller Parent pursuant to the Purchase Agreement (the “Sale”),
and to enable Buyer to secure more fully the benefits of the Sale, Buyer has
required that Seller and Seller Parent enter into this Agreement;
and

       

      Whereas, each of Seller and
Seller Parent believe that the restrictions set forth in this Agreement are just
and reasonable in light of the Sale and are entering into this Agreement in
order to induce Buyer to consummate the Sale and the other transactions
contemplated by the Transaction Documents.

       

      Now,
Therefore, in consideration of the foregoing and the respective
covenants, agreements and representations and warranties set forth herein, the
parties to this Agreement, intending to be legally bound, hereby agree as
follows:

       

      AGREEMENT

       

      1.           Definitions.  As
used in this Agreement, the following terms shall have the following respective
meanings:

       

      1.1           “Affiliate”
shall mean, with respect to any Person, a direct or indirect wholly-owned
subsidiary of such Person.

       

      1.2           “Business”
shall mean the business of: (i) providing the proprietary FAMILION family
of genetic tests for inherited cardiac syndromes; and (ii) developing and
commercializing other proprietary genetic and related biomarker tests, other
than any proprietary genetic and related biomarker tests of or relating to the
Seller’s therapeutic development business, which, for the avoidance of doubt,
does not and will not include any proprietary genetic and related biomarker
tests included in the Assets.

       

      1.3           “Competitive
Business” means any business, whether conducted within or outside of the
United States, that competes, either directly or indirectly, with the Business
or that otherwise interferes, either directly or indirectly, with the
Business.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      1.4           “Noncompetition
Period” shall mean the period commencing on the Closing Date and ending
on the third (3rd) anniversary of the Closing Date; provided, however, that in the
event of any breach by either Seller or Seller Parent or any of their Affiliates
or Representatives of any provision of this Agreement, the Noncompetition Period
shall be automatically extended by a number of days equal to the total number of
days in the period from the date on which such breach shall have first occurred
through the date as of which such breach shall have been fully
cured.

       

      1.5           “Representatives”
means the executive officers and employees.

       

      1.6           “Seller
Employee” means any individual who is an employee of Seller or Seller
Parent on the Closing Date, other than Specified Employees.

       

      1.7           “Specified
Employee” means any individual who: (i) is or was an employee of Seller
or Seller Parent that, on the Closing Date or during the one hundred eighty
(180) day period ending on the Closing Date, provided services to Seller or
Parent Seller in connection with the Business; or (ii) is an employee of
Buyer or its Affiliates at any time during the Noncompetition
Period.

       

      2.           Restriction
on Competition. Each of Seller and
Seller Parent agree that, during the Noncompetition Period, it shall not, and
shall not permit any of its Affiliates or Representatives to manage, control,
participate in or otherwise engage in, directly or indirectly, a Competitive
Business; provided, however, that Seller
and Seller Parent may, without violating the restrictions set forth in this
Section 2, own, as a passive investment, shares of capital stock of a publicly
held corporation that engages in a Competitive Business if (i) such shares are
actively traded on an Exchange, (ii) the number of shares of such
corporation’s capital stock that are owned beneficially (directly or indirectly)
by Seller and Seller Parent, and the number of shares of such corporation’s
capital stock that are owned beneficially (directly or indirectly) by Seller’s
and Seller Parent’s Affiliates and Representatives collectively represent less
than one percent (1%) of the total number of shares of such corporation’s
outstanding capital stock and (iii) neither Seller nor Seller Parent nor any of
their respective Affiliates or Representatives is otherwise associated directly
or indirectly with such corporation or with any Affiliate or Representative of
such corporation.

       

      3.           No
Hiring or Solicitation of Employees.

       

      3.1           Each
of Seller and Seller Parent agree that, during the Noncompetition Period, it
shall not, and shall not permit any of its Affiliates or Representatives to:
(i) hire any Specified Employee; or (ii) directly or indirectly encourage,
induce, attempt to induce, solicit or attempt to solicit (on its own behalf or
on behalf of any other Person) any Specified Employee to leave his or her
employment with Buyer or any of its Affiliates or Representatives, as
applicable; provided, however, that this
paragraph will not restrict Seller and Seller Parent from hiring any Specified
Employee who applies for employment with Seller or Seller Parent in response to
an advertisement in a publication or medium of general circulation that is not
targeted to such Specified Employee.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      3.2           Buyer
agrees that, during the Noncompetition Period, it shall not, and shall not
permit any of its Affiliates or Representatives to:  (i) hire any
Seller Employee; or (ii) directly or indirectly encourage, induce, attempt
to induce, solicit or attempt to solicit (on its own behalf or on behalf of any
other Person) any Seller Employee to leave his or her employment with Seller or
any of its Affiliates or Representatives as applicable; provided, however, that this
paragraph will not restrict Buyer from hiring any Seller Employee who applies
for employment with Buyer in response to an advertisement in a publication or
medium of general circulation that is not targeted to such Seller
Employee.

       

      4.           Nondisparagement. Each of Seller and
Seller Parent agree that, during the Noncompetition Period, it shall not make
any written or oral statements or disclosures, or cause or encourage any of its
Affiliates, Representatives or directors to make any written or oral statements
or disclosures, that defame, disparage or in any way criticize the Business or
the reputation, practices or conduct of Buyer or any of its Affiliates,
Representatives or directors.  Buyer agrees that, during the
Noncompetition Period, it shall not make any written or oral statements or
disclosures, or cause or encourage any of its Affiliates, Representatives or
directors to make any written or oral statements or disclosures, that defame,
disparage or in any way criticize Seller or Seller Parent or the reputation,
practices or conduct of Seller or Seller Parent or any of its Affiliates,
Representatives or directors.

       

      5.           Reasonableness
of Covenants. The
parties hereto expressly acknowledge and agree that the character, duration and
geographical scope of the restrictive covenants set forth in this Agreement are
reasonable in light of the circumstances as they exist on the date hereof,
including, without limitation, Seller’s and Seller Parent’s substantial economic
interest in the transactions contemplated by the Transaction
Documents.  Without limiting the generality of the foregoing, if any
court determines that any of the restrictive covenants contained herein, or any
part thereof, is unenforceable because of the character, duration or geographic
scope of such covenant, the parties agree that it would serve the mutual intent
of such parties if such court would modify the duration or scope of such
provision so that such provision, in its modified form, shall then be
enforceable to the maximum extent permitted by applicable law.

