8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

December 28, 2010

TRANSGENOMIC, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-30975	91-1789357
(State of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)

12325 Emmet Street, Omaha, Nebraska	68164
(Address of principal executive offices)	(Zip Code)

(402) 452-5400

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Item 1.01 Entry into a Material Definitive Agreement	3
Item 2.01 Completion of Acquisition or Disposition of Assets	4
Item 2.03 Creation of a Direct Financial Obligation under an Off-Balance Sheet Arrangement of a Registrant	4
Item 3.02 Unregistered Sales of Equity Securities	4
Item 3.03 Material Modification to Rights of Security Holders	5
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers	5
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year	5
Item 9.01 Financial Statements and Exhibits	6
SIGNATURES	7
EXHIBIT INDEX	8

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Item 1.01 Entry into a Material Definitive Agreement.

Series A Preferred Stock Financing

On December 29, 2010, Transgenomic, Inc. (the “Company”) entered into a Series A Convertible Preferred Stock Purchase Agreement (the “Series A Purchase Agreement”) with Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC (collectively, the “Investors”), pursuant to which the Company: (i) sold to the Investors an aggregate of 2,586,205 shares of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) at a price per share of $2.32 for aggregate gross proceeds of approximately $6,000,000; and (ii) issued to the Investors warrants (the “Warrants”) to purchase up to an aggregate of 1,293,102 shares of Series A Preferred Stock with an exercise price of $2.32 per share (collectively, the “Financing”). The Warrants may be exercised at any time from December 29, 2010 until December 28, 2015 and contain a “cashless exercise” feature. The shares of Series A Preferred Stock issuable pursuant to the Series A Purchase Agreement and upon exercise of the Warrants are initially convertible into shares of the Company’s common stock (“Common Stock”) at a rate of 4-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation (as defined below under Item 5.03).  Certain additional terms of the Series A Preferred Stock are described under Item 5.03 below.  The Company used the net proceeds from the Financing to acquire certain assets of Clinical Data, Inc. (“Clinical Data”) and PGx Health, LLC, a wholly-owned subsidiary of Clinical Data (“PGx”), as more fully described under Item 2.01 below.

In connection with the Financing, the Company also entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”). Pursuant to the terms of the Registration Rights Agreement, the Company has granted the Investors certain demand, “piggyback” and S-3 registration rights covering the resale of the shares of Common Stock underlying the Series A Preferred Stock issued pursuant to the Series A Purchase Agreement and issuable upon exercise of the Warrants and all shares of Common Stock issuable upon any dividend or other distribution with respect thereto.

The foregoing descriptions of the Series A Purchase Agreement, Warrants and Registration Rights Agreement do not purport to be complete and are qualified in their entireties by reference to the full text of the Series A Purchase Agreement, form of Warrant and Registration Rights Agreement, which are filed as Exhibit 4.1, Exhibit 4.2 and Exhibit 4.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

Amendment to Asset Purchase Agreement

On November 29, 2010, the Company announced that it had entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Clinical Data and PGx.  PGx is in the business of providing the proprietary FAMILION family of genetic tests for inherited cardiac syndromes and developing and commercializing other proprietary genetic and related biomarker tests (the “Biomarker Business”).  Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, PGx agreed to sell certain assets of PGx and Clinical Data that are owned or primarily used by PGx and Clinical Data in connection with the operation of the Biomarker Business (the “Assets”). The Purchase Agreement provided, among other things, that, upon completion of the acquisition of the Assets: (i) the Company would issue to PGx a one-year senior secured promissory note in the amount of $932,000 for facility improvements made to the CLIA-certified laboratory; and (ii) PGx would be entitled to received a certain percentage of certain account receivables related to the Biomarker Business collected by the Company during the 18-month period following the closing of the acquisition.

On December 29, 2010, the Company entered into an amendment to the Purchase Agreement (the “Amendment”).    The Amendment: (i) increases the principal amount of the previously disclosed promissory note from $932,000 to $988,500, as a result of certain additional costs related to the Company’s sublease of a portion of Clinical Data’s CLIA-certified laboratory located in New Haven, Connecticut; and (ii) reduces certain percentage amounts payable upon collection of certain account receivables related to the Biomarker Business collected by the Company during the 18-month period following the closing of the acquisition.

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is filed as Exhibit 2.2 to this Current Report on Form 8-K and incorporated herein by reference.

Additional Ancillary Agreements

Concurrently with the completion of the acquisition of the Assets, as more fully described below under Item 2.01, the Company entered into a: (i) sublease agreement with Clinical Data (the “Sublease”); and (ii) noncompetition and nonsolicitation agreement with PGx and Clinical Data (the “Noncompetition Agreement”).

Pursuant to the terms of the Sublease, the Company will sublease 23,123 square feet of space at Clinical Data’s CLIA-certified laboratory located in New Haven, Connecticut.  The base rent under the Sublease is $21,196 per month through January 31, 2011 and $40,466 per month thereafter.  The Sublease expires on March 31, 2013, unless otherwise terminated pursuant to the terms thereof.

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Pursuant to the terms of the Noncompetition Agreement, PGx and Clinical Data will, for a period of three years following the closing of the Company’s acquisition of the Assets and subject to certain exceptions, be prohibited from: (i) engaging in any activity that is competitive with the Biomarker Business for a period of three years; and (ii) soliciting the employment of the Company’s employees.

Additionally, in connection with the Company’s issuance of the Notes (as defined below under Item 2.01), the Company entered into a security agreement with PGx (the “Security Agreement”), pursuant to which the Company has granted to PGx a security interest in all of the assets of the Company to secure the Company’s obligation to, among other things:  (i) repay all of the unpaid principal amount of, and accrued interest on the Notes, and perform when due of all covenants and agreements by the Company under the Notes and the Security Agreement; and (ii) pay any fees, costs or expenses of PGx under the Notes and the Security Agreement.

The foregoing descriptions of the Sublease, Noncompetition Agreement and Security Agreement do not purport to be complete and are qualified in their entireties by reference to the full text of the Sublease, Noncompetition Agreement and Security Agreement, which are filed as Exhibit 10.1, Exhibit 10.2 and Exhibit 10.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On December 29, 2010, following the execution of the Amendment, the Company completed its previously announced acquisition of the Assets, pursuant to the Purchase Agreement (as amended by the Amendment).

In consideration for the purchase of the Assets and in addition to assuming certain liabilities of PGx and Clinical Data, at the closing, the Company paid to PGx $6,000,000 in cash (the “Cash Consideration”) and issued to PGx: (i) a three-year senior secured promissory note in the amount of $8,639,650 (the “First Note”); and (ii) a one-year senior secured promissory note in the amount of $988,500 for facility improvements made to the CLIA-certified laboratory (the “Second Note” and together with the First Note, the “Notes”).  The First Note will accrue interest at the rate of 10% per year, with the aggregate principal amount payable in equal quarterly installments commencing on the date that is 18 months following the closing date and continuing thereafter until the third anniversary of the closing date.  The Second Note will accrue interest at the rate of 6.5% per year, with the aggregate principal payable in 12 monthly installments with the final payment due on the first anniversary of the closing date.  The entire unpaid balance of the Notes will become immediately due and payable if:  (i) the Company fails to make timely payments under the Notes; (ii) the Company makes an assignment for the benefit of its creditors; (iii) the Company files for bankruptcy; or (iv) upon any event of default under the Security Agreement.  Additionally, under the terms of the First Note, if the Company consummates an equity financing that involves the receipt by the Company of net proceeds of not less than $6,000,000, then the Company shall, upon the consummation of such equity financing, pay to PGx the lesser of:  (i) 25% of the gross proceeds received by the Company from such financing; and (ii) the then-outstanding balance under the First Note.  Under the terms of the Second Note, in the event of a sale of all or substantially all of the assets of the Company, the Company shall pay PGx the lesser of:  (i) 100% of the proceeds, less certain fees, received by the Company pursuant to such sale; and (ii) the then-outstanding balance under the Second Note.

In addition to the Cash Consideration and the Notes, pursuant to the Purchase Agreement (as amended by the Amendment), PGx will also be entitled to receive: (i) a percentage of certain account receivables related to the Biomarker Business collected by the Company during the 18-month period following the closing; (ii) milestone payments upon the successful development and commercialization by the Company of certain gene assays relating to the Biomarker Business; and (iii) royalty/margin consideration based on certain reimbursements received by the Company in connection with the performance by the Company of certain biomarker assays relating to the Biomarker Business.  PGx may also be entitled to receive certain additional payments in the event the Company sells or otherwise transfers to a third party certain assay technologies relating to the Biomarker Business.

The foregoing descriptions of the Purchase Agreement, the Amendment, the First Note and the Second Note do not purport to be complete and are qualified in their entireties by reference to the Purchase Agreement, the Amendment, the First Note and the Second Note, which are filed as Exhibit 2.1, Exhibit 2.2, Exhibit 4.4 and Exhibit 4.5, respectively, to this Current Report on Form 8-K and incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information disclosed under Item 2.01 of this Current Report on Form 8-K with respect to the Company’s acquisition of the Assets and the issuance of the Notes is incorporated by reference into this Item 2.03 in its entirety.

Item 3.02 Unregistered Sales of Equity Securities.

The securities described in Item 1.01 and Item 2.01 above were offered and sold in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder. The agreements executed in connection with the Financing and the acquisition of the Assets contain representations to support the Company’s reasonable belief that the Investors and PGx and Clinical Data, respectively, had access to information concerning the Company’s operations and financial condition, the Investors and PGx and Clinical Data acquired the securities for their own account and not with a view to the distribution thereof in the absence of an effective registration statement or an applicable exemption from registration, and that the Investors and PGx and Clinical Data are sophisticated within the meaning of Section 4(2) of the Securities Act and are “accredited investors” (as defined by Rule 501 under the Securities Act). In addition, the issuances did not involve any public offering; the Company made no solicitation in connection with the Financing or the acquisition of the Assets other than communications with the Investors and PGx and Clinical Data, respectively; the Company obtained representations from the Investors and PGx and Clinical Data regarding their investment intent, experience and sophistication; and the Investors and PGx and Clinical Data either received or had access to adequate information about the Company in order to make an informed investment decision.

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At the time of their issuance, the securities were deemed to be restricted securities for purposes of the Securities Act, and the certificates and notes representing the securities bear legends to that effect.  The securities may not be resold or offered in the United States without registration or an exemption from registration.

The information set forth in Item 1.01 and Item 2.01 of this Current Report on Form 8-K is incorporated into this Item 3.02 by reference.

Item 3.03 Material Modification to Rights of Security Holders.

The information disclosed under Item 5.03 of this Current Report on Form 8-K regarding the election of directors is incorporated by reference into this Item 3.03 in its entirety.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On December 29, 2010, upon completion of the Financing: (i) the following directors resigned from the Company’s board of directors (the “Board”):  Messrs. Gregory Sloma, Jeffrey Sklar and Michael McNulty (the “Former Directors”); (ii) the size of the Board was decreased to five members; and (iii) the following individuals, each of whom are affiliates of the Investors, were appointed to serve on the Board to fill the vacancies created by the resignation of the Former Directors: Rob Patzig and Doit Koppler (the “New Directors”). Mr. Patzig and Mr. Koppler will be the Class I directors of the Company.  Drs. Antonius Schuh and Rod Markin will continue to serve as Class II directors of the Company and Mr. Craig Tuttle will continue to serve as a Class III director of the Company.  The Board has not yet determined the committees of the Board to which the New Directors will be appointed.

No family relationships exist between any of the New Directors and any of the Company’s other directors or executive officers. Other than the Series A Purchase Agreement or the Certificate of Designation (as defined below under Item 5.03), there are no arrangements between any of the New Directors and any other person pursuant to which any of the New Directors was selected as a director, and other than the Financing, nor are there any transactions to which the Company is or was a participant in which any of the New Directors has a material interest subject to disclosure under Item 404(a) of Regulation S-K.

Item 5.03  Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On December 28, 2010, in connection with the Financing, the Company filed a Certificate of Designation of Series A Convertible Preferred Stock with the Secretary of State of the State of Delaware (the “Certificate of Designation”), designating 3,879,307 shares of the Company’s Preferred Stock as Series A Preferred Stock. Certain rights of the holders of the Series A Preferred Stock are senior to the rights of the holders of Common Stock.  The Series A Preferred Stock has a liquidation preference equal to its original price per share, plus any accrued and unpaid dividends thereon. The Series A Preferred Stock accrues cumulative dividends at the rate of 10.0% of the original price per share per annum.

Generally, the holders of the Series A Preferred Stock are entitled to vote together as a single group with the holders of Common Stock on an as-converted basis.  However, the Certificate of Designation provides that the Company shall not perform the following activities, subject to certain exceptions, without the affirmative vote of a majority of the holders of the outstanding shares of Series A Preferred Stock: (i) authorize, create or issue any other class or series of capital stock having rights, preferences or privileges senior to or in parity with the Series A Preferred Stock; (ii) alter or change the rights, preferences or privileges of the Series A Preferred Stock or increase or decrease the authorized number of shares of Series A Preferred Stock; (iii) authorize or declare any dividends on the common shares or any other shares of capital stock other than the Series A Preferred Stock; (iv) authorize any offering of equity securities of the Company representing (on a pro forma basis after giving effect to the issuance of such equity securities) the right to receive not less than 10% of any amounts or funds that would, as of immediately following such issuance, be legally available for distribution in connection with a liquidation event; (v) redeem any shares of capital stock (other than pursuant to employee agreements or the terms of the capital stock); (vi) increase or decrease the authorized number of members of the Board; (vii) enter into any binding agreement with any director, employee or any affiliate of the Company; (viii) materially change the nature of the Company’s business, enter into new lines of business or exit the current line of business or invest in any person or entity engaged in a business that is not substantially similar to the Company’s business, or change the location of any permanent location of any part of the Company’s business, in each case except as contemplated by the Purchase Agreement or any of the transaction documents included therein; (ix) make any loans or advances, individually or in the aggregate in excess of $1,000,000, to, or own any securities of, any subsidiary or other corporation or other entity unless it is wholly owned by the Company; (x) make any loan or advance to any natural person, including, without limitation, any employee or director of the Company, except advances and similar expenditures in the ordinary course of business; (xi) guarantee, directly or indirectly, any indebtedness, except for trade accounts of the Company arising in the ordinary course of business; (xii) sell or otherwise dispose of any assets of the Company with a value, individually or collectively, in excess of $500,000, other than in the ordinary course of business; (xiii) liquidate or wind-up the business and affairs of the Company or effect a change in control or any other liquidation event; (xiv) incur any indebtedness in excess of $1,000,000 in the aggregate, other than trade credit incurred in the ordinary course of business or as contemplated by the Purchase Agreement; (xv) expend funds in excess of $500,000 in the aggregate per year for capital improvements, other than any such expenditure that is consistent with a budget approved by the Board, including the directors elected by the holders of Series A Preferred Stock or as contemplated by the Purchase Agreement; (xvi) obligate the Company to make aggregate annual payments in excess of $500,000 or sell, transfer or license any material technology or intellectual property of the Company, other than a non-exclusive license in the ordinary course of business, in each case except as contemplated by the Purchase Agreement; or (xvii) increase the number of shares reserved and issuable under any of the Company’s equity or option incentive compensation plans.

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Additionally, the Certificate of Designation provides that the holders of Series A Preferred Stock shall be entitled, as a separate voting group, at each annual or special election of directors, to elect two directors of the Company.

All outstanding shares of Series A Preferred Stock will be automatically converted into Common Stock, at the then applicable conversion rate, at the election of the holders of a majority of the then-outstanding shares of Series A Preferred Stock.  At any time following the fifth anniversary of the completion of the Financing, the holders of a majority of the then-outstanding Series A Preferred Stock, voting together as a separate class, can require the Company to redeem all of the then-outstanding Series A Preferred Stock at a price equal to the then-current stated value of such shares plus all accrued but unpaid dividends thereon.  The conversion rate for the Series A Preferred Stock is subject to adjustment in the event of certain stock splits, stock dividends, mergers, reorganizations, reclassifications, and dilutive issuances.

The foregoing description of the Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the full text of the Certificate of Designation, which is filed as Exhibit 3.1 to this Current Report on Form 8-K and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(a)  Financial Statements of Businesses Acquired

The financial statements required by this Item 9.01(a) will be filed by amendment to this Current Report on Form 8-K not later than 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed.

(b)  Pro Forma Financial Information

The pro forma financial statements required by this Item 9.01(b) will be filed by amendment to this Current Report on Form 8-K not later than 71 calendar days after the date on which this Current Report on Form 8-K is required to be filed.

(d)  Exhibits

Exhibit No.	Description
2.1+	Asset Purchase Agreement, dated November 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc.
2.2+	Amendment to Asset Purchase Agreement, dated December 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc.
3.1	Certificate of Designation of Series A Convertible Preferred Stock dated as of December 28, 2010.
4.1	Series A Convertible Preferred Stock Purchase Agreement, dated December 29, 2010, by and among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC.
4.2	Form of Warrant.
4.3	Registration Rights Agreement, dated December 29, 2010, by and among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC.
4.4	Secured Promissory Note, issued December 29, 2010 by Transgenomic, Inc. in favor of PGxHealth, LLC.
4.5	Secured Promissory Note, issued December 29, 2010 by Transgenomic, Inc. in favor of PGxHealth, LLC.
10.1	Sublease Agreement, dated December 29, 2010, by and between Transgenomic, Inc. and Clinical Data, Inc.
10.2	Noncompetition and Nonsolicitation Agreement, dated December 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc.
10.3	Security Agreement, dated December 29, 2010, by and between PGxHealth, LLC and Transgenomic, Inc.
99.1	Press release dated December 29, 2010.

+ Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated:  January 4, 2010	TRANSGENOMIC, INC.
	By:	/s/ Brett L. Frevert
		Brett L. Frevert
		Interim Chief Financial Officer

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Exhibit Index

Exhibit No.	Description
2.1+	Asset Purchase Agreement, dated November 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc.
2.2+	Amendment to Asset Purchase Agreement, dated December 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc.
3.1	Certificate of Designation of Series A Convertible Preferred Stock dated as of December 28, 2010.
4.1	Series A Convertible Preferred Stock Purchase Agreement, dated December 29, 2010, by and among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC.
4.2	Form of Warrant.
4.3	Registration Rights Agreement, dated December 29, 2010, by and among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC.
4.4	Secured Promissory Note, issued December 29, 2010 by Transgenomic, Inc. in favor of PGxHealth, LLC.
4.5	Secured Promissory Note, issued December 29, 2010 by Transgenomic, Inc. in favor of PGxHealth, LLC.
10.1	Sublease Agreement, dated December 29, 2010, by and between Transgenomic, Inc. and Clinical Data, Inc.
10.2	Noncompetition and Nonsolicitation Agreement, dated December 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc.
10.3	Security Agreement, dated December 29, 2010, by and between PGxHealth, LLC and Transgenomic, Inc.
99.1	Press release dated December 29, 2010.

+ Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

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EX-2.1

Exhibit 2.1

*** Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 17 C.F.R. 24b-2

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of November 22, 2010, is by and among PGxHealth, LLC, a Delaware limited liability company (the “Seller”), Clinical Data, Inc., a Delaware corporation (the “Seller Parent”), and Transgenomic, Inc., a Delaware corporation (the “Buyer”). Seller, Seller Parent and Buyer are referred to herein collectively as the “Parties” and individually as a “Party”.

RECITALS

WHEREAS, Seller desires to sell and assign certain of its assets and assign certain of its liabilities specified herein to Buyer, and Buyer desires to purchase those assets and to assume only those certain liabilities, for the consideration stated herein and on the terms set forth herein; and

WHEREAS, Seller Parent indirectly owns all of the issued and outstanding equity interests of Seller and will be directly and indirectly benefited by the transactions described herein.

NOW THEREFORE, in consideration of the premises and of the mutual representations, warranties and covenants herein contained, the Parties agree as follows:

ARTICLE 1

DEFINITIONS AND CONSTRUCTION

1.1          Defined Terms.  Capitalized terms not otherwise defined in this Agreement shall have the meanings given to them as follows:

“20-Day VWAP” shall mean the average VWAP for the twenty (20) Trading Days prior to (but not including) the date of measurement.

“ABCB1 Assay” shall have the meaning given to such term in Section 2.4(b).

“ABCB1 Assay Milestone Consideration” shall have the meaning given to such term in Section 2.4(b).

“Accounts Receivable Consideration” shall have the meaning given to such term in Section 2.3.

“Additional Fundamental Representations” shall have the meaning given to such term in Section 6.1.

“Affiliate” shall mean, with respect to any Person, any other Person that, directly or indirectly, controls, is controlled by, or is under a common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) as used

1

in the preceding sentence means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. For purposes hereof, Seller Parent shall be deemed an Affiliate of Seller.

“Agreement” shall mean this Asset Purchase Agreement and the Exhibits and Schedules referred to herein and attached hereto.

“Allocation Schedule” shall have the meaning given to such term in Section 6.8.

“A/R Collection Period” shall have the meaning given to such term in Section 2.3.

“Assay Costs” shall mean the sum of: (i)  the cost of all direct reagents, consumables, labor, collection kits, collection draw fees, shipping costs and any royalties owed in connection with utilizing […***…] associated with performing such Subject Biomarker Assay; plus (ii) all sales representative salary (provided that such salary will be calculated on a pro-rated basis based on the amount of time spent by the applicable sales representative selling the performance of such Subject Biomarker Assay as opposed to the performance of other assays and that in no event will such costs […***…] associated with the sale of the performance of such Subject Biomarker Assay.

“Assay Technology Value” shall mean that amount equal to the portion of the total consideration payable upon the closing of a Change of Control to Buyer or Buyer’s stockholders in connection with such Change of Control that is attributed to the value of the Subject Biomarker Assay Technology being sold, transferred or otherwise disposed of in connection with such Change of Control relative to the value of all assets being sold, transferred or otherwise disposed of in connection with such Change of Control.

“Assets” shall mean all assets owned or primarily used by Seller or Seller Parent in connection with the operation of the Business, including:

(1)           the Equipment;

(2)           the Books and Records;

(3)           the Assumed Contracts;

(4)           all pre-paid expenses of Seller or Seller Parent set forth on Schedule 1.1;

(5)           all work-in-process;

(6)           all Intellectual Property owned by Seller or Seller Parent, including the registered Intellectual Property set forth on Schedule 1.1, and all embodiments thereof, including but not limited to documentations, manuals, notes, files, data, and other materials relating to such Intellectual Property;

*Confidential Treatment Requested

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(7)           all accounts receivable, notes receivable and other receivables of Seller or Seller Parent, including any unbilled receivables, together with any unpaid interest or fees accrued thereon or other amounts due with respect thereto;

(8)           all Permits held by Seller or Seller Parent, but only to the extent that they are assignable or transferable;

(9)           all rights in and under all express or implied guarantees, warranties, representations, covenants, indemnities and similar rights in favor of Seller or Seller Parent; and

(10)         all rights to all Claims available to, or being pursued by Seller or Seller Parent, whether arising by way of counterclaim or otherwise, but only to the extent relating to, or arising out of, the assets owned by Seller or Seller Parent and primarily used by Seller or Seller Parent in connection with the operation of the Business, including the assets referenced in the foregoing clauses “(1)” through “(9)”.

“Assignment and Assumption Agreement” shall mean the Assignment and Assumption Agreement among Buyer, Seller and Seller Parent, in the form attached hereto as Exhibit A.

“Assumed Contracts” shall mean the Contracts and Auto Leases listed on Schedule 1.1 (other than any obligation or liability under any such Contract or Auto Lease resulting from any default or non-performance by Seller or Seller Parent prior to the Closing).

“Assumed Liabilities” shall mean: (i) the Liabilities due or arising after the Closing under the Assumed Contracts (other than any Liability arising out of or relating to a breach or violation under an Assumed Contract which occurred prior to the Closing); (ii) the Liabilities of Seller or Seller Parent for those severance and stay bonus obligations, if applicable, set forth on Schedule 1.2 to the extent such severance and stay bonus obligations become payable to any Continuing Employee pursuant to an offer of employment made in accordance with Section 5.4(a) hereof, and accrued but unused vacation, as described and in the aggregate amounts set forth on Schedule 1.2; and (iii) payments, if any, due in respect of overpayments for testing services and all costs relating to the completion of any work-in-process.

“Audit” shall mean any audit, assessment or other examination of Taxes or Tax Returns by the IRS or any other domestic or foreign Governmental Authority responsible for the administration of any Taxes, proceeding or appeal of such proceeding relating to Taxes.

“Auto Leases” shall mean the automobile leases related to the automobiles leased by Seller or Seller Parent on behalf of any Continuing Employee in connection with his or her employment with Seller or Seller Parent, as applicable, prior to the Closing Date.

    […***…]

*Confidential Treatment Requested

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[…***… (continued)]

“Bill of Sale” shall mean the bill of sale executed by Seller and Seller Parent in favor of Buyer, in the form attached hereto as Exhibit B.

“Books and Records” shall mean the original or true and complete copies of all material books, records, data and information in each case with respect to the Assets and the operation of the Business possessed by Seller or Seller Parent, including all records (maintenance and otherwise), manuals, drawings and warranties relating to the Leased Real Property and all Equipment.

“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 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.

“Buyer Employee Benefit Plans” shall have the meaning given to such term in Section 5.4(c).

“Business Employees” shall mean the employees of Seller or Seller Parent, as applicable, who perform services primarily in connection with the operation of the Business, each of whom is set forth on Schedule 3.13(a).

“Buyer” shall have the meaning given to such term in the first sentence of this Agreement.

“Buyer Common Stock” shall mean the common stock, par value $0.01 per share, of Buyer.

“Buyer Confidential Information” shall have the meaning given to such term in Section 6.10(a).

“Buyer Indemnified Party” and “Buyer Indemnified Parties” shall have the meanings given to such terms in Section 6.2(a).

“Buyer Indemnifying Party” and “Buyer Indemnifying Parties” shall have the meanings given to such terms in Section 6.2(a).

“Buyer SEC Documents” shall mean all reports, schedules, forms, statements, prospectuses, registration statements, certifications and other documents required to be filed with or furnished to the SEC by Buyer or its officers since December 31, 2009, together with any exhibits and schedules thereto and other information incorporated therein.

“Buyer Securities” shall have the meaning given to such term in Section 3.28(a).

*Confidential Treatment Requested

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“Cash Indemnification Limit” shall have the meaning given to such term in Section 6.4(a).

“Change of Control” shall mean any single transaction or series of related transactions involving:  (i) any merger, consolidation, business combination, or other similar transaction involving Buyer, as a result of which the stockholders of Buyer immediately prior to such transaction hold, in the aggregate, less than 50% of the voting power of Buyer or the surviving entity immediately after such transaction; or (ii) any sale, transfer or disposition of all or substantially all of the assets of Buyer.

“Claim” shall mean all demands, claims, actions, investigations, causes of action, proceedings and arbitrations, whether brought by any Party to this Agreement or any third party.

“Clean-Up” shall mean all actions required under Environmental Laws to: (i) contain, clean-up, remove, treat or remediate Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (ii) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (iii) respond to any government requests for information or documents in any way relating to clean-up, removal, treatment or remediation or potential clean-up, removal, treatment or remediation of Hazardous Material in the indoor or outdoor environment.

“Closing” shall have the meaning given to such term in Section 2.7.

“Closing Cash Consideration” shall have the meaning given to such term in Section 2.2(a).

“Closing Consideration” shall have the meaning given to such term in Section 2.2(c).

“Closing Date” shall have the meaning given to such term in Section 2.7.

“Collected A/R Amounts” shall have the meaning given to such term in Section 2.3.

“Continuing Employee” shall have the meaning given to such term in Section 5.4(b).

“Contracts” shall mean all oral or written contracts, agreements, leases, licenses, mortgages, indentures, instruments and other arrangements to which a Party is a party or by which a Party or any of its properties are bound.

“Delayed Asset” shall have the meaning given to such term in Section 2.1(b).

“Delayed Liability” shall have the meaning given to such term in Section 2.1(b).

“Delayed Required Consent” shall have the meaning given to such term in Section 2.1(b).

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“Employee Benefit Plans” shall mean any “employee benefit plan” (as defined in Section 3(3) of ERISA) and any other employee benefit plans, programs or arrangements, including each severance pay, bonus, deferred compensation, incentive compensation, stock purchase, stock option or other equity-based compensation, death benefit, group insurance, hospitalization or other medical, dental, health, life (including all individual life insurance policies as to which Seller or Seller Parent is the owner, beneficiary or both), disability or other insurance, IRC Section 125 “cafeteria” or “flexible” benefit plan, pension, savings, profit-sharing or retirement plan, program or arrangement: (i) under which current or former employees, officers or independent contractors are entitled to participate by reason of their employment or service with Seller, Seller Parent or their respective ERISA Affiliates or any of their dependents or beneficiaries, whether or not any of the foregoing is funded, insured or self-funded, written or otherwise or with respect to which Seller, Seller Parent or their respective ERISA Affiliates are or were a party or a sponsor or a fiduciary thereof or by which Seller, Seller Parent or their respective ERISA Affiliates are bound; or (ii) with respect to which Seller, Seller Parent or their respective ERISA Affiliates may have any direct or indirect, actual or contingent Liability (including any of the foregoing that have been terminated previously).

“Encumbrance” shall mean any right, option, right of refusal, restriction, covenant, condition, agreement, Lien, pledge, security interest, mortgage or other encumbrance of title.

“Environmental Claim” shall mean any Claim by any Person against Seller, Seller Parent or the Facility alleging Liability (including Liability for investigatory costs, Clean-Up costs, Remedial Action, governmental response costs, natural resources damages, property damages, personal injuries or penalties) under any Environmental Law arising out of, based on or resulting from: (i) the presence, or Release, of any Hazardous Material at the Facility; or (ii) circumstances forming the basis of any violation, or alleged violation, by Seller or Seller Parent under any Environmental Law or Environmental Permit.

“Environmental Law” shall mean all applicable federal, state and local laws and regulations relating to pollution or protection of human health, natural resources and the environment. Without limiting the generality of the foregoing, Environmental Law includes Laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials and all Laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials.

“Environmental Liability” shall mean any Liability resulting from: (i) an actual Environmental Claim; (ii) the failure to comply with any requirement of Environmental Law; (iii) the failure to obtain or comply with any required Environmental Permit; (iv) a Remedial Action; or (v) any harm or injury to any Person, to public health, or to the environment as a result of actual or threatened exposure to any Hazardous Material.

“Environmental Permit” shall mean each Permit which is or may be required under any applicable Environmental Law.

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“Equipment” shall mean all machinery, vehicles, equipment, furniture, fixtures, furnishings, parts, tools, raw materials, works-in-progress, finished goods, supplies, inventory, engineering and other items of tangible personal property owned or leased by Seller or owned or leased by Seller Parent, whether located at the Leased Real Property or otherwise, that are primarily used in the operation of the Business. Each material item of Equipment is set forth on Schedule 1.1.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“ERISA Affiliates” shall mean any entity, trade or business (whether or not incorporated) that is a member of a controlled group with, or under common control with, or part of an affiliated service group that includes, Seller or Seller Parent within the meaning of Section 414(b), (c), (m), (o) or (t) of the IRC.

“Exchange” shall mean any national securities exchange registered with the SEC pursuant to Section 6(a) of the Exchange Act.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Excluded Assets” shall mean all assets of Seller and Seller Parent other than the Assets, which, for the avoidance of doubt, shall include the following: (i) all cash and cash equivalents; (ii) any amounts due from Affiliates of Seller or Seller Parent; (iii) any and all Contracts or policies of insurance and insurance plans and any cash value thereof; and (iv) any and all Claims of Seller with respect to refunds of monies paid to any Governmental Authority (including Tax refunds) prior to the Closing Date.

“Excluded Liabilities” shall mean all Liabilities of Seller, Seller Parent and their respective Affiliates that are not Assumed Liabilities, including: (i) any Liability or responsibility of Seller, Seller Parent or any of their respective Affiliates under the Transaction Documents; (ii) any Environmental Claim against, or Environmental Liability of, Seller or Seller Parent to the extent the underlying Claim is attributable to acts or omissions occurring at or prior to the Closing; (iii) any Liability or responsibility of Seller, Seller Parent or any of their respective Affiliates arising out of or relating to a breach or violation under an Assumed Contract which occurred on or prior to the Closing; (iv) all Liabilities of Seller, Seller Parent or their respective Affiliates arising under applicable Workers’ Compensation Acts for or based upon the employment of (a) the current and former employees of Seller, Seller Parent or their respective Affiliates who are not Business Employees and (b) the Business Employees, but in the case of Business Employees who are Continuing Employees only with respect to Claims where the date of injury, acts or misconduct or the date of last injurious exposure occurred prior to the date such Continuing Employees began working for Buyer; (v) all Liabilities of Seller, Seller Parent or their respective ERISA Affiliates arising under or related to or based upon any Employee Benefit Plans  (except to the extent expressly set forth in clause “(ii)” of the definition of Assumed Liabilities with respect to the Continuing Employees), whether under the terms of such Employee Benefit Plans or any other Laws, including all Liabilities of a fiduciary for breach of fiduciary duty or any other failure to act or comply in connection with such Employee Benefit Plans, all Liabilities arising from or related to the termination thereof or any other failure to act

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or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan; (vi) all Liabilities of Seller, Seller Parent or their respective Affiliates for salaries, wages, bonuses, vacation days, personal days and similar forms of leave or compensation for or based upon the employment (or termination of employment) by Seller or Seller Parent of (a) the current and former employees of Seller, Seller Parent or their respective affiliates who are not Business Employees and (b) the Business Employees (except to the extent expressly set forth in clause “(ii)” of the definition of Assumed Liabilities with respect to the Continuing Employees); (vii) all Liabilities of Seller, Seller Parent or any of their respective Affiliates for Claims of any current or former employees pursuant to the WARN Act arising out of acts or omissions of Seller, Seller Parent or any of their respective Affiliates prior to and including the Closing Date; (viii) all Liabilities of Seller, Seller Parent or any of their respective Affiliates arising out of or in connection with compliance prior to the Closing Date with Health and Safety Requirements pertaining to the Assets, and all Liabilities of Seller, Seller Parent or any of their respective Affiliates arising out of or in connection with compliance with all Laws relating to equal employment opportunity, employment or labor relations concerning the employment of any employee by Seller, Seller Parent or any of their respective Affiliates, or relating to any other action taken or not taken by Seller, Seller Parent or any of their respective Affiliates concerning (a) the current and former employees of Seller, Seller Affiliate or Seller Parent who are not Business Employees and (b) the Business Employees, but only with respect to matters commencing during or arising out of the employment of such Business Employees by Seller, Seller Parent or any of their respective Affiliates; and (ix) the amount of accrued but unpaid vacation determined pursuant to Section 2.2(b)(ii).

“Facility” shall mean Seller’s existing leased CLIA-certified laboratory facility located at 5 Science Park, New Haven, Connecticut 06511.

“FCGamma Assay” shall have the meaning given to such term in Section 2.4(a).

“FCGamma Assay Milestone Consideration” shall have the meaning given to such term in Section 2.4(a).

“Financial Statements” shall have the meaning given to such term in Section 3.3.

“First Note” shall mean the secured promissory note, in the form attached hereto as Exhibit D, to be issued by Buyer to Seller pursuant to Section 2.2(b).

“First Note Consideration” shall have the meaning given to such term in Section 2.2(b).

“Fundamental Representations” shall have the meaning given to such term in Section 6.1.

“GAAP” shall mean generally accepted accounting principles as in effect in the United States of America as of the date and period covered by the subject financial statement.

“Governmental Authority” shall mean any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court,

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agency, commission or official, including any political subdivision thereof, or any non-governmental self-regulatory agency, commission or authority.

“Hazardous Material” shall mean any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or material in such quantities and/or concentrations that are classified or regulated as “hazardous” or “toxic” or words of like import pursuant to Environmental Law, and includes friable asbestos-containing material, polychlorinated biphenyls and oil.

“Health and Safety Requirements” shall mean all applicable federal, state, local and foreign Laws concerning public health and safety and worker health and safety each as in effect as of the Closing Date, other than Environmental Laws.

“Indefinite Fundamental Representations” shall have the meaning given to such term in Section 6.1.

“Indemnification Deductible” shall have the meaning given to such term in Section 6.4(a).

“Intellectual Property” shall mean and includes all past, present, and future rights of the following types, which may exist or be created under the laws of any jurisdiction in the world: (i) trademarks, service marks, brand names, certification marks, trade names, trade dress, logos, symbols, proprietary indicia, domain names, corporate names and doing business designations and other indications of origin, and all translations, adaptations, derivations and combinations of the foregoing , whether registered, unregistered and/or under common law, and applications for registration of the foregoing, together with the goodwill associated therewith, throughout the world (“Trademarks”); (ii) all patents, all filed or pending patent applications, patent disclosures, utility models, design registrations and certificates of invention and other governmental grants for the protection of inventions or industrial designs, including all related continuations, divisionals, reissues and reexaminations and foreign counterparts throughout the world (“Patents”); (iii) trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; (iv) rights associated with works of authorship, including exclusive exploitation rights, copyright rights, moral rights, mask works, database rights, design rights, industrial property rights, publicity rights and privacy rights and all registrations and applications for registration thereof; (v) other proprietary rights in Intellectual Property of every kind and nature including without limitation inventions, invention disclosures, statutory invention registrations, trade secrets and confidential information, know-how, manufacturing and product processes, procedures and techniques, specifications, research and development information, clinical data, formulae, assays, software, documentation, data, including financial, marketing, technical, and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, whether patentable or non-patentable, whether copyrightable or non-copyrightable and whether or not reduced to practice; and (vi) other proprietary rights in or relating to registrations, renewals, extensions, combinations, continuations, divisionals,  reexaminations, and reissues of, and applications for and foreign counterparts of, any of the rights referred to in clauses “(i)” through “(v)” above, including the right to enforce and receive remedies, including damages, against

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past, present, and future infringement thereof and rights of protection of interest therein under the laws of all jurisdictions.

“IRC” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“IRS” means the Internal Revenue Service.

“Key Customers and Suppliers” shall have the meaning given to such term in Section 3.20.

“Knowledge of Buyer” and “to Buyer’s Knowledge” means the actual knowledge of the directors and executive officers of Buyer after reasonable investigation.

“Knowledge of Seller” and “to Seller’s Knowledge” means the actual knowledge of the directors and executive officers of Seller and Seller Parent after reasonable investigation; provided, however, when used in Section 3.16, “Seller’s Knowledge” shall mean the actual knowledge of the directors and executive officers of Seller and Seller Parent without further inquiry or investigation.

“Landlord” shall mean Science Park Development Corporation.

“Landlord Consent” shall mean the Landlord’s written consent to the Sublease, which shall be in a form reasonably acceptable to the Parties.

“Law” and “Laws” shall mean any constitution, statute, code, regulation, rule, injunction, judgment, order, decree, ruling, charge, permit, license or other authorization or restriction of any applicable Governmental Authority.

“Leased Real Property” shall mean that portion of the Facility that is utilized in connection with the operation of the Business and is being subleased to Buyer pursuant to the Sublease Agreement and any and all rights, title and interests of Seller or Seller Parent in such portion of the Facility, together with all fixtures, structures and improvements located thereon and appurtenances belonging thereto, including all easements, licenses, rights, claims and interests necessary or appropriate to the operation of such portion of the Facility.

“Lease” shall mean that certain Lease, dated January 12, 2006 and as thereafter amended from time to time, between the Landlord and Seller Parent.

“Liability” and “Liabilities” shall mean any and all liabilities, debts or obligations, asserted or unasserted, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, due or to become due, including any liability for Taxes.

“Lien” shall mean, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind or nature.

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“Loss” or “Losses” shall mean all debts, liabilities, obligations, losses, damages, costs and expenses (including, interest and prejudgment interest in any litigated matter), penalties, fines, court costs and reasonable consultants’ and attorneys’ fees and expenses, judgments, settlements and assessments.

“Material Adverse Effect” shall mean any event, change or occurrence that individually or together with any other event, change or occurrence, has a material and adverse impact on: (i) the Assets; (ii) the ability of Seller or Seller Parent to consummate the transactions contemplated by this Agreement and the other Transaction Documents; or (iii) the condition or operation of the Business or the Leased Real Property, except to the extent resulting from (a) changes in general local, domestic, foreign, or international economic conditions, (b) changes affecting generally the industries or markets of the Business, (c) acts of war, sabotage or terrorism, military actions or the escalation thereof, (d) any changes in applicable laws or accounting rules or principals, including changes in GAAP, (e) any other action required by this Agreement, or (f) the announcement of this Agreement or the transactions contemplated hereby.

“Milestone Consideration” shall have the meaning given to such term in Section 2.4(b).

“Multiemployer Plan” shall mean any Employee Benefit Plan that is a “multiemployer plan” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.

“Noncompetition Agreement” shall mean the Noncompetition and Nonsolicitation Agreement among Buyer, Seller and Seller Parent, in the form attached hereto as Exhibit C.

“Notes” shall mean the First Note and the Second Note.

“Outstanding A/R Amounts” shall have the meaning given to such term in Section 2.3.

“Party” and “Parties” shall have the meanings given to such terms in the first sentence of this Agreement.

“Permits” shall mean all licenses, identification numbers, permits, certificates, orders, consents, approvals, registrations, authorizations, qualifications and filings required under all applicable Laws.

“Permitted Encumbrances” shall mean (i) Encumbrances imposed by any Governmental Authority for Taxes not yet due and payable or that are being contested in good faith; and (ii) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Encumbrances arising in the ordinary course of business or that are being contested in good faith.

“Person” shall mean any natural person, firm, partnership, association, corporation, limited liability company, trust, entity, public body or Governmental Authority.

“Pre-Closing Period” shall have the meaning given to such term in Section 5.3.

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“Purchase Price” means the sum of: (i) the Closing Consideration paid pursuant to Section 2.2; (ii) the Accounts Receivable Consideration, if any, paid pursuant to Section 2.3; (iii) the Milestone Consideration, if any, paid pursuant to Section 2.4; (iii) the Royalty/Margin Consideration, if any, paid pursuant to Section 2.5; and (iv) the Subsequent Sale Consideration, if any, paid pursuant to Section 2.6.

“Qualified Plan” shall mean any Employee Benefit Plan intended to be qualified under Section 401(a) of the IRC.

“Related Material Contracts” shall have the meaning given to such term in Section 3.10(a).

“Release” shall mean any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment (including ambient air, surface water, groundwater and surface or subsurface strata), or into or out of any property (including the Facility and any other property that has affected or may affect the Facility), including the movement of Hazardous Material through or in the air, soil, surface water, groundwater or property.

“Remedial Action” shall mean any action or proceeding required under Environmental Law to: (i) cause the removal of any Hazardous Material; (ii) correct or prevent an environmental problem resulting from the prior treatment, storage, disposal or Release of Hazardous Material or to recover the cost of any such corrections or preventions by a Governmental Authority or third party; or (iii) cause the removal of any fill or implement any remediation, restoration or mitigation that may be required in connection with any dredging, filling or disturbance activities in any “wetlands”, “waters of the United States”, “State-owned bottoms” or “subaqueous bottoms” (as those terms are defined by the regulations and formal guidance established by the U.S. Army Corps of Engineers or any other Governmental Authority of competent jurisdiction).

“Required Consents” shall mean: (i) the Landlord Consent; and (ii) the consents set forth on Schedule 3.2(b), each of which shall be satisfactory in form to Buyer in its sole discretion.

“Royalty/Margin Consideration” shall have the meaning given to such term in Section 2.5.

“Royalty/Margin Payment Period” shall mean, for each Subject Biomarker Assay, the period commencing on the date of the first commercial sale of such Subject Biomarker Assay and ending on the expiration date of the last to expire Valid Claim of any Patent right with respect to such Subject Biomarker Assay that were included in the Assets.  For the FCGamma Assay, the Royalty/Margin Payment Period shall extend until at least the last to expire Valid Claim of any of the following US Patent Application Serial Nos. 08/868,279; 10/492,183; 12/858,343; 11/597,981; 11/629,808; and 11/587,781.

“Schedule of Accrued Vacation” shall mean the itemized schedule of all accrued but unpaid vacation for each Business Employee as of the Closing Date, which schedule shall be delivered no less than two Business Days prior to Closing and shall set forth, in each case as of

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the Closing Date, (i) the name of each Business Employee, (ii) the number of accrued vacation days for each Business Employee; and (iii) the total cost for such accrued vacation days for each Business Employee.

“SEC” shall mean the United States Securities and Exchange Commission.

“Second Note” shall mean the secured promissory note, in the form attached hereto as Exhibit E, to be issued by Buyer to Seller pursuant to Section 2.2(c).

“Second Note Consideration” shall have the meaning given to such term in Section 2.2(c).

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Security Agreement” means the Security Agreement between Buyer and Seller, in the form attached hereto as Exhibit F.

“Seller” shall have the meaning given to such term in the first sentence of this Agreement.

“Seller Confidential Information” shall have the meaning given to such term in Section 6.10(b).

“Seller Indemnified Party” and “Seller Indemnified Parties” shall have the meanings given to such terms in Section 6.3(a).

“Seller IP” shall have the meaning given to such term in Section 3.19(c).

“Seller Parent” shall have the meaning given to such term in the first sentence of this Agreement.

“Seller Parent SEC Documents” shall mean all reports, schedules, forms, statements, prospectuses, registration statements, certifications and other documents required to be filed with or furnished to the SEC by Seller Parent or its officers since March 31, 2010, together with any exhibits and schedules thereto and other information incorporated therein.