       

      
        	
                6.

              	
                Miscellaneous.

              

      

       

      6.1           Attorneys’ Fees.  If
any action or proceeding relating to this Agreement or the enforcement of any
provision of this Agreement is brought against any party hereto, the prevailing
party shall be entitled to recover reasonable attorneys’ fees, costs and
disbursements in addition to any other relief to which the prevailing party may
be entitled.

       

      6.2           Notices.  All
notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed effectively given:  (i) upon personal delivery
to the party to be notified; (ii) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day; (iii) five (5) business days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or
(iv) one (1) business 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 respective parties at the
following addresses (or at such other addresses as shall be specified by notice
given in accordance with this Section 6.2):

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      If to
Seller or Seller Parent:

       

      Clinical
Data, Inc.

      One
Gateway Center, Suite 702

      Newton,
MA 02458

      Attn:
Caesar J. Belbel, EVP and Chief Legal Officer

      Fax:
617-965-0445

       

      With a
copy to (which shall not constitute notice):

       

      Cooley
LLP

      500
Boylston Street, 14 Floor

      Boston,
MA 02116

      Attn:
Marc A. Recht

      Fax:
617-937-2400

       

      If to
Buyer:

       

      Transgenomic,
Inc.

      12325
Emmet Street

      Omaha, NE
68164

      Attn:
Craig J. Tuttle, President and Chief Executive Officer

      Fax:
402-452-5461

       

      With a
copy to (which shall not constitute notice):

       

      Paul,
Hastings, Janofsky & Walker LLP

      4747
Executive Drive, 12th Floor

      San
Diego, CA 92121

      Attn:
Carl R. Sanchez, Esq.

      Fax:
858-458-3005

       

      Notwithstanding
the foregoing, the parties expressly acknowledge and agree that, for purposes of
delivering any notice pursuant to this Agreement: (i) any such notice delivered
to either Seller or Seller Parent in accordance with this Section 6.2 shall
be deemed to have been delivered to both Seller and Seller Parent; and (ii) any
such notice given by either Seller or Seller Parent in accordance with this
Section 6.2 shall be deemed to have been given by both Seller and Seller
Parent.

      

      6.3           Headings.  The
bold-face headings contained in this Agreement are for convenience of reference
only, shall not be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or interpretation of this
Agreement.

       

      6.4           Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware, excluding any conflict of law rules that may direct the
application of the laws of another jurisdiction.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      6.5           Successors and
Assigns.  This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, if
any.  Neither Seller nor Seller Parent shall assign its rights or
obligations under this Agreement to any Person without the consent of Buyer.
Buyer shall not assign its rights or obligations under this Agreement to any
Person without the consent of Seller Parent.

       

      6.6           Termination. This Agreement
shall automatically terminate and be of no further force or effect upon a
merger, change of control, or sale of all or substantially all of the assets of
Seller Parent.

       

      6.7           Remedies Cumulative; Specific
Performance.  The rights and remedies of the parties hereto
shall be cumulative and not alternative.  The parties agree that, in
the event of any breach or threatened breach by any party to this Agreement of
any covenant, obligation or other provision set forth in this Agreement for the
benefit of any other party to this Agreement, such other party shall be
entitled, in addition to any other remedy that may be available to it, to:
(i) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision; and
(ii) an injunction restraining such breach or threatened
breach.  The parties further agree that no Person shall be required to
obtain, furnish or post any bond or similar instrument in connection with or as
a condition to obtaining any remedy referred to in this Section 6.6, and the
parties irrevocably waive any right they may have to require the obtaining,
furnishing or posting of any such bond or similar instrument.

       

      6.8           Waiver.  No failure
on the part of any Person to exercise any power, right, privilege or remedy
under this Agreement, and no delay on the part of any Person in exercising any
power, right, privilege or remedy under this Agreement, shall operate as a
waiver of such power, right, privilege or remedy and no single or partial
exercise of any such power, right, privilege or remedy shall preclude any other
or further exercise thereof or of any other power, right, privilege or
remedy.  No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person, and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.

       

      6.9           Amendments.  This
Agreement may not be amended, modified, altered or supplemented other than by
means of a written instrument duly executed and delivered on behalf of all of
the parties hereto.

       

      6.10        Severability.  Subject
to the provisions of Section 5, if one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith.  In the event that the parties cannot
reach a mutually agreeable and enforceable replacement in writing for such
provision, then: (i) such provision shall be excluded from this Agreement; (ii)
the balance of the Agreement shall be interpreted as if such provision were so
excluded; and (iii) the balance of the Agreement shall be enforceable in
accordance with its terms.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      6.11        Counterparts.  This
Agreement may be executed in counterparts and by facsimile signatures, any one
of which need not contain the signatures of more than one Party and each of
which shall be an original, but all such counterparts taken together shall
constitute one and the same instrument.  The exchange of copies of
this Agreement or amendments thereto and of signature pages by facsimile
transmission or by e-mail transmission in portable digital format (or similar
format) shall constitute effective execution and delivery of such instrument(s)
as to the Parties and may be used in lieu of the original Agreement or amendment
for all purposes.  Signatures of the Parties transmitted by facsimile
or by e-mail transmission in portable digital format (or similar format) shall
be deemed to be their original signatures for all purposes.

       

      6.12        Entire
Agreement.  This Agreement, together with each of the other
Transaction Documents and the schedules and exhibits hereto and thereto, set
forth the entire understanding of the parties hereto relating to the subject
matter hereof and thereof and supersede all prior agreements and understandings
among or between any of the parties relating to the subject matter hereof and
thereof.

      

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      In Witness
Whereof, the parties have duly executed this Noncompetition
and Nonsolicitation Agreement as of the date first set forth
above.

      

      
        	 
      	 
      	
                BUYER:

              
	 
      	 
      	 
      
	 
      	 
      	
                Transgenomic,
      Inc.

              
	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                /s/ Craig J. Tuttle

              
	 
      	 
      	 
      	
                Craig
      J. Tuttle

              
	 
      	 
      	 
      	
                President
      and Chief Executive Officer

              
	 
      	 
      	 
      
	 
      	 
      	
                SELLER:

              
	 
      	 
      	 
      
	 
      	 
      	
                PGxHealth,
      LLC

              
	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                PGxHealth
      Holding, Inc.