“Seller Registered IP” shall have the meaning given to such term in Section 3.19(a).

“Seller Service Providers” shall have the meaning given to such term in Section 5.7.

“Subject Biomarker Assay” shall mean any biomarker assay developed, commercialized or sold by Buyer following the Closing that is based on Intellectual Property included in the Assets.

“Subject Biomarker Assay Technology” shall mean all proprietary technology, including all Intellectual Property, necessary for the performance of a Subject Biomarker Assay.

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“Sublease Agreement” shall mean the Sublease Agreement relating to the Leased Real Property between Buyer and Seller Parent, in the form attached hereto as Exhibit G.

“Sublicense Agreement” shall mean the Sublicense Agreement between Seller Parent and Buyer, in the form attached hereto as Exhibit H.

“Subsequent Sale Consideration” shall have the meaning given to such term in Section 2.6(c).

“Tax” or “Taxes” shall mean any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs, duties, capital stock, franchise, profits, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value-added, alternative or add-on minimum, estimated or other taxes of any kind whatsoever imposed, assessed or collected by or under the authority of any Governmental Authority, including any interest, penalties and additions imposed thereon or with respect thereto, whether disputed or not.

“Tax Return” shall mean any report, return, information return, schedule, claim for refund or other information, including any attachment thereto or amendment thereof, supplied or required to be supplied to a Governmental Authority in connection with Taxes.

“Third-Party IP” shall have the meaning given to such term in Section 3.19(a).

“Total Indemnification Limit” shall have the meaning given to such term in Section 6.4(a).

“Trading Day” shall mean: (i) if the Buyer Common Stock is listed or quoted on an Exchange, any day on which the Buyer Common Stock is traded on such Exchange; (ii) if the Buyer Common Stock is not listed or quoted on an Exchange but if prices for the Buyer Common Stock are then listed or quoted on the OTC Bulletin Board, any day on which the Buyer Common Stock is traded on the over-the-counter market, as reported by the OTC Bulletin Board; or (iii) if the Buyer Common Stock is not quoted on the OTC Bulletin Board but if prices for the Buyer Common Stock are then reported by Pink OTC Markets Inc. (or any similar organization or agency succeeding its functions of reporting prices), any day on which the Buyer Common Stock is traded in the over-the-counter market as reported by Pink OTC Markets Inc. (or any similar organization or agency succeeding its functions of reporting prices); provided, however, that in the event that the Buyer Common Stock is not listed or quoted as set forth in clause “(i)”, “(ii)” or “(iii)” of this definition, then Trading Day shall mean any business day.

“Transaction Documents” shall mean this Agreement and all other documents and certificates contemplated herein or delivered pursuant hereto, including the Assignment and Assumption Agreement, the Bill of Sale, the Landlord Consent, the Notes, the Security Agreement, the Sublease Agreement, the Transition Services Agreement, and the Sublicense Agreement.

“Transfer Taxes” shall mean all federal, state, local or foreign sales, use, transfer, real property transfer, mortgage recording, stamp duty, value-added or similar Taxes that may be imposed in connection with the transfer of the Assets or the assumption of the Assumed

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Liabilities, together with any interest, additions to Tax or penalties with respect thereto and any interest in respect of such additions to Tax or penalties.

“Transition Services” shall have the meaning given to such term in Section 5.7.

“Transition Services Agreement” shall have the meaning given to such term in Section 5.7.

“Valid Claim” shall mean a claim of an issued and unexpired Patent that has not been permanently revoked, held unenforceaable or invalid by a final, non-appealable decision of a court.

“VWAP” shall mean, for any Trading Day, the applicable price of Buyer Common Stock as determined by the first of the following clauses that applies: (i) if the Buyer Common Stock is then listed or quoted on an Exchange, the daily volume weighted average price of the Buyer Common Stock for such Trading Day on the Exchange on which the Buyer Common Stock is then listed or quoted as reported by Bloomberg L.P. (or any organization or agency succeeding its functions of reporting prices); (ii) if the Buyer Common Stock is not then listed or quoted on an Exchange, but if prices for the Buyer Common Stock are then listed or quoted on the OTC Bulletin Board, the volume weighted average price of the Buyer Common Stock for such Trading Day on the OTC Bulletin Board; (iii) if the Buyer Stock is not then listed or quoted on the OTC Bulletin Board, but if prices for the Buyer Common Stock are then reported by Pink OTC Markets Inc. (or any similar organization or agency succeeding its functions of reporting prices), the most recent bid price per share of the Buyer Common Stock so reported; or (iv) in all other cases, the fair market value of a share of Buyer Common Stock as determined in good faith by the board of directors of Buyer.

“Waban Agreement” means that certain Software Master License Agreement dated May 31, 2007 between Seller Parent and Phase Forward f/k/a Waban Software, Inc, as amended on August 29, 2008.

“WARN Act” shall mean the Worker Adjustment and Retraining Notification Act, as amended.

“Workers’ Compensation Acts” shall mean all applicable Laws that provide for awards to employees and their dependents for employment-related accidents and diseases.

1.2          Construction.  All article, section, subsection, schedule and exhibit references herein are to this Agreement unless otherwise specified. All schedules and exhibits attached to this Agreement constitute a part of this Agreement and are incorporated herein. Unless the context of this Agreement clearly requires otherwise: (i) the singular shall include the plural and the plural shall include the singular wherever and as often as may be appropriate; (ii) the words “includes” or “including” shall mean “including without limitation”; and (iii) the words “hereof”, “herein”, “hereunder” and similar terms in this Agreement shall refer to this Agreement as a whole and not any particular section or article in which such words appear.

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ARTICLE 2

SALE AND PURCHASE, ASSIGNMENT AND ASSUMPTION

2.1          Sale and Purchase, Assignment and Assumption.

(a)           At the Closing, Seller and Seller Parent shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall purchase and accept the assignment of, all of the Assets, free and clear of any and all Encumbrances, pursuant to the execution and delivery of the Bill of Sale, the Assignment and Assumption Agreement and such other documents as are necessary to sell, transfer, convey, deliver and assign the Assets to Buyer.  For the avoidance of doubt, Buyer shall not purchase or accept the assignment of, nor shall it be deemed to have purchased or accepted the assignment of, any Excluded Assets or Contracts that are not Assumed Contracts.  Prior to or promptly following the Closing, Seller or Seller Parent shall remove, at Seller’s or Seller Parent’s sole expense, all Excluded Assets from the Leased Real Property.

(b)           Notwithstanding anything to the contrary in this Agreement or the other Transaction Documents, this Agreement and the other Transaction Documents shall not constitute an agreement to assign or transfer any Asset or interest therein which, absent a Required Consent, would constitute a breach or violation of any Contract or Permit pertaining to such Asset or interest therein or of applicable Law, or would adversely affect the rights or obligations to be assigned or transferred to or for the account of Buyer with respect to such Asset or interest therein, if such Required Consent shall not have been obtained with respect to such Asset or interest therein prior to the Closing (each, a “Delayed Required Consent”).  Any transfer or assignment to Buyer by Seller or Seller Parent, as applicable, of any such Asset or interest therein (each, a “Delayed Asset”), and any assumption by Buyer of any corresponding Assumed Liability (each, a “Delayed Liability”), shall be made subject to all such Delayed Required Consents in respect of such Delayed Asset being obtained.  If there are any such Delayed Assets, each of Seller and Seller Parent shall use its commercially reasonable efforts to obtain all such Delayed Required Consents in respect thereof as promptly as practicable following the Closing, without any further cost to Buyer or any of its Affiliates.  Until all Delayed Required Consents have been obtained:  (i) Seller or Seller Parent, as applicable, shall maintain its corporate existence and hold such Delayed Assets in trust on behalf of Buyer; (ii) Seller or Seller Parent, as applicable, shall cooperate with Buyer for no additional consideration in any lawful arrangement (including subleasing or subcontracting, or performance thereunder by Seller or Seller Parent, as applicable, as Buyer’s agent) to preserve and to provide Buyer with all of the benefits of or under any such Delayed Assets; (iii) Seller or Seller Parent, as applicable, shall otherwise enforce and perform for the account of Buyer, at Buyer’s sole expense, and as reasonably directed by Buyer any other rights of Seller or Seller Parent, as applicable, arising from such Delayed Assets, and shall comply with the terms and provisions of such Delayed Assets as agent for Buyer and for Buyer’s benefit; and (iv) with respect to such Delayed Assets, Seller or Seller Parent, as applicable, except as permitted by Applicable Law, hereby hires and authorizes Buyer to perform the obligations specified in such Delayed Assets on Seller’s or Seller Parent’s behalf, as applicable, pursuant to the terms of such Delayed Assets.  At such time after the Closing as all Delayed Required Consents with respect to a Delayed Assets have been obtained, such Delayed Assets shall automatically be transferred and assigned by Seller or Seller Parent, as applicable, to Buyer for no additional consideration without any further act on the part of any Party.

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(c)           At the Closing, Seller shall transfer and assign to Buyer, and Buyer shall assume and accept the assignment of, and responsibility for payment of, the Assumed Liabilities pursuant to the execution and delivery of the Assignment and Assumption Agreement and such other documents as are necessary to assign the Assumed Liabilities to Buyer.  For the avoidance of doubt, Buyer shall not assume and shall not have any responsibility with respect to, and shall not be deemed to have assumed or be responsible for, any Excluded Liabilities.

2.2          Closing Consideration.  At the Closing and as consideration for the sale of the Assets to Buyer by Seller and Seller Parent, Buyer shall, in addition to assuming the Assumed Liabilities pursuant to Section 2.1(c):

(a)           pay to Seller, by wire transfer of immediately available funds to an account designated by Seller, an amount equal to $6,000,000 (the “Closing Cash Consideration”);

(b)           issue to Seller the First Note in the initial aggregate principal amount equal to the sum of (i) $8,500,000, plus (ii) an amount not to exceed $200,000, which amount shall be equal to the aggregate amount of accrued but unpaid vacation set forth on the Schedule of Accrued Vacation for those Business Employees who become Continuing Employees and who have elected to receive a cash payment, payable by Seller prior to or on the Closing Date, for their accrued but unpaid vacation, plus (iii) an amount equal to Buyer’s pro rata share of the  annual license and maintenance fee paid by Seller or Seller Parent pursuant to the Waban Agreement for the period beginning on August 28, 2010 and ending on August 27, 2011, with such pro rata share of Buyer determined based on the number of days between the Closing Date and August 27, 2011; and

(c)           issue to Seller the Second Note in the initial aggregate principal amount of $932,000 (the “Second Note Consideration” and, together with the First Note Consideration and the Closing Cash Consideration, the “Closing Consideration”).

2.3          Accounts Receivable Consideration.  As additional consideration for the sale of the Assets to Buyer by Seller and Seller Parent, for a period of eighteen (18) months following the Closing Date (the “A/R Collection Period”), Buyer shall pay to Seller, if and as applicable, a percentage of all amounts collected by Buyer during the A/R Collection Period without reduction or setoff (the “Collected A/R Amounts”) in respect of outstanding accounts receivables included in the Assets and set forth on Schedule 3.4 (the “Outstanding A/R Amounts”) in accordance with the following:

Collected A/R Amount	Percentage Owed to Seller
First $1,000,000 collected during the A/R Collection Period	[…***…]%
Next $1,500,000 collected during the A/R Collection Period	[…***…]%
All remaining amounts collected during the A/R Collection Period	[…***…]%

*Confidential Treatment Requested

 

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All payments of Collected A/R Amounts (collectively, the “Accounts Receivable Consideration”) shall be: (i) paid in cash on a quarterly basis, with payment for each quarter during the A/R Collection Period being due thirty (30) calendar days following the end of such quarter; and (ii) accompanied by a report containing reasonable details regarding Buyer’s collection of the Collected A/R Amounts during such quarter and the remaining Outstanding A/R Amounts following such quarter.  Buyer shall use commercially reasonable efforts (consistent with Buyer’s own accounts receivable collection policies) to collect all Outstanding A/R Amounts during the A/R Collection Period; provided, however, that subject to its compliance with the foregoing, in no event shall Buyer be liable to Seller or Seller Parent for any failure to collect any Outstanding A/R Amounts during the A/R Collection Period or for any Collected A/R Amounts in excess of the amounts set forth above or collected following the expiration of the A/R Collection Period.  Seller and Seller Parent will have the right, at their own expense, upon reasonable prior notice, to inspect and audit the records of Buyer with respect to Buyer’s payment obligations under this Section 2.3, and Buyer shall provide reasonable assistance to Seller or Seller Parent in connection with any such inspection and audit.

2.4          Milestone Consideration.  As additional consideration for the sale of the Assets to Buyer by Seller and Seller Parent, Buyer shall pay to Seller, if and as applicable:

(a)           a one-time payment of $250,000, due within ten (10) days following the […***…] by Buyer of any assay that […***…] FCGamma gene, whether alone or in combination with other genes or tests (“FCGamma Assay”) that is a Subject Biomarker Assay (the “FCGamma Assay Milestone Consideration”); provided, however, that such payment may be made, in Buyer’s sole discretion, either in cash or via the issuance to Seller of that number of shares of Buyer Common Stock equal to: (i) $250,000; divided by (ii) the 20-Day VWAP; and

(b)           a one-time payment of $250,000, due within ten (10) days following the […***…] by Buyer of any assay that […***…] ABCB or MDR gene, whether alone or in combination with other genes or tests (“ABCB1 Assay”) that is a Subject Biomarker Assay (the “ABCB1 Assay Milestone Consideration” and, together with the FCGamma Assay Milestone Consideration, the “Milestone Consideration”); provided, however, that such payment may be made, in Buyer’s sole discretion, either in cash or via the issuance to Seller of that number of shares of Buyer Common Stock equal to: (i) $250,000; divided by (ii) the 20-Day VWAP.

2.5          Royalty/Margin Consideration.

(a)           As additional consideration for the sale of the Assets to Buyer by Seller and Seller Parent, Buyer shall pay to Seller in respect of reimbursements received by Buyer or its Affiliates from payors or any sublicencees in connection with the performance of Subject Biomarker Assays (or sales of reagent-assay kits including Subject Biomarker Assays) during each quarter during the Royalty/Margin Payment Period an amount per Subject Biomarker Assay performed (or per reagent-assay kit including a Subject Biomarker Assay sold) during such quarter equal to the greater of: (i) […***…]

*Confidential Treatment Requested

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[…***… (continued)]]

Average Assay Reimbursement Amount	Applicable  Royalty Rate	Applicable  Margin Percentage
[…***…]	[…***…]%	[…***…]%
[…***…]	[…***…]%	[…***…]%
[…***…]	[…***…]%	[…***…]%
[…***…]	[…***…]%	[…***…]%

All payments based on the applicable royalty rates or applicable margin percentages set forth above (collectively, such payments being the “Royalty/Margin Consideration”) shall be:  (i) paid in cash on a quarterly basis, with payment for each quarter during the Royalty/Margin Payment Period being due forty-five (45) days following the end of such quarter; (ii) calculated and paid separately […***…]; and (iii) accompanied by a report containing reasonable details regarding Buyer’s calculation of the Royalty/Margin Consideration payable in respect of the applicable quarter during the Royalty/Margin Payment Period ([…***…]). Seller and Seller Parent will have the right, at their own expense, upon reasonable prior notice, to inspect and audit the records of Buyer with respect to Buyer’s payment obligations under this Section 2.5, and Buyer shall provide reasonable assistance to Seller and Seller Parent in connection with any such inspection and audit. In the event that Buyer undergoes a Change of Control, Buyer shall, as a condition to the consummation of such Change of Control, require that any acquiror expressly assume the obligations of Buyer to pay the Royalty/Margin Consideration under this Section 2.5 based on the reimbursements received by such acquiror or its Affiliates from payors or any sublicencees in connection with the performance of Subject Biomarker Assays (or sales of reagent-assay kits including Subject Biomarker Assays).

(b)           If, at any time during the Royalty/Margin Payment Period, Buyer sells, transfers, assigns or exclusively licenses, which for the avoidance of doubt shall not include a Change of Control (“Transfers”), to any third party any Subject Biomarker Assay Technology (the “Transferred Technology”), then as a condition to such Transfer, such third party shall be required to assume, with respect to such Transferred Technology, the obligations of Buyer to pay the Royalty/Margin Consideration based on the reimbursements received by such acquiror or its Affiliates from payors or any sublicencees in connection with the performance of Subject Biomarker Assays (or sales of reagent-assay kits including Subject Biomarker Assays).  The Royalty/Margin Consideration payable to Seller by such third party pursuant to this Section 2.5(b) shall be […***…] pursuant to the Transfer, assuming for these purposes that the Transferred Technology related to only one Subject Biomarker Assay.  Such […***…] shall be based on the following schedule:

*Confidential Treatment Requested

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[…***…]	[…***…] Royalty/Margin Consideration
[…***…]	[…***…]%
[…***…]	[…***…]%
[…***…]	[…***…]%

If the Transferred Technology relates to more than one Subject Biomarker Assay, then for the purposes of determining the […***…] in Royalty/Margin Consideration set forth above, the […***…] by Buyer pursuant to such Transfer shall be allocated equally among each of the Subject Biomarker Assays relating to such Transferred Technology.

2.6          Subsequent Sale Consideration.  As additional consideration for the sale of the Assets to Buyer by Seller and Seller Parent, Buyer shall pay to Seller (the “Subsequent Sale Consideration”), if and as applicable:

(a)           at any time when the aggregate amount of […***…] paid to Seller pursuant to Section 2.5 is […***…], an amount in cash equal to […***…] of the aggregate proceeds received by Buyer in connection with any Transfer to any third party of any Subject Biomarker Assay Technology during the Royalty/Margin Payment Period; or

(b)           at any time when the aggregate amount of […***…] paid to Seller pursuant to Section 2.5 is […***…], an amount in cash equal to […***…] of the aggregate proceeds received by Buyer in connection with any Transfer to any third party of any Subject Biomarker Assay Technology during the Royalty/Margin Payment Period.

(c)           In the event that Buyer undergoes a Change of Control, Buyer shall, as a condition to the consummation of such Change of Control, require that any acquiror expressly assume the obligations  of Buyer under this Section 2.6 to pay the Subsequent Sale Consideration upon any subsequent Transfer by such acquiror to any third party of any Subject Biomarker Assay Technology.

2.7          Closing.  The closing (the “Closing”) of the transactions contemplated in this Agreement shall take place at 10:00 a.m. Central Time at the offices of Buyer located at 12325 Emmet Street, Omaha, Nebraska 68164 on: (i) the date that is two (2) business days following the satisfaction or waiver of the conditions set forth in Article 5; or (ii) such other time and date as the Parties may agree in writing.  The date on which the Closing occurs is referred to herein as the “Closing Date”.

*Confidential Treatment Requested

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2.8          Deliveries at Closing.

(a)           At the Closing, Seller shall deliver, or caused to be delivered, to Buyer the following items, each (where applicable) properly executed:

(i)           a certificate, dated as of the Closing Date, executed by the corporate secretary of each of Seller and Seller Parent, in form and substance satisfactory to Buyer, certifying in each case as to (x) the organizational documents of Seller or Seller Parent, as applicable and (y) the approval of the board of directors (or board of managers) of Seller or Seller Parent, as applicable, approving the transactions contemplated by the Transaction Documents;

(ii)          a certificate, dated as of the Closing Date, executed by an authorized officer of each of Seller and Seller Parent, in form and substance satisfactory to Buyer, certifying in each case as to the fulfillment of the matters referred to in Sections 5.1(a), (b) and (c);

(iii)         a statement, dated as of the Closing Date, in the form set forth in Treasury Regulation § 1.1445-2(b)(2) and made under penalties of perjury by Seller and Seller Parent, that (among other things) neither Seller nor Seller Parent is a foreign Person;

(iv)          the Assignment and Assumption Agreement in the form of Exhibit A hereto;

(v)           the Bill of Sale in the form of Exhibit B hereto;

(vi)          the Landlord Consent;

(vii)         the Noncompetition Agreement in the form of Exhibit C hereto;

(viii)        the First Note and Second Note, in the form of Exhibit D and Exhibit E, respectively, hereto;

(ix)          the Security Agreement in the form of Exhibit F hereto;

(x)           the Sublease Agreement in the form of Exhibit G hereto;

(xi)         the Transition Services Agreement in the form to be agreed upon by the Parties pursuant to Section 5.7;

(xii)        all Required Consents other than the Delayed Required Consents (each of which Delayed Required Consents is set forth on Schedule 2.8(a)(xii));

(xiii)       the Schedule of Accrued Vacation; and

(xiv)        the Sublicense Agreement in the form of Exhibit H hereto.

(b)          At the Closing, Buyer shall deliver, or cause to be delivered, to Seller the following items, each (where applicable) properly executed:

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(i)           the Closing Cash Consideration;

(ii)          a certificate, dated as of the Closing Date, executed by the corporate secretary of Buyer, in form and substance satisfactory to Seller, certifying as to (x) the charter and bylaws of Buyer and (y) the approval of the board of directors of Buyer approving the transactions contemplated by the Transaction Documents;

(iii)         a certificate, dated as of the Closing Date, executed by an authorized officer of Buyer, in form and substance satisfactory to Seller, certifying fulfillment of the matters referred to in Sections 5.2(a) and (b); and

(iv)          counterpart signature pages to the documents referenced in Section 2.8(a)(iv) through (xi).

(c)           In connection with and following the Closing, Buyer, Seller and Seller Parent shall execute and deliver to each other such other documents and agreements as may be reasonably necessary and desirable to consummate the transactions contemplated hereby.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER PARENT

Subject to the exceptions set forth on the Schedules delivered by Seller and Seller Parent to Buyer concurrently with the execution of this Agreement (which disclosures shall delineate the section or subsection to which they apply but shall also qualify such other sections or subsections in this Article 3 to the extent that it is readily apparent (without a specific cross-reference) on its face from a reading of the disclosure items that such disclosure is applicable to such other section or subsection), Seller and Seller Parent, jointly and severally, represent and warrant to Buyer as of the date of this Agreement and as of the Closing Date (except with respect to representations and warranties that address matters only as of a particular date, which shall speak as of such particular date):

3.1          Organization of Seller; Authorization and Enforceability.

(a)           Each of Seller and Seller Parent is a limited liability company or corporation duly formed and validly existing under the laws of Delaware, and has all requisite power and authority to own, lease and operate its properties and to carry on the Business.  Each of Seller and Seller Parent is duly qualified or licensed to do business in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, except where the failure to be so qualified or in good standing individually or in the aggregate will not have a Material Adverse Effect.

(b)           This Agreement is, and the other Transaction Documents to which Seller or Seller Parent is a party will be, when executed and delivered by the parties thereto, the valid and binding obligation of Seller and Seller Parent, as applicable, enforceable against Seller and Seller Parent, as applicable, in accordance with their respective terms subject to:  (i) applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to creditors’ rights or creditors’ remedies generally; and (ii) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in

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equity).  Each of Seller and Seller Parent has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its respective obligations under this Agreement and the other Transaction Documents.