              
	 
      	 
      	
                Its:

              	
                Sole
      Member

              
	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                /s/ Caesar J. Belbel

              
	 
      	 
      	 
      	
                Caesar
      J. Belbel

              
	 
      	 
      	 
      	
                Executive
      Vice President and Chief Legal Officer

              
	 
      	 
      	 
      
	 
      	 
      	
                SELLER
      PARENT:

              
	 
      	 
      	 
      
	 
      	 
      	
                Clinical
      Data, Inc.

              
	 
      	 
      	 
      
	 
      	 
      	
                By:

              	
                /s/ Caesar J. Belbel

              
	 
      	 
      	 
      	
                Caesar
      J. Belbel

              
	 
      	 
      	 
      	
                Executive
      Vice President and Chief Legal
Officer

              

      

      

      [Signature
Page to Noncompetition and Nonsolicitation Agreement]Unassociated Document

     

    Exhibit 10.3

     

    SECURITY
AGREEMENT

     

    This
Security Agreement, dated as of December 29, 2010 (this “Security
Agreement”), is made by Transgenomic,
Inc., a Delaware corporation (the “Company”),
in favor of PGxHealth, LLC, a Delaware limited
liability company (together with its successors or assigns, “Secured
Party”).  Capitalized terms used and not otherwise defined
herein are intended to have the meanings given to them in the Purchase Agreement
(as defined below).

     

    Recitals

     

    Whereas,
Secured Party is a party to that certain Asset Purchase Agreement, dated
November 29, 2010, by and among the Company, Secured Party and Clinical Data,
Inc., a Delaware corporation (“Clinical
Data”), as amended by that certain Amendment to Asset Purchase Agreement,
dated December 29, 2010, by and among the Company, Secured Party and Clinical
Data (the “Purchase
Agreement”);

     

    Whereas,
pursuant to the terms of the Purchase Agreement, the Company has issued to
Secured Party (i) a secured promissory note dated as of the date hereof in the
initial aggregate principal amount of $8,639,650 (as amended, supplemented or
otherwise modified from time to time, the “First
Note”) and
(ii) a secured promissory note dated as of the date hereof in the initial
aggregate principal amount of $988,500 (as amended, supplemented or otherwise
modified from time to time, the “Second
Note” and
together with the First Note, the “Notes”);
and

     

    Whereas,
it is a condition to Secured Party’s acceptance of the Notes that the Company
shall have granted the security interests and undertaken the obligations
contemplated by the Notes and this Security Agreement.

     

    Agreement

     

    Now,
Therefore, in consideration for the agreements set forth herein and in
order to induce Secured Party to consummate the transactions contemplated by the
Purchase Agreement, the Company hereby agrees with Secured Party as
follows:

     

    1.           Defined
Terms.  When used in this Security Agreement, the following
terms shall have the following meanings (such meanings being equally applicable
to both the singular and plural forms of the terms defined):

     

    “Collateral”
shall have the meaning assigned to such term in Section 2 of this Security
Agreement.

     

    “Contracts”
means all contracts (including any customer, vendor, supplier, service or
maintenance contract), leases, licenses, undertakings, purchase orders, permits,
franchise agreements or other agreements (other than any right evidenced by
Chattel Paper, Documents or Instruments), whether in written or electronic form,
in or under which the Company now holds or hereafter acquires any right, title
or interest, including, without limitation, with respect to an Account, any
agreement relating to the terms of payment or the terms of performance
thereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Copyright
License” means any agreement, whether in written or electronic form, in
which the Company now holds or hereafter acquires any interest, granting any
right in or to any Copyright or Copyright registration (whether the Company is
the licensee or the licensor thereunder) including, without limitation, licenses
pursuant to which the Company has obtained the exclusive right to use a
copyright owned by a third party.

     

    “Copyrights”
means all of the following now owned or hereafter acquired or created (as a work
for hire for the benefit of the Company) by the Company or in which the Company
now holds or hereafter acquires or receives any right or interest, in whole or
in part: (a) all copyrights, whether registered or unregistered, held pursuant
to the laws of the United States, any State thereof or any other country; (b)
registrations, applications, recordings and proceedings in the United States
Copyright Office or in any similar office or agency of the United States, any
State thereof or any other country; (c) any continuations, renewals or
extensions thereof; (d) any registrations to be issued in any pending
applications, and shall include any right or interest in and to work protectable
by any of the foregoing which are presently or in the future owned, created or
authorized (as a work for hire for the benefit of the Company) or acquired by
the Company, in whole or in part; (e) prior versions of works covered by
copyright and all works based upon, derived from or incorporating such works;
(f) income, royalties, damages, claims and payments now and hereafter due and/or
payable with respect to copyrights, including, without limitation, damages,
claims and recoveries for past, present or future infringement; (g) rights to
sue for past, present and future infringements of any copyright; and (h) any
other rights corresponding to any of the foregoing rights throughout the
world.

     

    “Event of
Default” means (i) any failure by the Company forthwith to pay or perform
any of the Secured Obligations, (ii) any report, information or notice made to,
obtained or received by Secured Party at any time after the date hereof shall
indicate that Secured Party’s security interest in the Collateral is not prior
to all other security interests or other interests in the Collateral reflected
in such report, information or notice, (iii) any breach by the Company of any
warranty, representation, or covenant set forth herein, and (iv) any “Event of
Default” as defined in the Notes.

     

    “Intellectual
Property” means any intellectual property, in any medium, of any kind or
nature whatsoever, now or hereafter owned or acquired or received by the Company
or in which  the Company now holds or hereafter acquires or receives
any right or interest, and shall include, in any event, any Copyright,
Trademark, Patent, License, trade secret, customer list, marketing plan,
internet domain name (including any right related to the registration thereof),
proprietary or confidential information, mask work, source, object or other
programming code, invention (whether or not patented or patentable), technical
information, procedure, design, knowledge, know-how, software, data base, data,
skill, expertise, recipe, experience, process, model, drawing, material or
record.

     

    “IP Security
Agreement” means the Intellectual Property Security Agreement of even
date herewith by and between the Company and Secured Party and all Schedules
thereto, as the same may from time to time be amended, modified, supplemented or
restated.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “License”
means any Copyright License, Patent License, Trademark License or other license
of rights or interests, whether in-bound or out-bound, whether in written or
electronic form, now or hereafter owned or acquired or received by the Company
or in which the Company now holds or hereafter acquires or receives any right or
interest, and shall include any renewals or extensions of any of the foregoing
thereof.