(c)           Seller does not hold any ownership interest in any Person.

(d)           Seller Parent owns through one or more wholly owned subsidiaries all of the issued and outstanding equity interests in Seller.

3.2          No Violation or Conflict; Required Consents.

(a)           Except as set forth on Schedule 3.2(a), no notice to or Permit from any Governmental Authority is necessary or is required to be made or obtained by Seller or Seller Parent in connection with the execution and delivery of this Agreement or the other Transaction Documents by Seller or Seller Parent or for the consummation by Seller and Seller Parent of the transactions contemplated hereby or thereby.

(b)           Except as set forth on Schedule 3.2(b), the execution of this Agreement and the other Transaction Documents, the performance by Seller and Seller Parent of their respective obligations under this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby, do not and will not: (i) conflict with or result in any breach of any provision of the organizational documents of Seller or Seller Parent; (ii) conflict with or violate any Law binding on Seller or Seller Parent or any of their respective properties or assets; (iii) conflict with or result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, modification or acceleration) under, any of the terms, conditions or provisions of any Contract or other instrument or obligation to which Seller or Seller Parent is a party or by which Seller or Seller Parent or any of their respective properties or assets may be bound; or (iv) cause Seller or Seller Parent to violate, forfeit or otherwise have terminated any Permits or require Buyer, Seller or Seller Parent to file any notice related to any Permits with any Person other than any Governmental Authority.  Other than the Required Consents, no consent of any Governmental Authority or other Person, and no notice to, filing or registration with, or authorization, consent or approval of, any Governmental Authority, entity or other Person is necessary or required to be made or obtained by Seller or Seller Parent in connection with any of the transactions contemplated by the Transaction Documents.

3.3          Financial Statements.  Schedule 3.3 sets forth the following financial statements for the Business (collectively, the “Financial Statements”): (i) the unaudited balance sheet and statement of income for the Business as of, and for the fiscal year ended, March 31, 2010; and (ii) an unaudited balance sheet and statement of income for the Business as of, and for the six (6) months ended September 30, 2010 (the “Interim Balance Sheet”).  The Financial Statements: (x) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (subject to year-end adjustments and to the absence of footnotes); (y) present fairly in all material respects the financial condition of the Business as of such dates and the results of operations of the Business for such periods; and (z) are consistent with the books and records maintained by Seller or Seller Parent with respect to the Business.

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3.4          Accounts Receivable.  The accounts receivable of Seller or Seller Parent included in the Assets, which are listed on Schedule 3.4, arose from bona fide transactions in the ordinary course of business. To Seller’s Knowledge, the debtors to which such accounts receivable relate are not in nor subject to a bankruptcy or insolvency proceeding and none of such receivables have been made subject to an assignment for the benefit of creditors.  Neither Seller nor Seller Parent has received written notice of any, and to Seller’s Knowledge there are no, counterclaims or setoffs against or disputes regarding such accounts receivable.

3.5          No Adverse Change.  Except as set forth on Schedule 3.5, since October 1, 2010, there has not been: (i) any Material Adverse Effect; (ii) any loss, damage, condemnation or destruction to any material portion of the Assets (whether covered by insurance or not); (iii) any labor dispute or disturbance, litigation, work stoppage or other event or condition that could have an effect similar to a labor dispute, disturbance, work stoppage or litigation and that has had or could reasonably be expected to have a Material Adverse Effect; (iv) any material Encumbrance made on any of the Assets; (v) any sale, transfer or other disposition of any of the Assets; or (vi) any change in the methods of accounting or accounting practices of Seller, except as required by Law.

3.6          No Litigation.  Except as set forth on Schedule 3.6, there is no Claim pending or, to the Knowledge of Seller, any Claim threatened in writing: (i) relating to the Assets, or operation or maintenance of the Business or the Facility; or (ii) that seeks restraint, prohibition, damages or other relief in connection with this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby. Except as set forth on Schedule 3.6, to the Knowledge of Seller, no Claim has been threatened orally that could reasonably be expected to result in a Material Adverse Effect.

3.7          Title to Assets; Related Matters.  Seller or Seller Parent owns good and valid title to the Assets, free and clear of any and all Encumbrances other than Permitted Encumbrances.  At the Closing, subject to the fulfillment of Buyer’s obligations pursuant to this Agreement, good and valid title to the Assets, free and clear of any and all Encumbrances will pass to Buyer.  The Assets do not include any equity or debt securities of or interest in, or any right or obligation to acquire any equity or debt securities of or interest in, any corporation, partnership, limited liability company, business trust, joint venture or other business association.  Seller and Seller Parent are the only Persons that currently conduct or have conducted the Business since April 1, 2010.  The Assets constitute all of the assets necessary for the operation of the Business as conducted on the date of this Agreement.

3.8          Powers of Attorney.  Seller has granted no outstanding powers of attorney to any Person with respect to any matter.

3.9          Books and Records.  The Books and Records are complete and correct in all material respects, and Seller has made available to Buyer for examination the originals or true and correct copies of all Books and Records for examination.

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3.10        Contracts.

(a)           Schedule 3.10(a) is a true and complete list of all material Contracts to which Seller or Seller Parent is a party that relate to the Assets, the Business or the Facility (collectively, the “Related Material Contracts”), including:

(i)           each Assumed Contract;

(ii)          any lease or sublease of, or license to or for, any Asset;

(iii)         any agreement to purchase or sell a capital Asset or any Equipment;

(iv)         any Contract or other document that limits the freedom of Seller or Seller Parent to compete in any line of business similar to the Business or to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any Asset;

(v)           any confidentiality, non-solicitation, non-disclosure, non-competition, employment, change of control, severance or similar Contracts pertaining to the Business Employees;

(vi)          any partnership, joint venture or other similar Contract;

(vii)         any Contract with an Affiliate of Seller or Seller Parent;

(viii)       any agency, dealer, sales representative or other similar agreement;

(ix)         any confidentiality agreements and/or assignment of invention agreements with third parties; or

(x)           any currently proposed arrangement of a type that, if entered into, would be required to be disclosed pursuant to any other subsection of this Section 3.10(a).

Seller has delivered or made available to Buyer true and complete copies of each Related Material Contract that is a written Contract and has summarized on Schedule 3.10(a) the terms of each Related Material Contract that is an oral Contract. Each Assumed Contract: (i) (assuming, with respect to all parties thereto other than Seller or Seller Parent, as applicable, valid authorization, execution and delivery) is in full force and effect; and (ii) is enforceable against Seller or Seller Parent, as applicable, in accordance with its terms, subject to (x) applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to creditors’ rights or creditors’ remedies generally and (y) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). Except as expressly set forth on Schedule 3.10(a), no Assumed Contract has been materially modified by any oral agreement or modified in any respect by any written agreement.

(b)           Seller or Seller Parent, as applicable, has performed and, to the Knowledge of Seller, every other party has performed, each material term, covenant and condition of each of the Assumed Contracts in all material respects that is to be performed by

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any of them and no event has occurred that would, with the passage of time or compliance with any applicable notice requirements, constitute a material breach, violation or default by Seller or Seller Parent, as applicable, or, to the Knowledge of Seller, any other party, under any of the Assumed Contracts. No party to any of the Assumed Contracts has advised Seller or Seller Parent in writing of its intention to cancel, terminate or exercise any option under any of the Assumed Contracts.  All amount due and owing under the Assumed Contracts for goods and/or services delivered or rendered, as the case may be, prior to the Closing Date shall have been paid in full by Seller or Seller Parent.

(c)           Except for the Required Consents, no consent of any party to the Assumed Contracts is required to maintain such Contract in full force and effect or to avoid a breach, violation or default thereunder as a result of the consummation of the transactions contemplated by the Transaction Documents.

(d)           Other than as set forth on Schedule 3.10(d), Seller is not a party to any Contract, which is not otherwise an Assumed Contract, which will be binding on Buyer or to which any of the Assets will be subject as of or following the Closing Date.

3.11        Leased Real Property.  Seller has delivered to Buyer a true and complete copy of the Lease.  Neither Seller nor Seller Parent has subleased the Facility or any portion thereof (including the Leased Real Property).  All rental and other payments and other obligations required to be paid and performed by Seller or Seller Parent pursuant to the Lease have been duly paid and performed.  The Lease is in full force and effect and enforceable against the Landlord in accordance with its respective terms and there are no defaults and no event has occurred that would, with the passage of time or compliance with any applicable notice requirements, constitute a default by Seller or Seller Parent, or to the Knowledge of Seller, of any other party to the Lease. There are no pending or, to the Knowledge of Seller, threatened condemnation or other proceedings, lawsuits, or administrative actions relating to the Facility or any portion thereof (including the Leased Real Property), or the rights, title or interests of Seller or Seller Parent therein.

3.12        Insurance.  Seller and Seller Parent have been at all times since January 1, 2009 and are currently a party to, or the named insured or beneficiary of coverage under, comprehensive general liability insurance policies that are occurrence-based (rather than claims-made) policies and that are in full force and effect through the Closing.

3.13        Employees.

(a)           Schedule 3.13(a) contains a complete and accurate list of the following information for each Business Employee, including each Business Employee on leave of absence or layoff status: (i) name; (ii) job title; (iii) date of hiring or engagement; (iv) base salary rate, target bonus percentage and most recent bonus amount received and any change in compensation since October 1, 2010; (v) vacation accrued as of the Closing; and (vi) service credited for purposes of vesting and eligibility to participate under any pension, retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus, stock option, cash bonus, employee stock ownership (including investment credit or payroll stock ownership), severance pay, insurance, medical, welfare, or vacation plan, or any other similar plan of Seller or Seller Parent.  The

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Business Employees constitute all of the employees of Seller, Seller Parent or any of their respective Affiliates who perform services primarily in connection with the operation of the Business.

(b)           Schedule 3.13(b) sets forth a list of all written employment or engagement agreements, including offer letters, between Seller or Seller Parent, as applicable, and the Business Employees, and Seller or Seller Parent, as applicable, has delivered or made available true and complete copies thereof to Buyer.  Except as set forth on Schedule 3.13(b): (i) all Business Employees are “at will” and may be terminated at the discretion of Seller or Seller Parent, as applicable, at any time and for any reason or no reason and without any Liability with respect to any form of severance or similar payment; and (ii) Seller or Seller Parent, as applicable, has no oral agreements with any of the Business Employees.

(c)           Schedule 3.13(c) contains a correct and complete list of all consultants or independent contractors performing services in connection with the operation of the Business.

3.14        Compliance with Law.  Except as set forth on Schedule 3.14, Seller’s and Seller Parent’s use of the Assets and operation of the Business and the Facility as currently conducted, does not violate or conflict with, and has not violated or conflicted with, any applicable Law, except for such violations which have not had and will not have a Material Adverse Effect.

3.15        Tax Matters.  Except as set forth on Schedule 3.15: (i) all material Tax Returns of Seller and Seller Parent relating to the Assets or the Business have been timely filed through the date hereof in accordance with all applicable Laws and are correct and complete in all material respects; (ii) all material Taxes, deposits or other payments relating to the Assets or the Business for which Seller or Seller Parent may have any liability through the date hereof (whether or not shown on any Tax Return) have been paid in full or are accrued as liabilities for Taxes on the books and records of Seller or Seller Parent, as applicable; and (iii) none of the Assets are subject to Liens for Taxes other than Liens for Taxes which are not yet due and payable.

3.16        Environmental Matters.

(a)           Seller and Seller Parent have operated the Business and the Facility in compliance in all material respects with all applicable Environmental Laws (which compliance includes the possession of any material required Environmental Permits, and material compliance with the terms and conditions thereof).  Neither Seller nor Seller Parent has received any communications from any Person alleging that Seller or Seller Parent is not in such compliance, and to Seller’s Knowledge there are no past or present actions, activities, circumstances, conditions, events or incidents under the direction or control of Seller that could reasonably be expected to prevent or interfere with such compliance in the future. Except as set forth on Schedule 3.16(a), there are no Environmental Permits currently held by the Seller or Seller Parent in connection with the Business or the Facility

(b)           Except in the ordinary course of business in compliance in all material respects with all Environmental Laws then in effect, neither Seller nor Seller Parent has: (i) used, treated, stored, disposed of or caused a Release of any Hazardous Material on, under, at, from or

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in any way materially affecting the Facility; or (ii) shipped any Hazardous Material generated at the Facility to any other place for use, treatment, storage, treatment or disposal, which off-site shipment, treatment, storage, disposal or release would give rise to any material liabilities or obligations under Environmental Laws.

(c)           There is no Environmental Claim pending or threatened against Seller or Seller Parent in connection with the Business or the Facility.

(d)           To Seller’s Knowledge, there are no past or present actions, activities, circumstances, conditions, events or incidents, including the Release or presence of any Hazardous Material, which reasonably would be anticipated to form the basis of any material Environmental Claim or Environmental Liability against Seller or Seller Parent in connection with the Business or which reasonably would be anticipated to materially affect the Facility or any part thereof.

(e)           Except as may be permitted under Environmental Law, neither Seller nor Seller Parent has Released or caused the Release of Hazardous Material or any other wastes produced by, or resulting from, any business, commercial or industrial activities, operations or processes, on, beneath or adjacent to the Facility, the presence of which would give rise to a material Environmental Claim or Environmental Liability or constitute a material violation of any Environmental Law.

(f)           Except as may be permitted under Environmental Law, neither Seller nor Seller Parent has conducted any dredging, filling or any other activities in any “wetlands”, “waters of the United States”, “wetland”, “State-owned bottoms” or “subaqueous bottoms” (as those terms are defined by the regulations and formal guidance of the U.S. Army Corps of Engineers or any other Governmental Authority of competent jurisdiction) at the Facility or any part thereof (including the Leased Real Property).

(g)           Seller has delivered copies of, or otherwise made available for inspection to Buyer, true, complete and correct copies and results of any material reports, studies, analyses, tests or monitoring currently possessed by Seller or Seller Parent substantially pertaining to any matter referred to in this Section 3.16.

3.17        Labor Matters.

(a)           Except as set forth on Schedule 3.17(a) with respect to Seller and Seller Parent’s ownership and conduct of the Business:

(i)           there is no unfair labor practice charge or complaint against Seller or Seller Parent pending or, to the Knowledge of Seller, threatened against Seller or Seller Parent before the National Labor Relations Board or any other comparable Governmental Authority; and

(ii)          there is no litigation, arbitration proceeding, governmental investigation, administrative charge, or action of any kind pending or, to the Knowledge of Seller, proposed or threatened against Seller or Seller Parent relating to employment or engagement, employment or engagement practices, terms and conditions of employment or

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engagement, wages and hours, or the safety and health of employees, independent contractors and consultants.

(b)           Seller and Seller Parent do not have any collective bargaining relationship or existing duty to bargain with any labor organization, and Seller and Seller Parent have not recognized any labor organization as the collective bargaining representative of any of its employees, independent contractors or consultants. Except as set forth on Schedule 3.17(b), there are no organizing activities of any type being conducted or threatened to be conducted by any labor organization with respect to the Business Employees or any of Seller’s or Seller Parent’s other employees, as applicable, or at the Facility.

(c)           Since October 1, 2010, neither Seller, Seller Parent nor any of their respective Affiliates has effectuated: (i) a “plant closing” (as defined in the WARN Act) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of Seller, Seller Parent or any of their respective Affiliates; (ii) a “mass layoff” (as defined in the WARN Act); or (iii) such other transaction, layoff, reduction in force or employment terminations sufficient in number to trigger application of any similar state or local law.  Seller and Seller Parent will comply with all applicable requirements, and will incur no Liability, under the WARN Act (or any similar applicable state or local law) in connection with the termination of the Business Employees.

3.18        Employee Benefit Plans.

(a)           No Employee Benefit Plan currently or previously maintained or contributed to by any of Seller, Seller Parent or their respective ERISA Affiliates or with respect to which any of Seller, Seller Parent or their respective ERISA Affiliates has or had any liability (actual or contingent) is: (i) a Multiemployer Plan; (ii) a “multiple employer plan” as described in Section 413(c) of the IRC or Sections 4063 or 4064 of ERISA; (iii) a “defined benefit plan” as defined in Section 3(35) of ERISA or subject to Title IV of ERISA; or (iv) a pension plan subject to the funding standards of Section 302 of ERISA or Section 412 or 430 of the IRC.  None of Seller, Seller Parent nor any of their respective ERISA Affiliates has previously maintained or had an obligation to contribute to any such plans.

(b)           With respect to each Employee Benefit Plan presently or previously maintained or contributed to by any of Seller, Seller Parent or their respective ERISA Affiliates that is intended to be Qualified Plan and in which a Continuing Employee was a participant, each such Employee Benefit Plan is so qualified under Section 401(a) of the IRC, its related trust is tax-exempt under the IRC and there are no existing facts or circumstances that could reasonably be expected to adversely affect such Employee Benefit Plan’s qualification under Section 401(a) and related sections of the IRC or such related trust’s tax-exempt status.

(c)           With respect to each Employee Benefit Plan, no event has occurred, and there exists no condition or circumstances, including the consummation of the transactions contemplated by the Transaction Documents, in connection with which the Buyer could, directly or indirectly, be subject to any liability under ERISA, the IRC or any other applicable Law for any liability relating to any Employee Benefit Plan.

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(d)           None of the Assets are subject to any Lien under ERISA Section 303(k) or IRC Section 430(k).

3.19        Intellectual Property.

(a)           Schedule 3.19(a) contains a complete and accurate list of all: (i) Patents that Seller or Seller Parent owns and uses in connection with the operation of the Business; (ii) Trademarks that Seller or Seller Parent owns and uses in connection with the operation of the Business; and (iii) other material registered Intellectual Property that Seller or Seller Parent owns (excluding rights to “shrink wrapped” or “off the shelf” software licensed by Seller) and uses in connection with the Business; ((i), (ii) and (iii) collectively, “Seller Registered IP”) and (iv) Patents that Seller or Seller Parent licenses and uses in connection with the operation of the Business  In addition, Schedule 3.19(a) identifies which Patents are licensed and from whom, which Patents are owned by Seller or Seller Parent, and the jurisdiction in which each Patent or Trademark has been registered or filed.

(b)           Except as listed on Schedule 3.19(b), all Intellectual Property listed on Schedule 3.19(a) which is material to the Business, to the Knowledge of Seller, is covered by valid, enforceable and subsisting Intellectual Property rights (except as enforceability of such rights may be limited by bankruptcy, insolvency or other similar laws affecting creditor’s rights generally, and except where the enforcement of any equitable remedies relating to such rights may be limited by equitable principles of general applicability).

(c)           Schedule 3.19(c)(i) contains a complete and accurate list of all Contracts pursuant to which Seller or Seller Parent grants rights to any third party with respect to any Intellectual Property owned by Seller or Seller Parent, and all Contracts pursuant to which any third party grants to Seller or Seller Parent any rights with respect to any Intellectual Property owned by a third party in connection with the operation of the Business (“Third-Party IP”).  All Contracts set forth on Schedule 3.19(c)(i) which are material to the Business are in full force and effect and there is no default thereunder by Seller or Seller Parent, nor, to the Knowledge of Seller, by any other party thereto.  To the Knowledge of Seller, neither Seller nor Seller Parent is making any unlawful use of any Third-Party IP under such Contracts.  Except as listed on Schedule 3.19(c)(ii), there are no outstanding and, to the Knowledge of Seller, no threatened, disputes or disagreements with respect to any Contract set forth on Schedule 3.19(c) or the Intellectual Property owned by Seller or Seller Parent used in or held for use in connection with the operation of the Business (“Seller IP”).  Except in accordance with the ordinary course of business, no royalties or fees are payable by Seller or Seller Parent to any Person as of the Closing Date by reason of access to or use of any Third-Party IP.

(d)           Seller has obtained an assignment of all Seller IP material to the operation of the Business from the inventors.  Except as listed in the Contracts on Schedule 3.10 and listed on Schedule 3.19(a), to the Knowledge of Seller, no present or former employee or consultant of Seller or Seller Parent, and no other Person, owns or has a proprietary, financial or other interest, direct or indirect, in whole or in part in any Seller IP material to the operation of the Business.

(e)          Except as listed on Schedule 3.19(e), there have been no written Claims made against Seller or Seller Parent asserting the invalidity, misuse or unenforceability of any of

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the Intellectual Property set forth on Schedule 3.19(a).  To Seller’s knowledge, the transactions contemplated by the Transaction Documents will not materially adversely affect Seller’s or Seller Parent’s right, title or interest in and to Seller IP or Third-Party IP following the Closing.

(f)           Except as listed on Schedule 3.19(f)(1), to the Knowledge of Seller,  the Business as currently conducted and the products and services included in the Business do not infringe upon, misappropriate or conflict with the Intellectual Property of any third party, and neither Seller nor Seller Parent has received any written notices with respect to any such alleged infringement, misappropriation or conflict from any third party (including any demand or request that Seller or Seller Parent license any Intellectual Property from a third party). To the Knowledge of Seller, and with the exception of those Persons listed on Schedule 3.19(f)(2), no Person is currently infringing any Seller IP or exclusively in-licensed Third-Party IP.  There is no pending suit or legal action against Seller or Seller Parent in which Seller or Seller Parent is alleged to have infringed or misappropriated the Intellectual Property of any third party.

(g)         Seller and Seller Parent taken all reasonable steps to maintain the confidentiality of and otherwise protect and enforce their rights in all proprietary information included in Seller IP that Seller holds, or purports to hold, as a trade secret.

(h)          To the Knowledge of Seller, Seller IP and Third-Party IP constitute all Intellectual Property needed to conduct the Business as currently conducted.

(i)           Except as recited in the Patents themselves, no funding, facilities, or personnel of any Governmental Authority were used, directly or indirectly, to develop or create, in whole or in part, any Patents in the Seller IP.

3.20        Key Customers and Suppliers.  Schedule 3.20 sets forth a correct and complete list of the top twenty-five (25) customers and the top fourteen (14) suppliers of Seller or Seller Parent in connection with the operation of the Business (the “Key Customers and Suppliers”), determined on the basis of revenues, including license fees, royalties and other remunerations from services provided or items sold (with respect to customers) or costs of items purchased (with respect to suppliers) for the twelve (12) months ended October 31, 2010 in the case of customers and the thirteen (13) months ended August 31, 2010 in the case of suppliers. No Key Customer or Supplier has ceased doing business with Seller or Seller Parent and, to Seller’s Knowledge, no Key Customer or Supplier intends to cease doing business with Buyer following the Closing.

3.21       Warranties, Etc.  All products sold and any services rendered by Seller or Seller Parent in connection with the operation of the Business have been, in all material respects, in conformity with all applicable Contractual commitments and all expressed or implied warranties.  No Liability exists or will arise for repair, replacement or damage in connection with such sales or services.  Schedule 3.21 sets forth a correct and complete statement of all written warranties and warranty policies offered by Seller or Seller Parent in connection with the operation of the Business. All such written warranties and warranty policies are in conformity with the labeling and other requirements of applicable Law.  Schedule 3.21 sets forth a correct and complete list of all service or maintenance agreements entered into in connection with the operation of the Business under which Seller or Seller Parent is currently obligated. No products heretofore

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manufactured, processed, distributed, sold, delivered or leased by Seller or Seller Parent in connection with the operation of the Business or services rendered by Seller or Seller Parent in connection with the operation of the Business are now subject to any guarantee, Claim for product liability or patent or other Intellectual Property indemnity.

3.22       Absence of Undisclosed Liabilities.  Except as set forth on Schedule 3.22, the Assets are not subject to any Liability other than Liabilities: (i) reflected in the Seller Parent SEC Documents; (ii) reflected in the Financial Statements; (iii) pursuant to the Assumed Contracts; and (iv) Liabilities incurred in the ordinary course of business since September 30, 2010.

3.23       Permits.  Schedule 3.23 lists all Permits currently held by Seller or Seller Parent, as applicable, for the ownership of the Assets or the ownership and operation of the Facility, including Environmental Permits.  Each such Permit is in full force and effect, and Seller or Seller Parent, as applicable is not in violation of any of any material obligation thereunder. The Permits listed on Schedule 3.23 constitute all Permits which are necessary for the ownership of the Assets or the ownership and operation of the Facility as it is currently being operated.

3.24       Brokers’ Fees.  Except as set forth on Schedule 3.24, neither Seller nor Seller Parent has any Liability or obligation to pay any broker’s fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by the Transaction Documents.

3.25       Condition of Assets.  All of the Assets are in good operating condition and repair, ordinary wear and tear excepted. Seller and Seller Parent have provided Buyer access to all operating and maintenance logs relating to the Equipment and such logs are part of the Books and Records.  Except as described on Schedule 3.25, no Asset is in need of material repairs, modifications or upgrades (other than maintenance in accordance with the manufacturer’s recommended maintenance described in the manufacturer’s manuals that have been made available to Buyer).

3.26       Bulk Sales.  This Agreement, the other Transaction Documents and the transactions contemplated herein and therein are not subject to any applicable bulk sales laws.

3.27       Shareholder Approval.  No approval of this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby is necessary or required to be made or obtained from the equity holders of Seller or Seller Parent under applicable Law.

3.28        Securities Laws Representations.

(a)           The Notes and, if applicable, the shares of Buyer Common Stock issuable as Milestone Consideration being acquired by Seller hereunder (collectively, the “Buyer Securities”) will be acquired for investment purposes for Seller’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof.  Seller has neither any present intention of effecting, nor any Contract with any Person regarding, the sale, the granting of any participation in or any other distribution or transfer of any of the Buyer Securities.

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(b)           Seller has had an opportunity to ask questions and receive answers from Buyer regarding the terms and conditions of the offering of the Buyer Securities pursuant to this Agreement and the business, operations, properties and assets of Buyer.

(c)           Selleracknowledges that it is able to fend for itself, can bear the economic risk of its investment in the Buyer Securities and has such knowledge and experience in financial or business matters such that it is capable of evaluating the merits and risks of the investment in Buyer Securities.  Seller has not been organized for the purpose of acquiring the Buyer Securities.

(d)           Seller is an “accredited investor” within the meaning of Rule 501, as presently in effect, of Regulation D under the Securities Act.

(e)           Seller understands that the Buyer Securities are characterized as “restricted securities” under United States federal securities laws inasmuch as they are being acquired from Buyer in a transaction not involving a public offering and that, under such laws and applicable regulations, such Buyer Securities may be resold without registration under the Securities Act only in certain limited circumstances.  Seller is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.  Seller  understands that an investment in the Buyer Securities involves an extremely high degree of risk and may result in a complete loss of Seller’s investment.  Seller understands that the Buyer Securities have not been and will not be registered under the Securities Act and have not been and will not be registered or qualified in any state in which they are offered, and thus Seller will not be able to resell or otherwise transfer such Buyer Securities unless such Buyer Securities are subsequently registered under the Securities Act and registered or qualified under applicable state securities laws, or an exemption from such registration or qualification is available.

(f)           Seller has no immediate need for liquidity in connection with such Seller’s investment in the Buyer Securities, does not anticipate that it will be required to sell the Buyer Securities in the foreseeable future and has the capacity to sustain a complete loss of its investment in the Buyer Securities.

(g)           Seller understands that the instruments evidencing the Buyer Securities may bear a legend substantially in the following form:

“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF THE SECURITIES ACT.”

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3.29       Disclosure.  Neither this Agreement nor any other Transaction Document furnished to Buyer by Seller or Seller Parent contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller as of the date of this Agreement and as of the Closing Date (except with respect to representations and warranties that address matters only as of a particular date, which shall speak as of such particular date):

4.1         Organization.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted.

4.2          Enforceability.  With respect to Buyer: (i) the execution, delivery and performance of this Agreement and the other Transaction Documents to which Buyer is a party are within the corporate power of Buyer; and (ii) the execution and delivery of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby has been duly authorized, and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or the other Transaction Documents or to consummate the transactions contemplated herein or therein. This Agreement is, and the other Transaction Documents will be, when executed and delivered by the parties thereto, the valid and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms subject to: (x) applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws relating to creditors’ rights or creditors’ remedies generally; and (y) general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).  Buyer has the absolute and unrestricted right, power and authority to execute and deliver this Agreement and the other Transaction Documents and to perform its respective obligations under this Agreement and the other Transaction Documents.

4.3          No Violation or Conflict by Buyer.

(a)           No notice to, filing or registration with, and no permit, authorization, consent or approval of, any Governmental Authority is necessary or is required to be made or obtained by Buyer in connection with the execution and delivery of this Agreement or the other Transaction Documents by Buyer or for the consummation by Buyer of the transactions contemplated hereby or thereby.

 

(b)           The execution, delivery and performance of this Agreement and the other Transaction Documents by Buyer and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) conflict with or result in any breach of any provision of the certificate of incorporation or bylaws of Buyer; (ii) conflict with or violate any Law binding on Buyer, or any of its respective properties or assets; or (iii) conflict with or result in a violation or

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breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, modification or acceleration) under, any of the terms, conditions or provisions of any Contract or other instrument or obligation to which Buyer is a party or by which Buyer or any of its respective properties or assets may be bound.

4.4          No Litigation.  There is no Claim pending or, to the Knowledge of Buyer, proposed or threatened: (i) against Buyer relating to the business, assets, properties or products of Buyer that could materially impair the ability of Buyer to perform its obligations under this Agreement or the other Transaction Documents or to consummate the transactions contemplated hereby or thereby; or (ii) that seeks restraint, prohibition, damages or other relief in connection with this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.

4.5          Title to Buyer’s Assets.  Buyer owns good and valid title to its assets, free and clear of any and all material Liens.

4.6          SEC Documents.  The Buyer is subject to the reporting requirements of the Exchange Act, and has timely filed (subject to any permitted extensions for which the Buyer has timely filed) with SEC all Buyer SEC Documents.  Each Buyer SEC Document, (i) as of its date, complied in all material respects with the requirements of the Exchange Act, and (ii) did not, at the time it was filed, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  Each of the consolidated financial statements (including in each case, any notes thereto) contained in any Buyer SEC Documents was prepared in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q under the Exchange Act) on a consistent basis throughout the periods indicated, and each presented fairly the consolidated financial position, results of operations and cash flows of Buyer as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which did not and would not, individually or in the aggregate, reasonably be expected to have a material and adverse effect to the business, condition (financial or other), results of operations, performance or properties of the Buyer, taken as a whole).

4.7          Buyer’s Brokers’ Fees.  Except as set forth on Schedule 4.7, Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by the Transaction Documents.

4.8          Offering.  Assuming the accuracy of the representations and warranties of Seller contained in Article 3 hereof, the offer, sale and issuance of the Buyer Securities being acquired by Seller hereunder are and will be exempt from the registration and prospectus delivery requirements of the Securities Act and have been registered or qualified (or are exempt from registration and qualification) under the registration, permit, or qualification requirements of all applicable state securities laws.

4.9          Disclosure.  Neither this Agreement nor any other Transaction Document furnished to Seller or Seller Parent by Buyer contains any untrue statement of a material fact

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or omits to state a material fact necessary in order to make the statements contained therein or herein, in light of the circumstances under which they were made, not misleading.

ARTICLE 5

CONDITIONS PRECEDENT TO CLOSING AND PRE-CLOSING COVENANTS

5.1         Conditions Precedent to Obligations of Buyer.  Buyer’s obligation to consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part):

(a)          no event shall have occurred and no circumstance shall have arisen which, individually, or in the aggregate, has had or would reasonably be expected to cause a Material Adverse Effect from September 30, 2010 to the Closing Date;

(b)          each of the representations and warranties of Seller and Seller Parent contained in Article 3 that are qualified by reference to materiality thresholds shall have been true and correct as of the date of this Agreement and shall be true and correct at and as of the Closing Date (except with respect to such representations and warranties that address matters only as of a particular date, which shall be true and correct as of such particular date), and each of the representations and warranties of Seller and Seller Parent contained in Article 3 that are not so qualified shall have been true and correct in all material respects as of the date of this Agreement and shall be true and correct in all material respects at and as of the Closing Date (except with respect to such representations and warranties that address matters only as of a particular date, which shall be true and correct in all material respects as of such particular date);

(c)          Seller and Seller Parent shall have performed all obligations and complied with all covenants in all material respects that are required by the terms of this Agreement to be performed or complied with by them on or before the Closing Date;

(d)           no investigation, suit, action or other proceeding shall be threatened or pending before any Governmental Authority that seeks constraint, prohibition, damages or other relief in connection with this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby or that could reasonably be expected to have a Material Adverse Effect or impair the ability of the Parties to consummate the transactions contemplated hereby or thereby;

(e)          except for the Assumed Contracts that have expired by their terms, the Assumed Contracts shall be in effect as of the Closing Date;

(f)           Seller or Seller Parent, as applicable, shall have terminated the employment of each of the Business Employees and shall have paid or satisfied all Liabilities arising in respect of such termination of employment other than the Liabilities expressly contemplated by clause “(ii)” of the definition of Assumed Liabilities with respect to the Continuing Employees;

(g)          All Required Consents set forth on Schedule 5.1(g) shall have been obtained and shall be in full force and effect;

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(h)          The Business Employee matters set forth on Schedule 5.1(h) shall have been satisfied;

(i)           Seller or Seller Parent, as applicable, shall have delivered to Buyer all of the items set forth in Section 2.8(a); and

(j)           Buyer shall have consummated an offering and sale of shares of equity securities resulting in aggregate gross proceeds to Buyer of not less than $6,000,000.

5.2         Conditions Precedent to Obligations of Seller and Seller Parent.  Seller’s and Seller Parent’s obligations to consummate the transactions contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Seller Parent (on behalf of itself and Seller), in whole or in part):

(a)          each of the representations and warranties of Buyer contained in Article 4 that are qualified by reference to materiality thresholds shall have been true and correct as of the date of this Agreement and shall be true and correct at and as of the Closing Date (except with respect to such representations and warranties that address matters only as of a particular date, which shall be true and correct as of such particular date), and each of the representations and warranties of Buyer contained in Article 4 that are not so qualified shall have been true and correct as of the date of this Agreement and shall be true and correct in all material respects at and as of the Closing Date (except with respect to such representations and warranties that address matters only as of a particular date, which shall be true and correct in all material respects as of such particular date);

(b)          Buyer shall have performed all obligations and complied with all covenants in all material respects that are required by the terms of this Agreement to be performed or complied with on or before the Closing Date;

(c)           no investigation, suit, action or other proceeding shall be threatened or pending before any Governmental Authority that seeks constraint, prohibition, damages or other relief in connection with this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby or that could reasonably be expected to have a Material Adverse Effect or impair on the ability of the Parties to consummate the transactions contemplated hereby or thereby; and

(d)          Buyer shall have delivered to Seller or Seller Parent all of the items set forth in Section 2.8(b).

5.3          Operation of the Business During the Pre-Closing Period.  At all times during the period from the date of this Agreement through the Closing (the “Pre-Closing Period”), Seller and Seller Parent shall operate the Business and utilize the Assets in the ordinary course and consistent with past practice (including with respect to the collection of accounts receivable).  Without limiting the generality of the foregoing, without the prior written consent of Buyer, neither Seller nor Seller Parent shall: (i) amend, modify or terminate any Assumed Contract; (ii) cause any of the Assets to become subject to any Encumbrance other than Permitted Encumbrances; or (iii) take or omit to take any action that would reasonably be expected to result in the failure or frustration of any of the conditions set forth in Section 5.1 as of the Closing

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Date.  During the Pre-Closing Period, Seller and Seller Parent shall give Buyer and its representatives reasonable access during normal business hours to all of the properties, books and records and personnel of Seller and Seller Parent, as Buyer may from time to time reasonably request.

5.4          Employee Transitions.

(a)           During the Pre-Closing Period, Seller and Seller Parent will allow Buyer reasonable access to all Business Employees in order to allow for an orderly transition.  Buyer may, at its sole discretion, offer employment to any of the Business Employees.  Such offers shall provide that (i) employment with Buyer is conditioned upon (1) the Closing having occurred; and (2) the release of Seller’s or Seller Parent’s, as applicable, liability and obligations under any employment agreement, severance agreement or similar document between Seller or Seller Parent, as applicable, and the Business Employee; (ii) the base salary or base wages and annual incentive compensation, as applicable, provided to each such Business Employee must be no less favorable, in the aggregate, than such Business Employee’s base salary or base wages and annual incentive compensation, as applicable, on the Closing Date; (iii) each such Business Employee’s length of service as of the Closing Date with Seller or Seller Parent shall be carried over following the Closing as if such Business Employee had been employed by Buyer for such length of time; and (iv) each such Business Employee may, at his or her option, elect to (1) carry over any accrued but unpaid vacation time following the Closing; or (2) receive a cash payment, payable by Seller prior to or on the Closing Date, for the value of any vacation time that remains accrued but unpaid as of the Closing Date.

(b)           The term “Continuing Employee” means any individual who is a Business Employee and who accepts employment with Buyer prior to or at the Closing pursuant to an offer made by Buyer pursuant to Section 5.4(a).  Unless otherwise determined by Buyer, all Continuing Employees will be retained on an “at-will” basis by Buyer from and after the date of commencement of employment.  Buyer will have no obligation with respect to: (i) any Business Employee who does not become a Continuing Employee; or (ii) except as expressly set forth in clause “(ii)” of the definition of Assumed Liabilities with respect to Continuing Employees, any Continuing Employee for the period prior to such Continuing Employee’s commencement of employment with Buyer.  The terms of this Section 5.4 are not intended to and do not confer any rights or remedies on any Business Employee or Continuing Employee, or any other Person other than the Parties.

(c)           Each Continuing Employee shall be eligible for participation in health coverage, 401(k) plans, insurance, severance and other welfare benefit arrangements or benefit plans of Buyer (the “Buyer Employee Benefit Plans”), on the same basis as similarly-situated employees of Buyer, subject to the eligibility and other terms and conditions of such Buyer Employee Benefit Plans; provided, that nothing in this Agreement shall prevent Buyer from modifying or terminating any such Buyer Employee Benefit Plans from time to time.  For purposes of determining eligibility to participate, the level of benefit accrual, and the years of vesting credit for each Continuing Employee under any Buyer Employee Benefit Plans which Buyer currently sponsors or maintains, or hereafter adopts, Buyer shall credit each Continuing Employee with all prior service that the Continuing Employee performed for Seller or Seller Parent, as applicable.

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5.5         Access to Books and Records. During the Pre-Closing Period, upon reasonable notice, Seller and Seller Parent will provide to the Buyer and its authorized agents reasonable access during normal business hours to the Books and Records and such other information pertaining to the Books and Records as the Buyer and its authorized Agents may reasonably request; provided, however, that the activities of the Buyer and its agents shall be conducted in such a manner as not to interfere unreasonably with the operation of the businesses of Seller Parent.

5.6         Updates to Schedules.  On the Closing Date, Seller shall deliver to Buyer updates to the Schedules to reflect events or changes that occur between the date hereof and the Closing Date. No update to the Schedules under this Section 5.6 shall be deemed to qualify, supplement or amend a Schedule delivered on the date hereof for the purpose of: (a) determining the accuracy of any representation or warranty made by Seller or Seller Parent in this Agreement (for purposes of Section 6 or otherwise); or (b) determining whether any of the conditions set forth in Section 5.1 has been satisfied.  Nothing contained in this Section 5.6 shall be deemed to limit, modify, supplement or amend the indemnification rights of the Parties set forth in Article 6.

5.7         Transition Services Agreement.  The Parties hereby acknowledge that Buyer will require certain transition services to be performed by Seller, Seller Parent or one or more of their respective Affiliates (such Affiliates, together with Seller and Seller Parent, being collectively referred to herein as the “Seller Service Providers”) for one or more transition periods following the Closing (the “Transition Services”).  During the Pre-Closing Period the Parties hereby agree to negotiate in good faith and mutually agree upon the Transition Services and, at Closing, to enter into a transition services agreement with respect to such Transition Services (the “Transition Services Agreement”), it being understood that the Transition Services shall be provided by the Seller Service Providers (i) in a manner and at a level that is generally consistent with the manner and level at which the Transition Services were provided to Seller and Seller Parent in connection with the Business prior to the Closing Date; and (ii) at a cost not to exceed the actual cost of such services to the applicable Seller Service Provider.

ARTICLE 6

INDEMNITIES AND POST-CLOSING COVENANTS

6.1         Survival.  All representations, warranties, covenants, and obligations in the Transaction Documents will survive the Closing and remain in effect until the first anniversary of the Closing Date, except for those representations and warranties of Seller and Seller Parent contained in Sections 3.1, 3.2, 3.7 and 3.28 (the “Indefinite Fundamental Representations”), which shall survive indefinitely, and Sections 3.15, 3.16, 3.18 and 3.19 (the “Additional Fundamental Representations” and, together with the Indefinite Fundamental Representations, the “Fundamental Representations”), which shall survive until the thirtieth (30th) day after the expiration of the statute of limitations that would be applicable to any Claim brought by a third party or a Governmental Authority (whichever is the longer period) with respect to the subject matter of the underlying representation or warranty.

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6.2          Seller’s and Seller Parent’s Indemnity.

(a)          Seller and Seller Parent (each, a “Buyer Indemnifying Party” and collectively, the “Buyer Indemnifying Parties”), jointly and severally, hereby agree to indemnify and hold Buyer, its officers, directors, employees and authorized agents and their successors and permitted assigns (each, a “Buyer Indemnified Party” and collectively, the “Buyer Indemnified Parties”), harmless from and against any and all Losses that any Buyer Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with: (i) any breach or inaccuracy of any of the representations and warranties other than the Fundamental Representations made by Seller or Seller Parent to Buyer pursuant to this Agreement and the other Transaction Documents as of the date hereof and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date (except with respect to representations and warranties that address matters only as of a particular date, which shall speak as of such particular date); (ii) any breach or inaccuracy of any of Fundamental Representations made by Seller or Seller Parent to Buyer pursuant to this Agreement as of the date hereof and as of the Closing Date as though such representations and warranties were made on and as of the Closing Date (except with respect to representations and warranties that address matters only as of a particular date, which shall speak as of such particular date); (iii) any failure of Seller or Seller Parent to carry out, perform, satisfy and discharge any of their covenants, agreements, undertakings or obligations under this Agreement or under any of the other Transaction Documents; (iv) any fraud or willful misrepresentation or omission by Seller or Seller Parent; (v) any Excluded Liabilities; and (vi) any action or proceeding initiated by any Buyer Indemnified Party to enforce the provisions of Article 6, but only to the extent the Buyer Indemnified Party is entitled to recovery in any such action or proceeding.

(b)          If a Claim against the Buyer Indemnifying Parties for indemnification pursuant to the provisions of Section 6.2(a) of this Agreement is to be made by any Buyer Indemnified Party, the Buyer Indemnified Party shall give notice reasonably describing such Claim to Seller and Seller Parent promptly after the Buyer Indemnified Party becomes aware of any fact, condition or event which may give rise to Losses for which indemnification may be sought under Section 6.2(a).  In the event a third-party Claim against a Buyer Indemnified Party arises that is covered by the indemnity provisions of Section 6.2(a) of this Agreement, provided that the Buyer Indemnifying Parties admit in writing to the Buyer Indemnified Party seeking indemnification that such Claim is covered by the indemnity provisions of Section 6.2(a) hereof to the extent such Claim proves to be true, the Buyer Indemnifying Parties shall have the right to contest and defend by all appropriate legal proceedings relating to such Claim and to control all settlements (unless the party seeking indemnification agrees to assume the cost of settlement and to forgo such indemnity) and to select lead counsel to defend any and all such Claims at the sole cost and expense of the Buyer Indemnifying Parties; provided, however, that the Buyer  Indemnifying Parties may not effect any settlement that could result in any cost, expense or liability to, or admission of guilt or culpability by, the Buyer Indemnified Party unless the Buyer Indemnified Party consents in writing to such settlement and the Buyer Indemnifying Parties agree to indemnify such party therefor, which consent shall not be unreasonably withheld and which consent or objection thereto must be provided in a timely manner as the circumstances dictate and in any event within ten (10) business days of such request. Notwithstanding the foregoing, unless otherwise consented to in writing by the Buyer Indemnified Parties, the Buyer

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Indemnifying Party shall have no right whatsoever to assume, contest or defend any Claim relating to any Intellectual Property or Intellectual Property rights of Buyer; provided, however, that at any time while the Buyer Indemnifying Parties have a security interest in the Intellectual Property or Intellectual Property rights that are the subject of any Claim, the Buyer Indemnifying Parties shall have the right to assume, contest or defend any such Claim if the Buyer Indemnified Parties refuse or otherwise fail to so contest or defend such Claim for a period of not more than 30 days from notice of such Claim; provided, further, that at any time the Buyer Indemnifying Parties may retain separate co-counsel at Buyer Indemnifying Parties’ sole cost and expense and participate in the defense of any Claim relating to any Intellectual Property or Intellectual Property rights of Buyer, but Buyer shall control the investigation, defense and settlement thereof.  In the event the Buyer Indemnifying Parties do not admit in writing to a Buyer Indemnified Party seeking indemnification that such Claim, if true, is covered by the indemnity provisions of Section 6.2(a) hereof, the Buyer Indemnified Party shall take such actions as it deems necessary to defend such Claim; provided, however, that the Buyer Indemnified Party may not effect any settlement that could result in any cost, expense or liability to, or admission of guilt or culpability by, any Buyer Indemnifying Party without the consent of such Buyer Indemnifying Party, which consent shall not be unreasonably withheld and which consent or objection thereto must be provided in a timely manner as the circumstances dictate and in any event within ten (10) business days of such request. The Buyer Indemnified Party seeking indemnification may select counsel to participate in any defense conducted by the Buyer Indemnifying Parties, in which event such counsel shall be at the sole cost and expense of such Buyer Indemnified Party. In connection with any such third-party Claim for which indemnification is sought pursuant to Section 6.2(a), the Parties shall cooperate with each other and provide each other with reasonable access during normal business hours to relevant books and records in their possession.