     

    “Lien”
means any mortgage, lien, deed of trust, charge, pledge, security interest or
other encumbrance.

     

    “Patent
License” means any agreement, whether in written or electronic form, in
which the Company now holds or hereafter acquires any interest, granting any
right with respect to any invention on which a Patent is in existence (whether
the Company is the licensee or the licensor thereunder).

     

    “Patents”
means all of the following in which the Company now holds or hereafter acquires
any interest: (a) all letters patent of the United States or any other country,
all registrations and recordings thereof and all applications for letters patent
of the United States or any other country, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country; (b) all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof; (c) all
petty patents, divisionals and patents of addition; (d) all patents to issue in
any such applications; (e) income, royalties, damages, claims and payments now
and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to sue for past, present and future infringements
of any patent.

     

    “Permitted
Lien” means: (a) material Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Secured Party’s security interests created hereunder; (b) Liens (i) upon or in
any Equipment acquired or held by the Company to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment provided in each case such lien does not secure
more than the purchase price of such Equipment or (ii) existing on such
Equipment at the time of its acquisition, provided that the Lien is confined
solely to the Equipment so acquired, improvements thereon and the proceeds of
such Equipment; (c) leases or subleases and non-exclusive licenses or
non-exclusive sublicenses granted to others in the ordinary course of the
Company’s business if such are otherwise permitted under this Security Agreement
and do not interfere in any material respect with the business of the Company;
(d) any right, title or interest of a licensor under a license provided that
such license or sublicense does not prohibit the grant of the security interest
granted hereunder; (e) Liens arising from judgments, decrees or attachments to
the extent and only so long as such judgment, decree or attachment has not
caused or resulted in an Event of Default; (f) easements, reservations,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar Liens affecting real property not interfering in any material respect
with the ordinary conduct of the business of the Company; (g) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (h) Liens arising
solely by virtue of any statutory or common law provision relating to banker’s
liens, rights of setoff or similar rights and remedies as to deposit accounts or
other funds maintained with a creditor depository institution; and (j) Liens,
not otherwise permitted, which do not in the aggregate exceed $35,000 at any one
time.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    “Secured
Obligations” means (a) the obligation of the Company to repay Secured
Party all of the unpaid principal amount of, and accrued interest on (including
any interest that accrues after the commencement of bankruptcy), the Notes, and
the performance when due of all covenants and agreements by the Company under
the Notes and this Security Agreement, and (b) the obligation of the Company to
pay any fees, costs or expenses of Secured Party under the Notes, this Security
Agreement, or the IP Security Agreement, if any.

     

    “Trademark
License” means any agreement, whether in written or electronic form, in
which the Company now holds or hereafter acquires any interest, granting any
right in and to any Trademark or Trademark registration (whether the Company is
the licensee or the licensor thereunder).

     

    “Trademarks”
means any of the following in which the Company now holds or hereafter acquires
any interest: (a) any trademarks, tradenames, corporate names, company names,
business names, trade styles, service marks, logos, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof and any
applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country (collectively, the “Marks”);
(b) any reissues, extensions or renewals thereof; (c) the goodwill of the
business symbolized by or associated with the Marks; (d) income, royalties,
damages, claims and payments now and hereafter due and/or payable with respect
to the Marks, including, without limitation, damages, claims and recoveries for
past, present or future infringement; and (e) rights to sue for past, present
and future infringements of the Marks.

     

    “UCC”
means the Uniform Commercial Code as the same may from time to time be in effect
in the State of Delaware (and each reference in this Security Agreement to an
Article thereof (denoted as a Division of the UCC as adopted and in effect
in the State of Delaware) shall refer to that Article (or Division, as
applicable) as from time to time in effect; provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of Secured Party’s security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of Delaware, the term “UCC” shall mean the Uniform
Commercial Code (including the Articles thereof) as in effect at such time in
such other jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions related to
such provisions.

     

    In
addition, the following terms shall be defined terms having the meaning set
forth for such terms in the UCC: “Account” (including health-care-insurance
receivables), “Account Debtor”, “Chattel Paper” (including tangible and
electronic chattel paper), “Commercial Tort Claims”, “Commodity Account”,
“Deposit Account”, “Documents”, “Equipment” (including all accessions and
additions thereto), “Fixtures”, “General Intangible”, “Goods”, “Instrument”,
“Inventory”, “Investment Property”, “Letter-of-Credit Right”, “Money”, “Payment
Intangibles”, “Proceeds”, “Promissory Notes”, “Securities Account”, and
“Supporting Obligations”.  Each of the foregoing defined terms shall
include all of such items now owned or hereafter acquired by the Company and
wherever the same may be located.  Any other capitalized terms used
herein and not defined herein shall have the meanings given to such terms in the
Notes or Purchase Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    2.           Grant of
Security Interest.  As collateral security for the full,
prompt,  complete and final payment and performance when due (whether
at stated maturity, by acceleration or otherwise) of all the Secured Obligations
and in order to induce Secured Party to close the transactions contemplated by
the Purchase Agreement, the Company hereby assigns, conveys, mortgages, pledges,
hypothecates and transfers to Secured Party, and hereby grants to Secured Party,
a security interest in all of the Company’s right, title and interest in, to and
under all of the assets of the Company, wherever the same may be located (all of
which being collectively referred to herein as the “Collateral”),
including the following:

     

    (a)           All
Accounts of the Company;

     

    (b)           All
Chattel Paper of the Company more particularly described on Schedule B attached
hereto;

     

    (c)           The
Commercial Tort Claims of the Company more particularly described on Schedule A attached
hereto;

     

    (d)           All
Commodity Accounts of the Company more particularly described on Schedule C attached
hereto;

     

    (e)           All
Contracts of the Company;

     

    (f)           All
Deposit Accounts of the Company more particularly described on Schedule C attached
hereto;

     

    (g)           All
Documents of the Company;

     

    (h)           All
General Intangibles of the Company, including, without limitation, Intellectual
Property;

     

    (i)       
    All Goods of the Company, including without limitation,
Equipment, Inventory and Fixtures;

     

    (j)           All
Instruments of the Company, including, without limitation, Promissory Notes more
particularly described on Schedule B attached
hereto;

     

    (k)           All
Investment Property of the Company more particularly described on Schedule B attached
hereto;

     

    (l)       
    All Letter-of Credit Rights of the Company;

     

    (m)          All
Money of the Company;

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (n)           All
Securities Accounts of the Company more particularly described on Schedule C attached
hereto;

     

    (o)           All
Supporting Obligations of the Company;

     

    (p)           All
property of the Company held by Secured Party, or any other party for whom
Secured Party is acting as agent, including, without limitation, all property of
every description now or hereafter in the possession or custody of or in transit
to Secured Party or such other party for any purpose, including, without
limitation, safekeeping, collection or pledge, for the account of the Company,
or as to which the Company may have any right or power;

     

    (q)           All
other goods and personal property of the Company, wherever located, whether
tangible or intangible, and whether now owned or hereafter acquired, existing,
leased or consigned by or to the Company; and

     

    (r)           To
the extent not otherwise included, all Proceeds of each of the foregoing and all
accessions to, substitutions and replacements for and rents, profits and
products of each of the foregoing.