6.3          Buyer’s Indemnity.

(a)          Buyer hereby agrees to indemnify and hold Seller, Seller Parent, their respective officers, directors, employees and authorized agents and their successors and permitted assigns (each, a “Seller Indemnified Party” and collectively, the “Seller Indemnified Parties”and together with the Buyer Indemnified Parties, the “Indemnified Parties”) harmless from and against, any and all Losses that the Seller Indemnified Parties may at any time suffer or incur, or become subject to, as a result of or in connection with: (i) any breach or inaccuracy of any of the representations and warranties made by Buyer in or pursuant to this Agreement and the other Transaction Documents; (ii) any failure by Buyer to carry out, perform, satisfy and discharge any of its covenants, agreements, undertakings, liabilities or obligations under this Agreement or under any of the other Transaction Documents; (iii) any fraud or willful misrepresentation or omission by Buyer; and (iv) any Assumed Liabilities.

(b)           If a Claim against Buyer for indemnification pursuant to the provisions of Section 6.3(a) of this Agreement is to be made by any Seller Indemnified Party, such Seller Indemnified Party shall give notice of such Claim to Buyer promptly after such Seller Indemnified Party becomes aware of any fact, condition or event which may give rise to Losses for which indemnification may be sought under Section 6.3(a). In the event a third-party Claim against a Seller Indemnified Party arises that is covered by the indemnity provisions of Section 6.3(a) of this Agreement, provided that Buyer admits in writing to the Seller Indemnified

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Party seeking indemnification that such Claim is covered by the indemnity provisions of Section 6.3(a) hereof to the extent such Claim proves to be true, Buyer shall have the right to contest and defend by all appropriate legal proceedings such Claim and to control all settlements (unless the party seeking indemnification agrees to assume the cost of settlement and to forgo such indemnity) and to select lead counsel to defend any and all such Claims at the sole cost and expense of Buyer; provided, however, that Buyer may not effect any settlement that could result in any cost, expense or liability to, or admission of guilt or culpability by, the Seller Indemnified Parties unless Seller consents in writing to such settlement and Buyer agrees to indemnify the Seller Indemnified Parties therefor, which consent shall not be unreasonably withheld and which consent or objection thereto must be provided in a timely manner as the circumstances dictate and in any event within ten (10) business days of such request. In the event Buyer does not admit in writing to a Seller Indemnified Party seeking indemnification that such Claim, if true, is covered by the indemnity provisions of Section 6.3(a) hereof, the Seller Indemnified Party shall take such actions as it deems necessary to defend such Claim; provided, however, that the Seller Indemnified Party may not effect any settlement that could result in any cost, expense or liability to, or admission of guilt or culpability by, Buyer without the consent of Buyer, which consent shall not be unreasonably withheld and which consent or objection thereto must be provided in a timely manner as the circumstances dictate and in any event within ten (10) business days of such request. The Seller Indemnified Party seeking indemnification may select counsel to participate in any defense conducted by Buyer, in which event such counsel shall be at the sole cost and expense of such Seller Indemnified Party. In connection with any such third-party Claim, the Parties shall cooperate with each other and provide each other with reasonable access during normal business hours to relevant books and records in their possession.

6.4          Limitations of Indemnification.

(a)           Notwithstanding the provisions of Section 6.2(a): (i) the Buyer Indemnifying Parties shall not be liable for Losses under Section 6.2(a)(i) unless the aggregate amount of Losses with respect to all such breaches or inaccuracies of such representations and warranties exceeds $250,000 (the “Indemnification Deductible”), in which event all such Losses exceeding $125,000 shall be subject to indemnification; and (ii) the Buyer Indemnifying Parties’ maximum liability, as the case may be, under Section 6.2(a)(i) shall not exceed the Closing Cash Consideration (the “Cash Indemnification Limit”); provided, however, the Indemnification Deductible shall not apply to any Losses incurred by the Buyer Indemnified Parties resulting from a breach of the Indefinite Fundamental Representations and the Buyer Indemnifying Parties’ maximum liability under Section 6.2(a)(ii) and (vi) shall not exceed (x) the Closing Cash Consideration plus (y) the aggregate amount of any principal repayments made by Buyer to Seller or Seller Parent under the Notes (the “Total Indemnification Limit”); provided, further, neither the Indemnification Deductible nor the Cash Indemnification Limit or the Total Indemnification Limit shall apply to any Losses incurred by the Buyer Indemnified Parties and asserted pursuant to Section 6.2(a)(iii) through (v).

(b)           Notwithstanding the provisions of Section 6.3(a): (i) the Buyer shall not be liable for Losses under Section 6.3(a)(i) unless the aggregate amount of Losses with respect to all such breaches or inaccuracies of such representations and warranties exceeds the Indemnification Deductible, in which event all such Losses exceeding $125,000 shall be subject to indemnification; and (ii) the Buyer’s maximum liability, as the case may be, under

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Section 6.3(a)(i) shall not exceed the Cash Indemnification Limit; provided, however, neither the Indemnification Deductible nor the Cash Indemnification Limit or the Total Indemnification Limit shall apply to any Losses incurred by the Seller Indemnified Parties and asserted pursuant to Section 6.3(a)(ii) through (iv).

6.5          General Provisions Regarding Indemnification.

(a)           The indemnification provided in this Article 6 shall be the sole and exclusive remedy after the Closing Date for damages available to the Buyer Indemnified Parties or the Seller Indemnified Parties for breach of any of the representations, warranties, covenants or agreements contained herein.

(b)           Notwithstanding anything contained in this Agreement to the contrary, except as may be included in a third-party Claim, no Party shall be liable to the Buyer Indemnified Parties or the Seller Indemnified Parties for any indirect, special, punitive, exemplary or consequential loss or damage (including any diminution in value or loss of revenue or profit) arising out of this Agreement.

(c)           Any payment made to or for the benefit of an Indemnified Party pursuant to Article 6 shall be reduced by an amount equal to any insurance payments actually received by the Indemnified Party with respect to such claim.  Each Party shall in good faith take such actions to make a claim, or to cause its appropriate Affiliates to make a claim, for Losses with any applicable insurer in such manner as such Party deems to be in its best business interest taking into account the cost of pursuing such a claim, the possible affect on insurance rates and such other business considerations as such party deems appropriate.  In any case where an Indemnified Party or any of its Affiliates recovers from third parties (including insurance companies) any payments in respect of a matter with respect to which such Indemnified Party has been paid pursuant to Section 6.2 or Section 6.3, such Indemnified Party shall promptly pay over to the Buyer or Seller, as the case may be, the amount so recovered (after deducting therefrom the full amount of the out-of-pocket expenses reasonably incurred by it in procuring such recovery), but not in excess of the sum of (i) any amount previously so paid to or on behalf of the Indemnified Party in respect of such matter and (ii) any reasonable out-of-pocket amount expended by the Indemnified Party and its Affiliates in pursuing or defending any claim arising out of such matter.

6.6          Further Assistance.   In case at any time after the Closing Date any further action is necessary or desirable to carry out the purposes of this Agreement or the other Transaction Documents, each of the Parties will take, without additional consideration, such further reasonable action (including the execution and delivery of such further instruments and documents and the grant of access to any individuals, premises, books or records) as any other Party reasonably may request.

6.7          Tax Matters.

(a)          All Transfer Taxes shall be borne and paid fifty percent (50%) by Seller and fifty percent (50%) by Buyer regardless of which Party any such Taxes and fees are imposed upon.

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(b)          Seller shall be responsible for and shall pay any Taxes arising or resulting from or in connection with the conduct of the Business and/or the ownership of the Assets attributable to the Pre-Closing Period, and shall file or cause to be filed when due (including any extensions) all Tax Returns that are required to be filed in respect of such Taxes (other than Tax Returns for which Buyer is responsible pursuant to the following sentence).  Buyer shall be responsible for and shall pay any Taxes arising or resulting from or in connection with the conduct of the Business and/or the ownership of the Assets attributable to all periods subsequent to the Closing Date, and shall file or cause to be filed when due (including any extensions) all Tax Returns that are required to be filed in respect of such Taxes (other than income Tax Returns of Seller).

(c)          For all purposes of attributing or allocating Taxes between the Parties pursuant to this Section 6.7, all personal property, ad valorem or other similar Taxes (not including income Taxes) levied with respect to the Assets for a taxable period which includes (but does not end on) the Closing Date shall be apportioned between the Pre-Closing Period and the period subsequent to the Closing Date based on the relative number of days included in such taxable period through and including the Closing Date and the number of days included in such taxable period after the Closing Date.  Each party shall be solely responsible for income Taxes imposed with respect to such party.

(d)          For all Tax purposes, the Parties agree to treat (and shall cause each of their respective Affiliates to treat) any indemnity payment under this Agreement as an adjustment to the Purchase Price.

6.8          Allocation of Purchase Price. All amounts constituting consideration within the meaning of, and for the purposes of, Section 1060 of the IRC and the regulations thereunder shall be allocated among the Assets and any other rights acquired by the Buyer hereunder, as applicable, in the manner required by Section 1060 of the IRC and the regulations thereunder and all applicable laws. Within a reasonable time from the date hereof, the Buyer and Seller shall agree on a schedule (the “Allocation Schedule”) allocating all such amounts as provided herein. Each of the Parties agrees to: (i) prepare and timely file all Tax Returns, including Form 8594 (and all supplements thereto), in a manner consistent with the Allocation Schedule; and (ii) act in accordance with the Allocation Schedule as finalized for all Tax purposes.

6.9          Public Announcements.  The Parties agree that no Party shall publish any press release, make any other public announcement or otherwise communicate with any news media concerning this Agreement, the other Transaction Documents or the transactions contemplated hereby or thereby without consulting with each other before making, and giving each other a reasonable opportunity to review and comment upon, any such press release or other public announcements or statements; provided, however, that nothing contained herein shall prevent a Party from promptly making all filings with Governmental Authorities or Exchanges as may, in its judgment, be required or advisable in connection with the execution and delivery of this Agreement, the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.

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6.10       Confidentiality.

(a)           Neither Seller, Seller Parent nor any of their respective Affiliates shall use or divulge any trade secrets, customer or supplier lists, pricing information, marketing arrangements or strategies, business plans, internal performance statistics, training manuals or any other information concerning Buyer or any of its Affiliates that is competitively sensitive, proprietary or confidential (collectively, “Buyer Confidential Information”) for a period of three (3) years following the Closing Date; provided, however, that the confidentiality covenants contained in this Section 6.10(a) shall not apply to the following: (i) information that is already in the public domain or generally available to Persons in the same or similar industries as Seller, Seller Parent, Buyer or any of their respective Affiliates; (ii) information that becomes part of the public domain or generally available to companies in the same or similar industries as Seller, Seller Parent, Buyer or any of their respective Affiliates by publication or otherwise other than through any action on the part of Seller, Seller Parent or any of their respective Affiliates; (iii) information that Seller, Seller Parent or their respective Affiliates received from a third party who was not legally or contractually prohibited from disclosing such information; or (iv) information that Seller, Seller Parent or any of their respective Affiliates is legally compelled to disclose, but only as to the required disclosure. In the event that Seller, Seller Parent or any of their respective Affiliates becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any Buyer Confidential Information, such Seller, Seller Parent or Affiliate thereof will notify Buyer promptly in writing of such requirement so that Buyer may seek a protective order or other appropriate remedy or, in Buyer’s sole discretion, waive compliance with the terms of this Section 6.10(a). In the event that no such protective order or other remedy is obtained, or that Buyer waives compliance with the terms of this Section 6.10(a), such Seller, Seller Parent or Affiliate thereof will furnish only that portion of the Buyer Confidential Information which such Seller, Seller Parent or Affiliate is advised by counsel is legally required.

(b)           Neither Buyer nor any of its Affiliates shall use or divulge any trade secrets, customer or supplier lists, pricing information, marketing arrangements or strategies, business plans, internal performance statistics, training manuals or any other information concerning Seller, Seller Parent or any of their respect Affiliates that is competitively sensitive, proprietary or confidential (collectively, “Seller Confidential Information”) for a period of three (3) years following the Closing Date; provided, however, that the confidentiality covenants contained in this Section 6.10(b) shall not apply to the following: (i) information that is already in the public domain or generally available to Persons in the same or similar industries as Seller, Seller Parent, Buyer or any of their respective Affiliates; (ii) information that becomes part of the public domain or generally available to companies in the same or similar industries as Seller, Seller Parent, Buyer or any of their respective Affiliates by publication or otherwise other than through any action on the part of Buyer or any of its Affiliates; (iii) information that Buyer or its Affiliates received from a third party who was not legally or contractually prohibited from disclosing such information; or (iv) information that Buyer or any of its respective Affiliates is legally compelled to disclose, but only as to the required disclosure. In the event that Buyer or any of its Affiliates becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any Seller Confidential Information, Buyer or such Affiliate thereof will notify Seller or Seller Parent, as applicable, promptly in writing of such requirement so that Seller or Seller Parent, as applicable,

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may seek a protective order or other appropriate remedy or, in Seller’s or Seller Parent’s sole discretion, as applicable, waive compliance with the terms of this Section 6.10(b).  In the event that no such protective order or other remedy is obtained, or that Seller or Seller Parent, as applicable, waives compliance with the terms of this Section 6.10(b), Buyer or such Affiliate thereof will furnish only that portion of the Seller Confidential Information which Buyer or such Affiliate is advised by counsel is legally required.

ARTICLE 7

TERMINATION

7.1          Termination Events.  This Agreement may be terminated prior to the Closing:

(a)           by the mutual written consent of Seller Parent (on behalf of itself and Seller) and Buyer;

(b)           by Seller Parent (on behalf of itself and Seller) or Buyer, if the Closing has not taken place on or before January 31, 2011 (other than as a result of any failure on the part of the terminating party to comply with or perform its covenants and obligations under this Agreement);

(c)           by either Seller Parent (on behalf of itself and Seller) or Buyer if: (i) any court of competent jurisdiction or other Governmental Authority shall have issued a final and non-appealable order or shall have taken any other action having the effect of permanently restraining or otherwise prohibiting the transactions contemplated by the Transaction Documents; or (ii) any Law making illegal the transactions contemplated by the Transaction Documents shall have become effective;

(d)           by Seller Parent (on behalf of itself and Seller) if there is a material breach of any representation, warranty, covenant or obligation of Buyer pursuant to this Agreement; provided, however, that Seller Parent shall not be permitted to terminate this Agreement pursuant to this Section 7.1(d) on account of any breach which is curable by Buyer unless Buyer fails to cure such breach within thirty (30) days after receiving notice of such breach; or

(e)           by Buyer if there is a material breach of any representation, warranty, covenant or obligation of Seller or Seller Parent pursuant to this Agreement; provided, however, that Buyer shall not be permitted to terminate this Agreement pursuant to this Section 7.1(e) on account of any breach which is curable by Seller or Seller Parent unless Seller or Seller Parent fails to cure such breach within thirty (30) days after receiving notice of such breach.

7.2          Termination Procedures.  If either Buyer or Seller Parent is entitled and desires to terminate this Agreement pursuant to Section 7.1, it shall deliver to the other Party a written notice stating that it is terminating this Agreement and setting forth a brief description of the basis on which it is terminating this Agreement.

7.3          Effect of Termination. If this Agreement is terminated pursuant to Section 7.1, all further obligations of the Parties under this Agreement shall terminate and be of no further force or effect; provided, however, that: (i) no Party shall be relieved of any obligation or other Liability arising from any breach by such Party of any provision of this Agreement if this

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Agreement is terminated because of such breach; and (ii) the parties shall, in all events, remain bound by and continue to be subject to the provisions set forth in Sections 6.9, 6.10 and Article 8.

ARTICLE 8

MISCELLANEOUS

8.1          Expenses.  Except as otherwise set forth in this Agreement or any other Transaction Document, Seller, Seller Parent and Buyer shall bear and pay all of their respective costs and expenses incurred by them in connection with the transactions contemplated by this Agreement and the other Transaction Documents.

8.2          Waiver and Amendment.  Any provision of this Agreement may be waived only in writing at any time by the Party that is entitled to the benefits thereof. This Agreement may not be amended or supplemented at any time, except by an instrument in writing signed on behalf of each Party hereto. The waiver by any Party hereto of any breach of a provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

8.3          Assignment.  This Agreement shall not be assignable by any Party, except in connection with the sale, merger, change of control of such Party, or sale of all or substantially all of the assets of such Party, without the prior written consent of the other Parties.  This Agreement shall inure to the benefit of and will be binding upon the Parties hereto and their respective legal representatives, successors and permitted assigns.

8.4          Specific Performance.  The Parties hereto acknowledge that irreparable damage would result if this Agreement were not specifically enforced, and they therefore consent that the Parties hereto may exercise their rights and obligations under this Agreement by a decree of specific performance issued by any court of competent jurisdiction.  Each of the parties hereby further waives: (i) any defense in any action for specific performance that a remedy at law would be adequate; and (ii) any requirement under any Law to post security as a prerequisite to obtaining equitable relief. The foregoing remedy shall, however, not be exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise.

8.5          Notices.  All notices, requests, demands, claims and other communications that are required to be or may be given under this Agreement must be in writing and shall be deemed to have been effectively given: (i) upon personal delivery to the Party to be notified; (ii) when sent by facsimile if sent during normal business hours of the recipient; if not, then on the next business day; or (iii) one (1) business day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt, in each case to the intended recipient at following addresses:

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

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With a copy to:

Cooley LLP

500 Boylston Street, 14th 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:

Paul, Hastings, Janofsky & Walker LLP

4747 Executive Drive, 12th Floor

San Diego, CA  92121

Attn:  Carl R. Sanchez, Esq.

Fax:  858-458-3005

or to such other address as any Party shall have furnished to the other by notice given in accordance with this Section 8.5.

8.6          Governing Law.  This Agreement shall be governed in all respects by the laws of the State of Delaware, without giving effect to principles of conflicts of laws. Any disputes shall be exclusively resolved in the State or Federal courts residing in Dover, Delaware.

8.7          Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall continue in full force and effect and shall in no way be affected, impaired or invalidated unless such an interpretation would materially alter the rights and privileges of any Party or materially alter the terms of the transactions contemplated hereby, in which case the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible.

8.8          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

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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.

8.9          No Third-Party Beneficiaries.  Except as provided in Article 6, neither this Agreement nor any document delivered in connection with this Agreement, confers upon any Person who is not a Party any rights or remedies hereunder.

8.10        Attorneys’ Fees.  If any legal action or other legal proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought against any Party, 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).

8.11        Entire Agreement; Exhibits and Schedules.  This Agreement, together with the other Transaction Documents, constitutes the entire agreement among the Parties and supersedes all other prior agreements and understandings, both oral and written, among the Parties with respect to the subject matter hereof, except for that certain Mutual Non-Disclosure Agreement, dated July 9, 2009, by and between Buyer and Seller Parent, which shall remain in full force and effect following the Closing.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first written above.

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
BUYER:
Transgenomic, Inc.
By:	/s/  Craig J. Tuttle
	Craig J. Tuttle
	President and Chief Executive Officer

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

EX-2.2

Exhibit 2.2

*** Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 17 C.F.R. 24b-2

AMENDMENT TO ASSET PURCHASE AGREEMENT

This Amendment (the “Amendment”) to that certain Asset Purchase Agreement (the “Asset Purchase Agreement”), dated as of November 29, 2010, 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”), amends the Asset Purchase Agreement effective as of this 29th day of December, 2010, as follows:

Whereas, Buyer has determined to extend offers of employment to a greater number of the Business Employees than was previously contemplated by the Parties, thereby decreasing the amount of severance payable to certain Business Employees;

Whereas, in connection with the sublease of the Leased Real Property to Buyer, Seller and Seller Parent will be required to make certain modifications to the Leased Real Property to accommodate Buyer’s occupation of such space and, in doing so, will incur certain costs related thereto; and

Whereas, in connection with the foregoing, the Parties have agreed to adjust certain payment provisions in the Asset Purchase Agreement.

Now, Therefore, in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the Parties hereto covenant and agree as follows:

1. All capitalized terms not otherwise defined herein shall have their respective meanings as defined in the Asset Purchase Agreement.

2. Section 2.2(c) of the Asset Purchase Agreement is hereby deleted in its entirety and is replaced by the following:

“(c) issue to Seller the Second Note in the initial aggregate principal amount of $988,500 (the “Second Note Consideration” and, together with the First Note Consideration and the Closing Cash Consideration, the “Closing Consideration”).”

3. The table set forth in Section 2.3 of the Asset Purchase Agreement is hereby deleted in its entirety and is replaced by the following:

Collected A/R Amount	Percentage Owed to Seller
First $1,000,000 collected during the A/R Collection Period	[…***…]%
Next $1,500,000 collected during the A/R Collection Period	[…***…]%
All remaining amounts collected during the A/R Collection Period	[…***…]%

*Confidential Treatment Requested

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4. No Further Amendments.  The Asset Purchase Agreement and all terms therein not so amended by this Amendment shall remain in full force and effect pursuant to its terms as amended hereby.  In the event of a conflict or inconsistency between this Amendment and the Asset Purchase Agreement and the exhibits thereto, the provisions of this Amendment shall govern.

5. Counterparts.  This Amendment 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 Amendment 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 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. References.  Upon effectiveness of this Amendment, all references in the Asset Purchase Agreement to “the Agreement,” “hereunder,” “herein,” “hereof,” or words of like import referring to the Asset Purchase Agreement shall be deemed to refer to the Asset Purchase Agreement, as amended.

7. Entire Agreement.  This Amendment reflects the entire agreement of the Parties with respect to its subject matter, and supersedes all previous written or oral negotiations, commitments and writings with respect to such subject matter.  This Amendment shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns.  This Amendment and any provisions hereof may not be modified, amended, waived, extended, or changed orally, but only by an agreement in writing signed by the Party (or Parties) against whom the enforcement of any modification, amendment, waiver, extension, or change is sought.

8. Governing Law.  This Amendment shall be governed in all respects by the laws of the State of Delaware, without giving effect to principles of conflicts of laws. Any disputes shall be exclusively resolved in the State or Federal courts residing in Dover, Delaware.

[Remainder of Page Intentionally Left Blank]

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In Witness Whereof, Seller, Seller Parent and Buyer have executed this Amendment to Asset Purchase Agreement as of the date first above mentioned.

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
BUYER:
Transgenomic, Inc.
By:	/s/  Craig J. Tuttle
	Craig J. Tuttle
	President and Chief Executive Officer

Signature Page to Amendment to Asset Purchase Agreement

EX-3.1

Exhibit 3.1

CERTIFICATE OF DESIGNATION OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

TRANSGENOMIC, INC.