     

    If the Company shall at any time
acquire a Commercial Tort Claim, the Company shall immediately notify Secured
Party in a writing signed by the Company of the brief details thereof and grant
to Secured Party in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Security Agreement, with such writing to be
in form and substance satisfactory to Secured Party.

    

    3.           Rights
Of Secured Party; Collection Of Accounts.

     

    3.1           Obligations of the
Company.  Notwithstanding anything contained in this Security
Agreement to the contrary, the Company expressly agrees that it shall remain
liable under each of the Assumed Contracts to observe and perform all the
conditions and obligations to be observed and performed by it thereunder and
that it shall perform all of its duties and obligations thereunder, all in
accordance with and pursuant to the terms and provisions of each such Assumed
Contract.  Secured Party shall not have any obligation or liability
under any Assumed Contract by reason of or arising out of this Security
Agreement or the granting to Secured Party of a lien therein or the receipt by
Secured Party of any payment relating to any Assumed Contract pursuant hereto,
nor shall Secured Party be required or obligated in any manner to perform or
fulfill any of the obligations of the Company under or pursuant to any Assumed
Contract, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Assumed Contract, or to present or file any claim, or to
take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.2           Collections.  Secured
Party authorizes the Company to collect its Accounts constituting Collateral,
provided that such collection is performed in a prudent and businesslike manner,
and Secured Party may, upon the occurrence and during the continuation of any
Event of Default and without notice, limit or terminate said authority at any
time.  Upon the occurrence and during the continuance of any Event of
Default, at the request of Secured Party, the Company shall deliver all original
and other documents evidencing and relating to the performance of labor or
service which created such Accounts constituting Collateral, including, without
limitation, all original orders, invoices and shipping receipts.

     

    3.3           Notification of Third
Parties.  Secured Party may at any time, upon the occurrence
and during the continuance of any Event of Default, upon written notice to the
Company of its intention to do so, notify Account Debtors of the Company on
Accounts constituting Collateral, parties to the Assumed Contracts of the
Company, and obligors in respect of Instruments of the Company constituting
Collateral that the Accounts constituting Collateral and the right, title and
interest of the Company in and under such Assumed Contracts
and  Instruments constituting Collateral have been assigned to Secured
Party and that payments shall be made directly to Secured Party.  Upon
the request of Secured Party upon and during the pendency of an Event of
Default, the Company shall so notify such Account Debtors of the Company on
Accounts constituting Collateral, parties to such Assumed Contracts and obligors
in respect of such Instruments of the Company constituting
Collateral.  Upon the occurrence and during the continuance of any
Event of Default, Secured Party may, in its name or in the name of others,
communicate with such Account Debtors, parties to such Assumed Contracts, and
obligors in respect of such Instruments to verify with such parties, to Secured
Party’s satisfaction, the existence, amount and terms of any such Accounts,
Contracts, Instruments or Chattel Paper.

     

    4.           Representations
And Warranties.  The Company hereby represents and warrants to
Secured Party that:

     

    4.1           Ownership of
Collateral.  Except for the security interest granted to
Secured Party under this Security Agreement and Permitted Liens, the Company is
the sole legal and equitable owner of each item of the Collateral in which it
purports to grant a security interest hereunder.

     

    4.2           No Other Liens.  No
effective security agreement, financing statement, equivalent security or lien
instrument or continuation statement covering all or any part of the Collateral
exists, except such as may have been filed by the Company in favor of Secured
Party pursuant to this Security Agreement and except for Permitted
Liens.

     

    4.3           Security
Interest.  This Security Agreement creates a legal and valid
first priority security interest on and in all of the Collateral in which the
Company now has rights.

     

    5.           Covenants
of the Company.  The Company covenants and agrees with Secured
Party that from and after the date of this Security Agreement and until the
Secured Obligations have been performed and paid in full:

     

    5.1           Change of Jurisdiction of
Organization, Relocation of Business or Collateral.  The
Company’s principal place of business and the place where its records concerning
the Collateral are kept is at Transgenomic, Inc., 12325 Emmet Street, Omaha,
Nebraska 68164, and the Company shall not change its jurisdiction of
organization, relocate its principal place of business, remove such records or
allow the relocation of any Collateral (except as allowed pursuant to
Section 6.2) without thirty (30) days prior written notice to Secured
Party.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5.2           Limitation on Liens on
Collateral.  The Company shall not, directly or indirectly,
create, permit or suffer to exist, and shall defend the Collateral against and
take such other action as is necessary to remove, any Lien on the Collateral,
except for Permitted Liens and the Lien granted to Secured Party under this
Security Agreement.  The Company shall further use commercially
reasonable efforts to defend the right, title and interest of Secured Party in
and to any of the Company’s rights under the Collateral against the material
claims and demands brought by third parties.

     

    5.3           Limitations on Modifications of
Accounts, Etc.  Upon the occurrence and during the continuance
of any Event of Default, the Company shall not, without Secured Party’s prior
written consent, grant any extension of the time of payment of any of the
Accounts, Chattel Paper, Instruments or amounts due under any Contract or
Document, compromise, compound or settle the same for less than the full amount
thereof, release, wholly or partly, any person liable for the payment thereof,
or allow any credit or discount whatsoever thereon other than trade discounts
and rebates granted in the ordinary course of the Company’s
business.

     

    5.4           Insurance.  The
Company shall maintain insurance policies insuring the Collateral against loss
or damage from such risks and in such amounts and forms and with such companies
as are customarily maintained by businesses similar to the Company.

     

    5.5           Taxes, Assessments,
Etc.  The Company shall pay promptly when due all property and
other taxes, assessments and government charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against the
Equipment constituting Collateral, except to the extent the validity thereof is
being contested in good faith and adequate reserves are being maintained in
connection therewith.

     

    5.6           Maintenance of
Records.  The Company shall keep and maintain at its own cost
and expense satisfactory and complete records of the Collateral.  The
Company shall not create any Chattel Paper without placing a legend on the
Chattel Paper acceptable to Secured Party indicating that Secured Party has a
security interest in the Chattel Paper.

     

    5.7           Notification Regarding Changes in
Intellectual Property.  The Company shall:

     

    (a)           promptly
advise Secured Party in writing of any subsequent ownership right or interest of
the Company in or to any Copyright, Patent, Trademark or License;

     

    (b)           promptly
give Secured Party written notice of any applications or registrations of
intellectual property rights pertaining to Patents or Trademarks filed with the
United States Patent and Trademark Office, including the date of such filing and
the registration or application numbers, if any; and

     

    (c)           prior
to the filing of any such applications or registrations, shall execute such
documents as Secured Party may reasonably request for Secured Party to maintain
its perfection and priority in such intellectual property rights to be
registered by the Company, and upon the request of Secured Party, shall file
such documents simultaneously with the filing of any such applications or
registrations.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    5.8           Defense of Intellectual
Property.  The Company shall (a) protect, defend and maintain
the validity and enforceability of its Patents and Trademarks, (b) use its
commercially reasonable efforts to detect infringements of its Patents and
Trademarks and promptly advise Secured Party in writing of material
infringements detected and (c) not allow any of its Patents or Trademarks to be
abandoned, forfeited or dedicated to the public without the prior written
consent of Secured Party.

     

    5.9           Further Assurances; Pledge of
Instruments.  At any time and from time to time, upon the
written request of Secured Party, and at the sole expense of the Company, the
Company shall promptly and duly execute and deliver any and all such further
instruments and documents and take such further action as Secured Party may
reasonably deem necessary or desirable to obtain the full benefits of this
Security Agreement, including, without limitation, (a) using its
commercially reasonable efforts to secure all consents and approvals necessary
or appropriate for the grant of a security interest to Secured Party in any item
of Collateral held by the Company or in which the Company has any right or
interest, (b) executing, delivering and causing to be filed any financing
or continuation statements (including “in lieu” continuation statements) under
the UCC with respect to the security interests granted hereby, (c) filing or
cooperating with Secured Party in filing any forms or other documents required
to be recorded with the United States Patent and Trademark Office, United States
Copyright Office, or any actions, filings, recordings or registrations in any
foreign jurisdiction or under any international treaty, required to secure or
protect Secured Party’s interest in the Collateral, (d) transferring the
Collateral to Secured Party’s possession (if a security interest in such
Collateral can be perfected only by possession), (e) at Secured Party’s
reasonable request, placing the interest of Secured Party as lienholder on the
certificate of title (or similar evidence of ownership) of any vehicle or other
item of Collateral owned by the Company which is covered by a certificate of
title (or similar evidence of ownership), (f) executing and delivering and
causing the applicable depository institution, securities intermediary,
commodity intermediary or issuer or nominated party under a letter of credit to
execute and deliver a collateral control agreement with respect to each Deposit
Account, Securities Account or Commodity Account or Letter-of-Credit Right in or
to which the Company now or hereafter has any right or interest in order to
perfect the security interest created hereunder in favor of Secured Party
(including giving Secured Party “control” over such Collateral within the
meaning of the applicable provisions of Article 8 and Article 9 of the
UCC), (g) at Secured Party’s reasonable request, executing and delivering or
causing to be delivered written notice to insurers of Secured Party’s security
interest in, or claim in or under, any policy of insurance (including unearned
premiums) and (h) at Secured Party’s reasonable request, using its commercially
reasonable efforts to obtain acknowledgments from bailees having possession of
any Collateral with a value in excess of $25,000 and waivers of liens from
landlords and mortgagees of any location where any of Collateral  with
a value in excess of $25,000 may from time to time be stored or
located.  Secured Party may at any time and from time to time file
financing statements, continuation statements (including “in lieu” continuation
statements) and amendments thereto that describe the Collateral as all assets of
the Company or words of similar effect.  Any such financing
statements, continuation statements or amendments may be signed by Secured Party
on behalf of the Company and may be filed at any time in any
jurisdiction.  The Company also hereby authorizes Secured Party to
file any such financing or continuation statement (including “in lieu”
continuation statements) without the signature of the Company.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    6.           Negative
Covenants.  The Company covenants and agrees with Secured Party
that from and after the date of this Security Agreement and until the Secured
Obligations have been performed and paid in full, the Company shall not, and
shall not permit any subsidiary to:

     

    6.1           Indebtedness.  Create,
issue, incur, assume, become liable in respect of or suffer to exist any
indebtedness for borrowed money other than the indebtedness incurred under the
Notes and this Security Agreement or indebtedness incurred in connection with a
Permitted Lien.

     

    6.2           Disposition of
Collateral.  Sell, lease, transfer or otherwise dispose of any
of the Collateral, or attempt or contract to do so, other than (a) the sale of
Inventory, (b) the granting of non-exclusive Licenses, and (c) the disposal of
worn-out or obsolete Equipment, all in the ordinary course of the Company’s
business.

     

    6.3           Restricted
Payments.  (a) Make any payment or prepayment of principal of,
premium, if any, or interest on, or redemption, purchase, retirement, defeasance
(including in-substance or legal defeasance), sinking fund or similar payment
with respect to, any indebtedness for borrowed money, or (b) declare or pay any
dividend (other than dividends payable solely in common stock of the Person
making such dividend) on, or make any payment on account of, or set apart assets
for a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any capital stock of the Company or any
subsidiary, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Company or any subsidiary (collectively, “Restricted
Payments”).