Pursuant to Section 151 of the

General Corporation Law of the

State of Delaware

Transgenomic, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify that, pursuant to the authority conferred upon the Board of Directors by the Third Restated Certificate of Incorporation of the Corporation (as amended from time to time, the “Certificate of Incorporation”), and pursuant to the provisions of Section 151 of the Delaware General Corporation Law, the Board of Directors of the Corporation (the “Board”) duly adopted a resolution on December 27, 2010, providing for the issuance of up to Three Million Eight Hundred Seventy-Nine Thousand Three Hundred and Seven (3,879,307) shares of the Preferred Stock, which shall be a series designated as Series A Convertible Preferred Stock, par value $0.01 per share (“Series A Preferred”).

Pursuant to such resolution and the authority conferred upon the Board by the Certificate of Incorporation, there is hereby created the Series A Preferred, which series shall have the following voting powers, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, in addition to those set forth in the Certificate of Incorporation:

Section 1.      Designation and Amount of Series A Preferred.  Three Million Eight Hundred Seventy-Nine Thousand Three Hundred and Seven (3,879,307) shares of the Preferred Stock shall be a series designated as Series A Convertible Preferred Stock of the Corporation.  Shares of Series A Preferred shall have an initial value of $2.32 per share (the “Series A Stated Value”) and par value per share of $0.01.

Section 2.      Voting Rights.

(a) General.  Except as set forth in Sections 2(b) and 2(c) herein and as otherwise required by law, the holders of the Series A Preferred shall be entitled to that number of votes equal to the number of whole shares of the Corporation’s common stock, par value $0.01 per share (“Common Stock”) into which the Series A Preferred may be converted as of the date such vote is held.  Except as otherwise provided herein or as required by law, the holders of the Series A Preferred shall vote together as a single voting group with the holders of the Common Stock on all matters submitted to a vote of the Corporation’s stockholders.  Fractional votes shall not be permitted.  Whenever any matter is required to be approved by the holders of the Series A Preferred as a separate group, such consent shall require the approval of the holders of greater than fifty percent (50%) of the then outstanding shares of Series A Preferred.  The approval from the holders of the Series A Preferred required by Section 2(b) below is not intended to create a separate class voting right or require a stockholder vote, but rather constitutes a requirement of approval (which does not have to be obtained or given in the manner required for stockholder votes) necessary for certain actions in addition to any stockholder approval otherwise required under the Certificate of Incorporation or by law.

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(b) Negative Covenants.  So long as any shares of Series A Preferred are outstanding, the Corporation shall not, without the prior written consent of the holders of more than a majority of the outstanding shares of Series A Preferred:

(i) Authorize, create or issue (by reclassification or otherwise) any other class or series of capital stock having rights, preferences or privileges senior to or in parity with the Series A Preferred;

(ii) Alter or change the rights, preferences or privileges of the Series A Preferred or increase or decrease the authorized number of shares of Series A Preferred;

(iii) Authorize the declaration of dividends on the Common Shares (as hereinafter defined in Section 4(e)(vi)) or any other shares of capital stock other than the Series A Preferred, other than dividends payable solely in Common Shares;

(iv) Authorize any offering of equity securities of the Corporation representing (on a pro forma basis after giving effect to the issuance of such equity securities) the right to receive not less than ten percent (10%) of any amounts or funds that would, as of immediately following such issuance, be legally available for distribution in connection with a Liquidation Event (as defined in Section 7);

(v) Redeem any shares of capital stock (other than pursuant to employee agreements or the terms of the capital stock);

(vi) Increase or decrease the authorized number of members of the Board;

(vii) Enter into any binding agreement with any director, employee or any affiliate of the Corporation;

(viii) Materially change the nature of the Corporation’s business, enter into new lines of business or exit the current line of business or invest in any person or entity engaged in a business that is not substantially similar to the Corporation’s business, or change the location of any permanent location of any part of the Corporation’s business, in each case except as contemplated by that certain Asset Purchase Agreement, dated as of November 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and the Corporation (the “Asset Purchase Agreement”) or any of the transaction documents included therein;

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(ix) Make any loans or advances, individually or in the aggregate in excess of $1,000,000, to, or own any stock or other securities of, any subsidiary or other corporation, partnership or other entity unless it is wholly owned by the Corporation;

(x) Make any loan or advance to any natural person, including, without limitation, any employee or director of the Corporation, except advances and similar expenditures in the ordinary course of business;

(xi) Guarantee, directly or indirectly, any indebtedness except for trade accounts of the Corporation arising in the ordinary course of business;

(xii) Sell or otherwise dispose of any assets of the Corporation with a value, individually or collectively, in excess of $500,000 other than in the ordinary course of business;

(xiii) Liquidate, dissolve or wind-up the business and affairs of the Corporation or effect a Change in Control (as defined below) or any other Liquidation Event.  For purposes hereof, a “Change in Control” means (x) a merger, consolidation, share exchange or other transaction involving the Corporation or any of its subsidiaries or the stockholders of the Corporation; (y) the sale or transfer of a number of shares of voting capital stock of the Corporation or any securities convertible into or exchangeable for voting capital stock in any one (1) year period that, pursuant to either (x) or (y), results in one person or entity or an affiliated group of persons or entities, other than the stockholders of the Corporation immediately preceding the consummation of such transaction(s) either (i) owning in excess of fifty percent (50%) of the total voting capital stock of the Corporation taking into account issued and outstanding shares of such stock and any other shares of such capital stock that would be issued and outstanding assuming conversion or exchange of any and all other securities of the Corporation so convertible or exchangeable or (ii) being able to elect a majority of the Board of Directors; or (z) the sale, lease, abandonment, transfer or other disposition by the Corporation or any of its subsidiaries of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, excluding the grant of a security interest by the Corporation in all or substantially all of its assets in connection with the Asset Purchase Agreement or to a bank pursuant to a bona fide financing arrangement approved by the Board, which approval includes the approval of all of the Series A Directors.  Only for purposes of (y) hereof, (i) transfers due to the death of a stockholder or (ii) transfers to a member of a stockholder’s immediate family, family limited partnership, family limited liability company or a trust of which the beneficiary is such immediate family member shall not be considered as transfers;

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(xiv) Incur any indebtedness in excess of $1,000,000 in the aggregate other than trade credit incurred in the ordinary course of business or as contemplated by the Asset Purchase Agreement;

(xv) Expend funds in excess of $500,000 in the aggregate per year for capital improvements or other infrastructure of the Corporation, other than any such expenditure that is consistent with a budget approved by the Board of Directors, including the Series A Directors (as defined below) or as contemplated by the Asset Purchase Agreement;

(xvi) Obligate the Corporation, by contract or otherwise, to make aggregate annual payments in excess of $500,000 or sell, transfer, pledge or license any material technology or intellectual property of the Corporation other than a non-exclusive license in the ordinary course of business, in each case except as contemplated by the Asset Purchase Agreement; or

(xvii) Increase the number of shares reserved and issuable under any of the Corporation’s equity or option incentive compensation plans.

(c) Election of Directors.  The holders of Series A Preferred shall be entitled, as a separate voting group, at each annual or special election of directors, to elect two (2) directors (“Series A Directors”).  The holders of the Common Shares shall be entitled, as a separate voting group, at each annual or special election of directors, to elect all remaining directors.  In the case of a vacancy in the office of any Series A Director, the holders of the outstanding Series A Preferred, voting exclusively as a separate class in person or by proxy, shall elect a successor to hold office for the unexpired term of such Series A Director whose place shall be vacant, by the affirmative vote of the holders of a majority of the outstanding shares of Series A Preferred, voting in person or by proxy, voting as a separate voting group, at a special meeting called for that purpose at which a quorum is present or pursuant to a written consent of the holders of not less than a majority of the outstanding shares of the Series A Preferred.  In the event all the shares of Series A Preferred are converted or redeemed pursuant to the terms hereof, then the holders of the Common Shares shall be entitled to elect all directors of the Corporation.

Section 3.      Dividends.

(a) The holders of the Series A Preferred shall be entitled to receive dividends from any funds legally available therefor equal to the greater of (i) the rate of ten percent (10%) of the Series A Stated Value per annum, which shall accrue from the date of issuance whether or not declared, shall compound annually and shall be cumulative, and (ii) the amount the Series A Preferred would be entitled to receive on an as-if-converted basis with respect to dividends paid on the Common Stock.  To the extent that the Corporation has positive Distributable Cash Flow (as defined below) in any calendar quarter, the Corporation shall be required to pay from any funds legally available therefor a cash dividend to the holders of the Series A Preferred in the amount equal to the lesser of (i) 50% of such positive Distributable Cash Flow or (ii) the aggregate amount of dividends accrued on the Series A Preferred.  For purposes hereof, “Distributable Cash Flow” shall mean as of the end of each calendar quarter the Corporation’s earnings before interest expense, income taxes, depreciation and amortization but after required interest payments on any of the Corporation’s debt to third parties for borrowed money or to finance the acquisition of assets.  Such dividend shall be due and payable on March 15, June 15, September 15 and December 15 of each year (each such date or the next business date if such date is not a business day, a “Dividend Payment Date”) with the first Dividend Payment Date to be March 15, 2011.  No dividend shall be paid on Common Shares (i) at a rate greater than the rate at which dividends are paid on the Series A Preferred and (ii) until all accrued dividends on the Series A Preferred have been paid in full.

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(b) In no event, so long as any shares of Series A Preferred shall remain outstanding, shall any dividend whatsoever be declared or paid upon, nor shall any distribution be made upon, any other capital stock of the Corporation, nor shall any other capital stock of the Corporation be purchased or redeemed by the Corporation, nor shall any monies be paid to or made available for a sinking fund for the purchase or redemption of any other capital stock of the Corporation, unless in each instance dividends on all outstanding shares of the Series A Preferred for all Dividend Payment Dates shall have been accrued and paid in full and the full dividend on all outstanding shares of the Series A Preferred for the then-current dividend payment due shall have been accrued and paid in full or declared and sufficient funds for the payment thereof set apart.

Section 4.      Conversion.

(a) Optional Conversion Prior to a Liquidation or Redemption.  Each holder of shares of Series A Preferred shall have the right at any time and from time to time on or prior to the date of a Liquidation Event (as defined in Section 7), as set forth in the Liquidation Notice (as defined in Section 7), at such holder’s option, to convert any or all of the shares of Series A Preferred held by such holder into the number of fully paid and non-assessable shares of Common Stock obtained by multiplying the number of shares of Series A Preferred to be converted by the “Series A Preferred Conversion Rate”, as determined from time to time pursuant to this Section 4.  The initial Series A Preferred Conversion Rate shall be 4.0.

(b) Automatic Conversion.  All outstanding shares of Series A Preferred shall be automatically converted into fully paid and non-assessable shares of Common Stock, at the then applicable Series A Preferred Conversion Rate, at the election of the holders of a majority of the then outstanding shares of the Series A Preferred.

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(c) Mechanics of Conversion.  Before any holder of shares of Series A Preferred converts any such shares into shares of Common Stock, such holder shall surrender the certificate or certificates evidencing the shares to be converted, duly endorsed, at the principal office of the Corporation and shall give written notice to the Corporation at such office of the election to convert such shares into shares of Common Stock.  The notice shall state the number of the shares of Series A Preferred to be converted and the name in which the certificate(s) for shares of Common Stock are to be issued.  The Corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder, a certificate or certificates for the number of full shares of Common Stock to which such holder is entitled.  Any conversion shall be deemed to occur immediately prior to the close of business on the date of surrender of the shares to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date and shall no longer be entitled to any dividends paid or accrued thereafter on the Series A Preferred.  To the extent permitted by law, when shares of Series A Preferred are converted, all dividends accrued and unpaid on the shares of Series A Preferred so converted on the date of conversion shall be immediately due and payable and must accompany the shares of Common Stock issued upon such conversion.

(d) No Fractional Shares.  No fractional shares of Common Stock or scrip shall be issued upon conversion of the shares of Series A Preferred.  If a holder surrenders for conversion more than one share of Series A Preferred at any time, the number of full shares of Common Stock issuable upon conversion thereof shall be computed using the aggregate number of shares of Series A Preferred so surrendered.  Instead of issuing any fractional shares of Common Stock that would otherwise be issuable upon conversion of any of the shares of Series A Preferred, the Corporation shall round down to the nearest whole number of shares of Common Stock and pay to such holder cash equal to the fair market value of such fraction on the date of conversion (as determined in good faith by the Board).

(e) Adjustment of Conversion Rate.  The Series A Preferred Conversion Rate shall be subject to adjustment from time to time as follows:

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(i) Effect of “Split-ups” and “Split-downs”; Stock Dividends.  If at any time or from time to time the Corporation shall subdivide as a whole, by reclassification, by the issuance of a stock dividend on the shares of Common Stock payable in shares of Common Stock, or otherwise, the number of shares of Common Stock, with or without par value, the Series A Preferred Conversion Rate shall be increased proportionately as of the effective or record date of such action by multiplying the Series A Preferred Conversion Rate, respectively, by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to the applicable record date plus the additional number of shares of Common Stock necessary to effect such reclassification, stock dividend or otherwise, and the denominator shall be the number of shares of Common Stock outstanding immediately prior to the applicable record date.  The issuance of such a stock dividend shall be treated as a subdivision of the whole number of shares of Common Stock outstanding immediately before the record date for such dividend into a number of shares equal to such whole number of shares so outstanding plus the number of shares issued as a stock dividend.  In case at any time or from time to time the Corporation shall combine as a whole, by reclassification or otherwise, the number of shares of Common Stock then outstanding into a lesser number of shares of Common Stock, with or without par value, the Series A Preferred Conversion Rate shall be reduced proportionately as of the effective date of such action by multiplying the Series A Preferred Conversion Rate by a fraction, the numerator of which shall be the number of shares of Common Stock which would be outstanding immediately after giving effect to such reclassification, stock dividend or otherwise without regard to this Section, and the denominator shall be the number of shares of Common Stock outstanding immediately prior to the applicable record date.  Notwithstanding the foregoing, in the event that any record date for a subdivision or combination of shares of Common Stock or for the issuance of a stock dividend is fixed but such subdivision, combination or issuance is not fully effected or made on the date fixed therefor, the Series A Preferred Conversion Rate shall be recomputed accordingly as of the close of business on such date and thereafter only adjusted to reflect the subsequent actual effect of such subdivision, combination or issuance.

(ii) Effect of Certain Dividends.  If on any date the Corporation makes a distribution (other than a distribution consisting only of Common Shares) to holders of its Common Shares but not the holders of Series A Preferred (including any such distribution made in connection with a consolidation or merger in which the Corporation is the continuing corporation), the holders of the Series A Preferred shall be entitled to receive a portion of such distribution equal to the amount each such holder would have received if such holder had converted all of its shares of Series A Preferred into Common Shares immediately prior to the record date for such distribution.  

(iii) Effect of Merger or Consolidation.  If the Corporation shall, while any shares of Series A Preferred remain outstanding, enter into any consolidation with or merge into any other corporation wherein the Corporation is not the continuing corporation, or wherein securities of a corporation other than the Corporation are distributable to holders of Common Shares of the Corporation, or sell or convey its property as an entirety or substantially as an entirety (other than any Liquidation Event), and in connection with such consolidation, merger, sale or conveyance, shares of stock or other securities shall be issuable or deliverable in exchange for the shares of Common Stock of the Corporation, the holder of any shares of Series A Preferred shall thereafter be entitled to obtain on account of such Series A Preferred (in lieu of the number of shares of Common Stock that such holder would have been entitled to receive if such holder had converted its shares of Series A Preferred immediately before the effective date of such consolidation, merger, sale or conveyance) the shares of stock or other securities to which such number of shares of Common Stock would have been entitled if such shares of Series A Preferred had been converted immediately before such consolidation, merger, sale or conveyance.  In case of any such consolidation, merger, sale or conveyance, appropriate provision (as determined by a resolution of the Board) shall be made with respect to the rights and interests thereafter of the holders of Series A Preferred to the end that all the provisions of Sections 3, 4, 5 and 6 hereof (including adjustment provisions) shall thereafter be applicable as nearly as reasonably practicable, in relation to such stock or other securities.

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(iv) Reorganization and Reclassification.  In case of any capital reorganization or any reclassification of the capital stock of the Corporation (except as provided in Section 4(e)(i) herein or pursuant to a Liquidation Event) while any shares of Series A Preferred remain outstanding, the holder of any shares of Series A Preferred shall thereafter be entitled to receive upon conversion of such Series A Preferred (in lieu of the number of shares of Common Stock that such holder would have been entitled to receive if such holder had converted immediately before such reorganization or reclassification) the shares of stock of any class or classes or other securities or property to which such number of shares of Common Stock would have been entitled if such shares of Series A Preferred had been converted immediately before such reorganization or reclassification.  In case of any such reorganization or reclassification, appropriate provision (as determined by resolution of the Board) shall be made with respect to the rights and interests thereafter of the holders of Series A Preferred, to the end that all the provisions of Sections 3, 4, 5 and 6 hereof (including adjustment provisions) shall thereafter be applicable, as nearly as reasonably practicable, in relation to such stock or other securities or property.

(v) Adjustment of Conversion Rate after a “Diluting Issue”.  If on any date on or after the date on which the Corporation first issues shares of Series A Preferred (the “Original Issue Date”), any additional Common Shares (other than Excluded Securities, as hereinafter defined) shall be issued for a consideration per share (or, in the case of any transactions contemplated in Section 4(e)(v)(B) or 4(e)(v)(C) herein, shall be deemed to be issued on or after the date hereof for a Presumed Consideration (as defined in Section 4(e)(vi)(F)(II) herein) per share) less than the Current Conversion Price (as defined in Section 4(e)(v)(F)(II) herein) on the date such Common Shares were issued or deemed to have been issued, the Series A Preferred Conversion Rate shall be adjusted at the close of business on such date to equal the product resulting from the multiplication of (x) the Series A Preferred Conversion Rate, immediately before such issuance or deemed issuance of Common Shares (as may have been previously adjusted) by (y) a fraction, (I) the numerator of which is the total number of Common Shares outstanding (as defined below) immediately before such issue plus the number of additional shares being issued, and (II) the denominator of which is the total number of Common Shares outstanding immediately prior to such issue plus the number of Common Shares that the aggregate consideration received (or, without duplication, the Presumed Consideration deemed to have been received) for the total number of additional shares so issued would purchase at the Current Conversion Price on such date.  For the purpose of the calculation described in this Section 4(e)(v), the number of Common Shares outstanding will include (1) the number of Common Shares outstanding; (2) the number of shares of Common Stock into which the then outstanding shares of Series A Preferred could be fully converted on the day preceding the issuance or deemed issuance of the applicable Common Shares; and (3) the number of Common Shares which could be obtained through the conversion of all Convertible Securities (as defined in Section 4(e)(vi)) which are convertible on the day next preceding the issuance or deemed issuance of the applicable Common Shares.

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For the purpose of this Section 4(e)(v), the following provisions shall be applicable with respect to the issuance of additional Common Shares and the computation set forth in the immediately preceding paragraph:

(A) Stock Dividends, etc.  In case on or after the Original Issue Date any additional Common Shares shall be issued as a dividend on any class of stock of the Corporation other than Common Shares (in which case Section 4(e)(i) hereof shall apply) or Series A Preferred (in which case Section 3 herein shall apply), such Common Shares shall be deemed to have been issued without consideration on the day immediately succeeding the date for the determination of stockholders entitled to such dividend.

(B) Rights or Options below Current Conversion Price.  In case the Corporation shall on or after the Original Issue Date grant any rights or options (other than any rights or options that are Excluded Securities) to subscribe for or to purchase additional Common Shares or Convertible Securities, and the Presumed Consideration per share received and receivable by the Corporation for such additional shares under such rights or options shall be less than the Current Conversion Price in effect immediately prior to the granting of such rights or options, the maximum number of additional Common Shares issuable pursuant to such rights or options or upon the conversion or exchange of all such Convertible Securities, in each case without regard to any anti-dilution provisions applicable to such rights, options or Convertible Securities, shall be deemed to have been issued as of the date of the granting of such rights or options, and the Corporation shall be deemed to have received the Presumed Consideration therefor.  No adjustment (except as provided in Section 4(e)(v)(D) herein) shall be made upon the actual issuance of Common Shares, upon the exercise of rights or options referenced in this Section 4(e)(v)(B) or the conversion of Convertible Securities referenced in this Section 4(e)(v)(B).

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(C) Securities Convertible below Current Conversion Price.  In case:

(I) the Corporation shall on or after the Original Issue Date issue any Convertible Securities (other than Excluded Securities or as a dividend on Common Shares (in which case Section 4(e)(ii) shall apply) or as a dividend on shares of Series A Preferred (in which case Section 3 shall apply)), and

(II) the Presumed Consideration per share for additional Common Shares issuable pursuant to the terms of such Convertible Securities shall be less than the Current Conversion Price in effect immediately prior to the time of the issuance of such Convertible Securities, then the issuance of such Convertible Securities shall be deemed to be an issuance (as of the date of issuance of such Convertible Securities) of the maximum number of additional Common Shares issuable pursuant to all such Convertible Securities (without regard to any anti-dilution provisions applicable to such Convertible Securities), and the Corporation shall be deemed to have received the Presumed Consideration therefor as of the date of issuance of such Convertible Securities.  No further adjustment, except as provided in Section 4(e)(v)(D) herein, shall be made upon the actual issuance of Common Shares upon the conversion of Convertible Securities.

(D) Superseding Adjustment of Conversion Rate.  If, at any time after any adjustment of the Series A Preferred Conversion Rate shall have been made on the basis of Common Shares deemed to be issued by reason of the provisions of the foregoing Sections 4(e)(v)(B) or 4(e)(v)(C) on the basis of the granting of certain rights or options or the issuance of certain Convertible Securities, or after any new adjustments of the Series A Preferred Conversion Rate shall have been made on the basis of Common Shares deemed to be issued by reason of the provisions of this Section 4(e)(v)(D), such rights or options or the right of conversion or exchange in any such Convertible Securities shall expire, and less than the maximum number of Common Shares issuable in respect of such rights or options, or the right of conversion or exchange in respect of such Convertible Securities, as the case may be, shall have been issued, or if a greater amount of consideration than the Presumed Consideration shall be received by the Corporation in connection with the exercise of any such rights, options or Convertible Securities, then such previous adjustment shall be adjusted as appropriate to reflect the actual number of Common Shares issued and the actual amount of consideration received by the Corporation, as applicable.

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(E) Effect of “Split-up” or “Split-down” on “deemed issued” shares.  Upon the effective or record date for any subdivision or combination of the Common Shares of the character described in Section 4(e)(i) hereof, including the issuance of a stock dividend that is treated as such a subdivision under Section 4(e)(v)(A) herein, the number of the Common Shares that are at the time deemed to have been issued by virtue of Sections 4(e)(v)(B) or 4(e)(v)(C) herein, but have not actually been issued, shall be deemed to be increased or decreased proportionately.