     

    7.           Secured
Party’s Appointment as Attorney-in-Fact; Performance by Secured
Party.

     

    (a)           Subject
to Section 7(b) below, the Company hereby irrevocably constitutes and appoints
Secured Party, and any officer or agent of Secured Party, with full power of
substitution, as its true and lawful attorney-in-fact with full, irrevocable
power and authority in the place and stead of the Company and in the name of the
Company or in its own name, from time to time at Secured Party’s discretion, for
the purpose of carrying out the terms of this Security Agreement, to take any
and all appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement and, without limiting the generality of the foregoing,
hereby gives Secured Party the power and right, on behalf of the Company,
without notice to or assent by the Company to do the following:

     

    (i)           to
ask, demand, collect, receive and give acquittances and receipts for any and all
monies due or to become due under any Collateral and, in the name of the
Company, in its own name or otherwise to take possession of, endorse and collect
any checks, drafts, notes, acceptances or other Instruments for the payment of
monies due under any Collateral and to file any claim or take or commence any
other action or proceeding in any court of law or equity or otherwise deemed
appropriate by Secured Party for the purpose of collecting any and all such
monies due under any Collateral whenever payable;

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (ii)           to
pay or discharge any Liens, including, without limitation, any tax lien, levied
or placed on or threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Security Agreement and to pay all or
any part of the premiums therefor and the costs thereof, which actions shall be
for the benefit of Secured Party and not the Company;

     

    (iii)          to
(1) direct any person liable for any payment under or in respect of any of
the Collateral to make payment of any and all monies due or to become due
thereunder directly to Secured Party or as Secured Party shall direct,
(2) receive payment of any and all monies, claims and other amounts due or
to become due at any time arising out of or in respect of any Collateral,
(3) sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other Instruments and
Documents constituting or relating to the Collateral, (4) commence and
prosecute any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral, (5) defend any suit,
action or proceeding brought against the Company with respect to any Collateral,
(6) settle, compromise or adjust any suit, action or proceeding described
above, and in connection therewith, give such discharges or releases as Secured
Party may deem appropriate, (7) license, or, to the extent permitted by an
applicable License, sublicense, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any Copyright, Patent or
Trademark throughout the world for such term or terms, on such conditions and in
such manner as Secured Party shall in its discretion determine and
(8) sell, transfer, pledge, make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as though Secured Party
were the absolute owner thereof for all purposes; and

     

    (iv)          to
do, at Secured Party’s option and the Company’s expense, at any time, or from
time to time, all acts and things which Secured Party may reasonably deem
necessary to protect, preserve or realize upon the Collateral and Secured
Party’s security interest therein in order to effect the intent of this Security
Agreement, all as fully and effectively as the Company might do.

     

    (b)           Secured
Party agrees that, except upon the occurrence and during the continuation of an
Event of Default, it shall not exercise the power of attorney or any rights
granted to Secured Party pursuant to this Section 7.  The Company
hereby ratifies, to the extent permitted by law, all that said attorney shall
lawfully do or cause to be done by virtue hereof.  The power of
attorney granted pursuant to this Section 7 is a power coupled with an
interest and shall be irrevocable until the Secured Obligations are completely
and indefeasibly paid.

     

    (c)           If
the Company fails to perform or comply with any of its agreements contained
herein and Secured Party, as provided for by the terms of this Security
Agreement, shall perform or comply, or otherwise cause performance or
compliance, with such agreement, the reasonable expenses, including reasonable
attorneys’ fees and costs, of Secured Party incurred in connection with such
performance or compliance, together with interest thereon at a rate of interest
equal to the highest per annum rate of interest charged on the Loans, shall be
payable by the Company to Secured Party within five (5) business days of
demand and shall constitute Secured Obligations secured hereby.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    8.           Rights And
Remedies Upon Default.  After any Event of Default shall have
occurred and while such Event of Default is continuing:

     

    (a)           Secured
Party may exercise in addition to all other rights and remedies granted to it
under this Security Agreement, the IP Security Agreement, the Notes or the
Purchase Agreement and under any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the UCC.  Without limiting the generality of the
foregoing, the Company expressly agrees that in any such event Secured Party,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon the Company or any other person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the UCC and other applicable law), may (i) reclaim, take
possession, recover, store, maintain, finish, repair, prepare for sale or lease,
shop, advertise for sale or lease and sell or lease (in the manner provided
herein) the Collateral, and in connection with the liquidation of the Collateral
and collection of the accounts receivable pledged as Collateral, use any
Intellectual Property, Intellectual Property Right or process used or owned by
the Company and (ii) forthwith collect, receive, appropriate and realize upon
the Collateral, or any part thereof, and may forthwith sell, lease, assign, give
an option or options to purchase or sell or otherwise dispose of and deliver
said Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker’s board or
at any of Secured Party’s offices or elsewhere at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk.  To the extent the Company has the right to do so, the
Company authorizes Secured Party, on the terms set forth in this Section 8
to enter the premises where the Collateral is located, to take possession of the
Collateral, or any part of it, and to pay, purchase, contact, or compromise any
encumbrance, charge, or lien which, in the opinion of Secured Party, appears to
be prior or superior to its security interest.  Secured Party shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of said Collateral so sold, free of any right or equity of redemption, which
equity of redemption the Company hereby releases.  The Company further
agrees, at Secured Party’s request, to assemble the Collateral and make it
available to the Secured Party at places which Secured Party shall reasonably
select, whether at the Company’s premises or elsewhere.  Secured Party
shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale as provided in Section 8(f), below and
only after so paying over such net proceeds and after the payment by Secured
Party of any other amount required by any provision of law, need Secured Party
account for the surplus, if any, to the Company.  To the maximum
extent permitted by applicable law, the Company waives all claims, damages, and
demands against Secured Party arising out of the repossession, retention or sale
of the Collateral.  The Company agrees that Secured Party need not
give more than ten (10) days’ notice  of the time and place of any
public sale or of the time after which a private sale may take place and that
such notice is reasonable notification of such matters. The Company shall remain
liable for any deficiency if the proceeds of any sale or disposition of the
Collateral are insufficient to pay all amounts to which Secured Party is
entitled from the Company, the Company also being liable for the attorney costs
of any attorneys employed by Secured Party to collect such
deficiency.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b)           As
to any Collateral constituting certificated securities or uncertificated
securities, if, at any time when Secured Party shall determine to exercise its
right to sell the whole or any part of such Collateral hereunder, such
Collateral or the part thereof to be sold shall not, for any reason whatsoever,
be effectively registered under Securities Act of 1933, as amended (as so
amended the “Act”),
Secured Party may, in its discretion (subject only to applicable requirements of
law), sell such Collateral or part thereof by private sale in such manner and
under such circumstances as Secured Party may deem necessary or advisable, but
subject to the other requirements of this Section 8(b), and shall not be
required to effect such registration or cause the same to be
effected.  Without limiting the generality of the foregoing, in any
such event Secured Party may, in its sole discretion, (i) in accordance
with applicable securities laws, proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Collateral or part thereof could be or shall have been filed under the Act;
(ii) approach and negotiate with a single possible purchaser to effect
such sale; and (iii) restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such
Collateral or part thereof.  In addition to a private sale as
provided above in this Section 8(b), if any of such Collateral shall not be
freely distributable to the public without registration under the Act at the
time of any proposed sale hereunder, then Secured Party shall not be required to
effect such registration or cause the same to be effected but may, in its sole
discretion (subject only to applicable requirements of law), require that any
sale hereunder (including a sale at auction) be conducted subject to such
restrictions as Secured Party may, in its sole discretion, deem necessary or
appropriate in order that such sale (notwithstanding any failure so to register)
may be effected in compliance with the Bankruptcy Code and other laws affecting
the enforcement of creditors’ rights and the Act and all applicable state
securities laws.

     

    (c)           The
Company agrees that in any sale of any of such Collateral, whether at
a foreclosure sale or otherwise, Secured Party is hereby authorized to
comply with any limitation or restriction in connection with such sale as it may
be advised by counsel is necessary in order to avoid any violation of applicable
law (including compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders and
purchasers have certain qualifications and restrict such prospective bidders and
purchasers to persons who will represent and agree that they are purchasing for
their own account for investment and not with a view to the distribution or
resale of such Collateral), or in order to obtain any required approval of the
sale or of the purchaser by any governmental authority, and the Company further
agrees that such compliance shall not result in such sale being considered or
deemed not to have been made in a commercially reasonable manner, nor shall
Secured Party be liable nor accountable to the Company for any discount allowed
by the reason of the fact that such Collateral is sold in compliance with any
such limitation or restriction.

     

    (d)           The
Company also agrees to pay all fees, costs and expenses of Secured Party,
including, without limitation, reasonable attorneys’ fees, incurred in
connection with the enforcement of any of its rights and remedies
hereunder.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (e)           The
Company hereby waives presentment, demand, protest or any notice (to the maximum
extent permitted by applicable law) of any kind in connection with this Security
Agreement or any Collateral.

     

    (f)           The
Proceeds of any sale, disposition or other realization upon all or any part of
the Collateral shall be distributed by Secured Party in the following order of
priorities:

     

    First,
to Secured Party in an amount sufficient to pay in full the costs of Secured
Party in connection with such sale, disposition or other realization, including
all fees, costs, expenses, liabilities and advances incurred or made by Secured
Party in connection therewith, including, without limitation, attorneys’
fees;

     

    Second,
to Secured Party in an amount equal to the then unpaid Secured Obligations;
and

     

    Finally,
upon payment in full of the Secured Obligations, to the Company or its
representatives, in accordance with the UCC or as a court of competent
jurisdiction may direct.

     

    9.           Indemnity.  The
Company agrees to defend, indemnify and hold harmless Secured Party and its
officers, employees, and agents against: (a) all obligations, demands, claims,
and liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Security Agreement; and (b) all losses or
expenses in any way suffered, incurred, or paid by Secured Party as a result of
or in any way arising out of, following or consequential to transactions between
Secured Party and the Company, under this Security Agreement (including without
limitation, reasonable attorneys fees and expenses), except for losses arising
from or out of Secured Party’s gross negligence or willful
misconduct.

     

    10.           Limitation
on Secured Party’s Duty in Respect of Collateral.  Secured
Party shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it takes such action as the Company
requests in writing except during an Event of Default, but failure of Secured
Party to comply with any such request shall not in itself be deemed a failure to
act reasonably, and no failure of Secured Party to do any act not so requested
shall be deemed a failure to act reasonably.

     

    11.           Reinstatement.  This
Security Agreement shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Company for liquidation
or reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Company’s property and assets, and shall continue to
be effective or be reinstated, as the case may be, if at any time payment and
performance of the Secured Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Secured Obligations, whether as a “voidable
preference,” “fraudulent
conveyance,” or
otherwise, all as though such payment or performance had not been
made.  In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    12.          Miscellaneous.

     

    12.1           Waivers;
Modifications.  None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Company and Secured
Party.

     

    12.2           Termination of this Security
Agreement.  Subject to Section 9 hereof, this Security
Agreement shall terminate upon the payment and performance in full of the
Secured Obligations.

     

    12.3           Successor and
Assigns.  This Security Agreement and all obligations of the
Company hereunder shall be binding upon the successors and assigns of the
Company, and shall, together with the rights and remedies of Secured Party
hereunder, inure to the benefit of Secured Party, any future holder of the Notes
and their respective successors and assigns.

     

    12.4           Governing Law.  In
all respects, including all matters of construction, validity and performance,
this Security Agreement and the Secured Obligations arising hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, except to
the extent that the UCC provides for the application of the law of another
state.

     

    12.5           Counterparts.  This
Security Agreement may be executed in counterparts and by facsimile signatures,
any one of which need not contain the signatures of more than one Party and each
of which shall be an original, but all such counterparts taken together shall
constitute one and the same instrument.  The exchange of copies of
this Security Agreement or amendments thereto and of signature pages by
facsimile transmission or by e-mail transmission in portable digital format (or
similar format) shall constitute effective execution and delivery of such
instrument(s) as to the Parties and may be used in lieu of the original Security
Agreement or amendment for all purposes.  Signatures of the Parties
transmitted by facsimile or by e-mail transmission in portable digital format
(or similar format) shall be deemed to be their original signatures for all
purposes.

     

    [REMAINDER
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    In Witness
Whereof, each of the parties hereto has caused this Security Agreement to
be executed and delivered by its duly authorized officer on the date first set
forth above.

     

    
      
        	 
      	
                COMPANY:

              
	 
      	 
      
	 
      	
                Transgenomic,
      Inc.

              
	 
      	 
      	 
      
	 
      	
                By:

              	
                /s/ Craig J. Tuttle

              
	 
      	 
      	
                Craig
      J. Tuttle

              
	 
      	 
      	
                President
      and Chief Executive Officer

              

      

    

     

    SECURED
PARTY:

     

    PGxHealth,
LLC

     

    By:  PGxHealth
Holdings, Inc.

    Its:  Sole
Member

     

    By: /s/
Caesar J. Belbel                                                                                     

     

    Printed
Name:  Caesar J.
Belbel                                                                        

     

    Title:  Executive Vice
President and Chief Legal
Officer                      
         

     

    [Signature
Page to Security Agreement]

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