(F) Computation of Consideration and Presumed Consideration.  For the purposes of this Section 4(e):

(I) The per share consideration received by the Corporation upon the actual issuance of additional Common Shares shall be deemed to be the quotient of (a) the sum of the amount of cash and the fair value of property (as determined in good faith by resolution of the Board at the time of issue) received by the Corporation as consideration at the time of issuance of the Common Shares, in each case without deduction for commissions and expenses incurred by the Corporation for any underwriting of, or otherwise in connection with the issue or sale of, such Common Shares, divided by (b) the aggregate number of Common Shares actually issued;

(II) The per share consideration deemed to have been received by the Corporation for additional Common Shares deemed to be issued pursuant to rights, options and Convertible Securities of the character described in Sections 4(e)(v)(B) and 4(e)(v)(C) hereof (the “Presumed Consideration”) shall be the quotient of (a) the sum of the amount of cash and the fair value of property (as determined in good faith by resolution of the Board at the time of “deemed issue”), if any, received or receivable by the Corporation as consideration for the issue of such rights, options or Convertible Securities, plus the sum of the minimum aggregate amount of additional cash and the fair value of property (as determined in good faith by resolution of the Board at the time of “deemed issue”) payable to the Corporation upon the exercise in full of such rights or options or the conversion or exchange of all such Convertible Securities (or, in the case of rights or options for Convertible Securities, the exercise in full of such rights or options for Convertible Securities and the conversion or exchange of all such Convertible Securities), divided by (b) the maximum number of Common Shares (without regard to any anti-dilution provisions applicable to such rights, options or Convertible Securities) issuable upon the exercise of such rights or options or conversion or exchange of such Convertible Securities.

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(vi) Determination by the Board.  All determinations by the Board under the provisions of this Section 4(e) shall be made in good faith with due regard to the interests of the holders of Series A Preferred and the other holders of securities of the Corporation and in accordance with good financial practice, and all valuations made by the Board under the terms of this Section 4(e) must be made with due regard to any market quotations of securities involved in, or related to, the subject of such valuation.

Unless the context otherwise requires, the following terms have the following respective meanings:

“Common Shares” means (i) shares of Common Stock, and (ii) shares of stock of the Corporation of any class hereafter authorized that ranks, or is entitled to a participation, as to assets or dividends, substantially on a parity with Common Stock.

“Convertible Securities” shall mean any obligations or stock convertible into or exchangeable for Common Shares.

“Current Conversion Price” shall initially mean $0.58 and shall be adjusted each time there is an adjustment in the Series A Preferred Conversion Rate to equal the product of the Current Conversion Price as in effect before such adjustment multiplied by a fraction in which the numerator is equal to the pre-adjustment Series A Preferred Conversion Rate and the denominator is equal to the as-adjusted Series A Preferred Conversion Rate.

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“Excluded Securities” means (i) warrants, options or rights granted to directors, officers, employees, consultants or service providers of the Corporation or its subsidiaries pursuant to any of the Corporation’s incentive compensation, option or benefit plans, as may be approved by the Board, including the Series A Directors, for officers, directors and employees of the Corporation (as the same may be adjusted pursuant to anti-dilution provisions contained in such stock options or rights), (ii) shares issued pursuant to the exercise of such warrants, options or rights granted pursuant to such plans or any other warrants, options or rights outstanding on the Original Issue Date, (iii) securities issued or issuable upon conversion of the Series A Preferred or as a dividend on shares of Series A Preferred or Common Shares, and (iv) securities issued or issuable in connection with mergers, consolidations, acquisitions, joint ventures or similar business or strategic transaction approved by the Board, including the Series A Directors.

(f) Notice to Holders.  In the event the Corporation shall propose to take any action of the types described in Section 4(e)(ii) or 4(e)(iii) herein, the Corporation shall give notice to each holder of Series A Preferred, which notice shall specify the record date, if any, with respect to any such action and the date on which such action is to take place.  Such notice shall also set forth such facts with respect thereto as shall be reasonably necessary to indicate the effect of such action (to the extent such effect may be known at the date of such notice) on the Series A Preferred Conversion Rate and the number, kind or class of shares or other securities or property that shall be deliverable or purchasable upon the occurrence of such action or deliverable upon conversion of the shares of Series A Preferred.  In the case of any action that would require the fixing of a record date, such notice shall be given at least ten (10) days prior to the date so fixed, and in case of all other action, such notice shall be given at least ten (10) days prior to the taking of such proposed action.

(g) Shares Free and Clear.  All shares of Common Stock issued in connection with the conversion provisions set forth herein shall be, upon issuance by the Corporation, validly issued, fully paid and nonassessable and free from all taxes, liens or charges with respect thereto created or imposed by the Corporation.

(h) Certificate as to Adjustments.  Upon the occurrence of each adjustment of the Series A Preferred Conversion Rate for any shares pursuant to Section 4 hereof, the Corporation at its expense shall promptly compute such adjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred a certificate setting forth such adjustment and showing in detail the facts upon which such adjustment is based.  The Corporation shall, upon the written request at any time of any holder of Series A Preferred, furnish or cause to be furnished to such holder a like certificate setting forth (a) the Series A Preferred Conversion Rate at that time in effect and (b) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of shares of Series A Preferred.  The Corporation shall file a like certificate among its permanent records and at all reasonable times during business hours shall permit inspection of such certificate by any holder of Series A Preferred requesting such inspection.

(i) Common Stock Reserved.  The Corporation shall reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares of Common Stock as shall from time to time be sufficient to effect conversion of the shares of Series A Preferred.

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Section 5.      Optional Redemption.

(a) At any time and from time to time after the fifth anniversary of the Original Issue Date, the holders of a majority of the then issued and outstanding shares of Series A Preferred, voting together as separate class, may require the Corporation to redeem (to the extent that such redemption shall not violate any applicable provisions of the laws of the State of Delaware), all of the then issued and outstanding shares of Series A Preferred at the Redemption Price per share (for purposes of Section 5, the “Redemption Demand”); provided, however, that such redemption shall occur in three equal annual installments, with the first of such installments due (subject to the last sentence of this Section 5(a)) sixty (60) days following the Corporation’s receipt of the Redemption Demand and the second and third such installments due (subject to the last sentence of this Section 5(a)) on the first and second anniversaries, respectively, of the due date for the first installment.  The “Redemption Price” shall mean, with respect to each share of Series A Preferred, an amount equal to the sum of (i) the Series A Preferred Stated Value thereof (subject to adjustment in the event of any stock dividend, stock split, stock distribution or combination with respect to such shares), plus (ii) all accrued but unpaid dividends thereon to the applicable Redemption Date (as defined below).  If upon any Redemption Date, the Corporation is unable to redeem any shares of Series A Preferred then required pursuant to this Section 5 to be redeemed because such redemption would violate the applicable laws of the State of Delaware, then the Corporation shall redeem such shares as soon thereafter as redemption would not violate such laws.

(b) Within five (5) days after the Corporation receives the Redemption Demand, written notice shall be mailed, postage prepaid, to each holder of the Series A Preferred, at his or its post office address last shown on the records of the Corporation, notifying such holder of the number of shares so to be redeemed, specifying the dates such shares are to be redeemed (for purposes of Section 5, each such date being referred to as a “Redemption Date”) and calling upon such holder to surrender to the Corporation, in the manner and at the place designated, his or its certificate or certificates representing the shares of Series A Preferred to be redeemed (for purposes of Section 5, the “Redemption Notice”) on each such Redemption Date.  Upon surrender of such certificate or certificates to the Corporation, in the manner and at the place designated in the Redemption Notice, the Corporation shall pay the Redemption Price of such shares of Series A Preferred being redeemed immediately payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be cancelled; provided, however, that each holder of Series A Preferred shall have the rights, at any time prior to each Redemption Date (unless the Corporation defaults in the payment of the Redemption Price, in which case such right shall not terminate at such time and date), to convert its shares of Series A Preferred into shares of Common Stock as provided in Section 5 hereof.  From and after each Redemption Date, unless there shall have been a default in payment of the applicable Redemption Price, all rights of the holders of Series A Preferred of the Corporation with respect to the shares of Series A Preferred redeemed on such Redemption Date (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease, and such shares of Series A Preferred shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever.

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(c) Except as provided in this Section 5 the Corporation shall have no right to redeem the shares of Series A Preferred.  Any shares of Series A Preferred so redeemed shall be permanently retired, shall no longer be deemed outstanding and shall not under any circumstances be reissued, and the Corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized number of Series A Preferred accordingly.

Section 6.      Miscellaneous.

(a) Registration of Transfer.  The Corporation shall keep at its principal office a register for the registration of shares of Series A Preferred.  Upon the surrender at its principal office of any certificate representing shares of Series A Preferred, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate.  Each such new certificate will be registered in such name and will represent such number of shares as is requested by the holder of the surrendered certificate (subject to the immediately preceding sentence) and will be substantially identical in form to the surrendered certificate.

(b) Replacement.  Upon receipt of evidence, and an agreement to indemnify reasonably satisfactory to the Corporation (an affidavit of the registered holder, without bond, will be satisfactory), of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of Series A Preferred, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate.

(c) Amendment and Waiver.  No amendment, modification or waiver of any of the terms of this Section 6 will be binding or effective without the prior written consent of holders of a majority of the shares of Series A Preferred at the time such action is taken.

(d) Notices.  All notices referred to herein, except as otherwise provided, will be hand delivered or made by registered or certified mail, return receipt requested, postage prepaid, or by overnight courier and will be deemed to have been given when so hand delivered or mailed.

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Section 7.     Liquidation Preference.  Upon the occurrence of a Liquidation Event (as defined herein), the Corporation shall first make such payments to the holders of the Series A Preferred, and thereafter to the holders of the Series A Preferred and the Common Shares, all in accordance with this Section 7.  Upon a Change in Control or any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (in each case, a “Liquidation Event”), all amounts and funds of the Corporation legally available for distribution shall be distributed as follows:

(a) First.  The holders of the Series A Preferred then outstanding shall be entitled to receive and to be paid out of the assets or surplus funds of the Corporation available for distribution to its stockholders, prior to and in preference to any payments to be made to the holders of the Common Shares, an amount per share equal to the sum of (i) the Series A Stated Value as adjusted for any stock dividends, combinations or splits with respect to such shares plus (ii) all accrued but unpaid dividends through the Liquidation Event, as adjusted for any stock dividends, combinations or splits with respect to such shares (the “Series A Liquidation Preference”).

(b) Second.  The holders of the Series A Preferred and the Common Shares shall receive all remaining assets and funds of the Corporation legally available for distribution (after the payments to the holders of the Series A Preferred described in Section 7(a) hereof) in proportion to the Common Shares held by each holder and the shares of Common Stock that each holder of the Series A Preferred has the right to acquire upon conversion of the shares of the Series A Preferred held by such holder; provided, however, that the holders of the Series A Preferred shall not be entitled to receive by operation of Section 5(a) and this Section 5(b) an amount per share of Series A Preferred in excess of four (4) times the Series A Stated Value (as adjusted for any stock dividends, combinations or splits with respect to such shares).

If upon such Liquidation Event, the assets of the Corporation are insufficient to pay the applicable preferential amount to the holders of shares of Series A Preferred as described in Section 7(a) herein, the assets of the Corporation will be distributed among the holders of Series A Preferred on a pro rata basis according to the amounts each holder was entitled to receive under Section 7(a) herein.

The Corporation will mail written notice of such Liquidation Event, not less than ten (10) days prior to the payment date stated herein, to each record holder of Series A Preferred.  The purchase or redemption by the Corporation of stock of any class, in any manner permitted by law, shall not for the purpose of this Section 7 be regarded as a Liquidation Event of the Corporation.

[REST OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Transgenomic, Inc. has caused this Certificate of Designation to be executed by its duly authorized officer on December 28, 2010.

TRANSGENOMIC, INC.
By:	/s/ Craig J. Tuttle
	Name:  Craig J. Tuttle
	Title:  Chief Executive Officer and President

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EX-4.1

Exhibit 4.1

SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this “Agreement”) is made as of this 29th day of December, 2010, by and among Transgenomic, Inc., a Delaware corporation (the “Company”), and Third Security Senior Staff 2008 LLC, a Virginia limited liability company (“Senior Staff LLC”), Third Security Staff 2010 LLC, a Virginia limited liability company (“Staff LLC”), and Third Security Incentive 2010 LLC, a Virginia limited liability company (“Incentive LLC” and, together with Senior Staff LLC and Staff LLC, the “Purchasers”).

WHEREAS, upon the terms and conditions set forth in this Agreement, the Company proposes to issue and sell to the Purchasers 2,586,205 shares of Series A Convertible Preferred Stock (the “Series A Preferred”) having the rights, preferences, privileges and restrictions set forth in the Certificate of Designation in the form attached to this Agreement as Exhibit A and in connection therewith warrants (“Warrants”) to purchase an aggregate of 1,293,102 additional shares of Series A Preferred, the form of which is attached to this Agreement as Exhibit D.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and conditions set forth herein, and for good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions.

In addition to the terms defined elsewhere herein, when used herein, the following terms shall have the meanings indicated hereunder:

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

“Affiliate” shall mean, with respect to any Person, any other Person who controls, is controlled by or is under common control with such Person.

“Agreement” means this Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof.

“Asset Purchase Agreement” means the Asset Purchase Agreement, dated November 29, 2010, by and among PGxHealth LLC, Clinical Data, Inc. and the Company.

“Assets” has the meaning set forth in Section 3.19 of this Agreement.

“Board of Directors” means the Board of Directors of the Company.

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“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of Delaware are authorized or required by law or executive order to close.

“Bylaws” means the Company’s Bylaws, as the same may have been amended and as in effect as of the Closing Date, in the form attached hereto as Exhibit C.

“Capital Stock” means all of the Company’s issued and outstanding equity securities.

“Certificate of Designation” means the certificate of designation setting forth the rights, preferences, privileges and restrictions of the Series A Preferred, in the form attached hereto as Exhibit A.

“Certificate of Incorporation” means the Third Amended and Restated Certificate of Incorporation of the Company, as the same may have been amended and as in effect as of the Closing Date, in the form attached hereto as Exhibit B.

“Claims” has the meaning set forth in Section 3.5 of this Agreement.

“Closing” has the meaning set forth in Section 2.2(a) of this Agreement.

“Closing Date” has the meaning set forth in Section 2.2(a) of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor statue thereto.

“Common” means Common Stock, $0.01 par value per share, of the Company, or any other Capital Stock into which such stock is reclassified or reconstituted.

“Company” has the meaning assigned to such term in the recitals to this Agreement.

“Company Disclosure Schedule” means the schedule of exceptions and qualifications to the representations and warranties made by the Company herein, as furnished to the Purchasers concurrently with the execution and delivery of this Agreement.

“Compensation Plans” means, without limitation, plans, arrangements or practices that provide for severance pay, deferred compensation, incentive, bonus or performance awards and stock ownership or stock options.

“Contractual Obligation(s)” means as to any Person, any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument to which such Person is a party or by which it or any of its property is bound.

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“Copyright(s)” means any foreign or United States copyright registrations and applications for registration thereof, and any non-registered copyrights.

“Environmental Laws” means federal, state, local and foreign laws, principles of common law, civil law, regulations and codes, as well as orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution, protection of the environment or public health and safety.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, as the same shall be in effect from time to time.

“Financial Statements” has the meaning set forth in Section 3.11 of this Agreement.

“GAAP” means U.S. generally accepted accounting principles in effect from time to time.

“Governmental Authority(ies)” when used in the singular, means any federal, state or local governmental or quasi-governmental instrumentality, agency, board, commission or department or any regulatory agency, bureau, commission or authority and, when used in the plural, means all such entities.

“Indebtedness” means, as to any Person, (a) all obligations of such person for borrowed money (including, without limitation, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers’ acceptances, whether or not matured), (b) all obligations of such person evidenced by notes, bonds, debentures or similar instruments, (c) all obligations of such person to pay the deferred purchase price of property or services, except trade accounts payable and accrued commercial or trade liabilities arising in the ordinary course of business, (d) all interest rate and currency swaps, caps, collars and similar agreements or hedging devices under which payments are obligated to be made by such Person, whether periodically or upon the happening of a contingency, (e) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (f) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases and (g) all indebtedness secured by any Lien (other than Liens in favor of lessors under leases other than leases included in clause (f)) on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person.

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“Intellectual Property Rights” means Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Mask Works, software (excluding “off the shelf” software) and other proprietary rights in intellectual property existing under Requirements of Law.

“Internet Assets” mean any internet domain names and other computer user identifiers and any rights in and to sites on the worldwide web, including rights in and to any text, graphics, audio and video files and html or other code incorporated in such sites.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other) or preference, priority, right or other security interest or preferential arrangement of any kind or nature whatsoever (excluding preferred stock and equity related preferences), including, without limitation, those created by, arising under or evidencing substantially the same economic effect as any of the foregoing.

“Losses” means all losses, Claims, or written threats thereof, damages, expenses (including reasonable fees, disbursements and other charges of counsel incurred) or other liabilities.

“Mask Works” means any mask works and registrations and applications for registrations thereof.

“Material Adverse Effect” means, subject to any applicable cure or grace periods, a material adverse effect upon any of (a) the financial condition, operations, business or properties of the Company, except to the extent resulting from (i) changes in general local, domestic, foreign, or international economic conditions (except to the extent such change has a materially disproportionate effect on the Company as compared to other similarly situated Persons in the industry in which the Company operates), (ii) changes affecting generally the industry or industries in which the Company operates (except to the extent such change has a materially disproportionate effect on the Company as compared to other similarly situated Persons in the industry in which the Company operates), (iii) acts of war, sabotage or terrorism, military actions or the escalation thereof, (iv) any changes in applicable laws or accounting rules or principles, including, without limitation, changes in GAAP, (v) any action required by this Agreement or (vi) the announcement of this Agreement or the transactions contemplated hereby, (b) the ability of the Company to perform its material obligations under this Agreement or any of the Transaction Documents or (c) the legality, validity or enforceability of this Agreement or any of the Transaction Documents.

“Material Company IP” has the meaning set forth in Section 3.21(b).

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“Obligations” means, collectively, all of the Company’s Indebtedness, liabilities and Contractual Obligations.

“Orders” has the meaning set forth in Section 3.2 of this Agreement.

“Patent(s)” means any foreign or United States patents and patent applications, including any divisionals, continuations, continuations-in-part, substitutions or reissues thereof, whether or not patents are issued on such applications and whether or not such applications are modified, withdrawn or resubmitted.

“Person” means any individual or group of individuals, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

“Permits” has the meaning set forth in Section 3.6(b) of this Agreement.

“Purchased Shares” has the meaning set forth in Section 2.1(a) of this Agreement.

“Purchasers” has the meaning assigned to such term in the recitals to this Agreement.

“Registration Rights Agreement” means the Registration Rights Agreement to be entered into among the Company and the Purchasers under the conditions set forth herein, the form of which is attached hereto as Exhibit E.

 “Requirements of Law” means, as to any Person, any law, statute, treaty, rule, regulation, license or franchise or determination of an arbitrator or a court or other Governmental Authority, in each case applicable or binding upon such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein.

“SEC” means the Securities and Exchange Commission or any similar agency then having jurisdiction to enforce the Act.

“SEC Documents” has the meaning set forth in Section 3.11 of this Agreement.

“Securities Filings” means the filing of a Form D with the SEC under the Act and any filing required to be filed with the any state by the Company in respect of its issuance of the Series A Preferred.

“Series A Preferred” means the Company’s Series A Convertible Preferred Stock.

“Share Purchase Price” means $2.32, the price per share of the Series A Preferred to be paid by the Purchasers.

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“Taxes” has the meaning set forth in Section 3.12 of this Agreement.

“Trade Secrets” means any scientific or technical information, design, process, procedure, formula or improvement that derives independent economic value from not being generally known, and not being readily ascertainable through proper means, to the Company’s competitors or other persons who can obtain economic value from its use.  To the fullest extent consistent with the foregoing, and otherwise lawful, Trade Secrets shall include, without limitation, information and documentation pertaining to the design, specifications, testing, validation, implementation and customizing techniques and procedures concerning the Company’s present and future products and services.

“Trademarks” means any foreign or United States trademarks, service marks, trade dress, trade names, brand names, designs and logos, corporate names, product or service identifiers, whether registered or unregistered, and all registrations and applications for registration thereof.

“Transaction Documents” means, collectively, this Agreement, the Warrants and the Registration Rights Agreement.

“Warrant Shares” means the shares of Series A Preferred issuable upon exercise of the Warrants in accordance with the terms thereof.

“Warrants” has the meaning assigned to such term in the recitals to this Agreement.

1.2 Accounting Terms; Financial Statements.

All accounting terms used herein not expressly defined in this Agreement shall have the respective meanings given to them in accordance with sound accounting practice.  The term “sound accounting practice” shall mean such accounting practice as, in the opinion of the independent certified public accountants regularly retained by the Company, conforms at the time to GAAP applied on a consistent basis except for changes with which such accountants concur.

1.3 Knowledge of the Company.

All references to “Knowledge of the Company” or any similar phrase means the actual knowledge of those individuals set forth on Schedule 1.3 of the Company Disclosure Schedule or knowledge any such person would be reasonably expected to have given their position with the Company.

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ARTICLE II

PURCHASE AND SALE OF SERIES A PREFERRED

2.1 Purchase and Sale of Series A Preferred.

(a) Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Purchasers, and each Purchaser agrees that it will purchase from the Company, on the Closing Date, such number of shares of Series A Preferred (all of the shares of Series A Preferred being purchased pursuant to this Section 2.1(a) being referred to herein as the “Purchased Shares”) and Warrants set forth opposite such Purchaser’s name on Schedule A hereto for the aggregate purchase price of Six Million Dollars ($6,000,000.00).

(b) The Purchased Shares shall have the preferences and rights set forth in the Certificate of Designation for the Series A Preferred.

2.2 Closing.

The closing of the sale and purchase of the Purchased Shares and Warrants (the “Closing”) shall take place at the offices of Third Security, LLC at 1881 Grove Avenue, Radford, Virginia 24141, at 10:00 a.m., local time, on December 29, 2010, or at such other time, place and date that the Company and the Purchasers may agree in writing (the “Closing Date”).  On the Closing Date, the Company shall deliver the Purchased Shares and Warrants being acquired by each of the Purchasers in the form of certificates issued in each Purchaser’s name upon receipt by the Company of payment of the aggregate purchase price for such Purchased Shares and Warrants, as set forth on Schedule A hereto, by or on behalf of each Purchaser to the Company by certified check or by wire transfer of immediately available funds to an account designated in writing by the Company.

2.3 Use of Proceeds.

The Company shall use the proceeds from the sale of the Purchased Shares and Warrants in connection with the transactions contemplated by the Asset Purchase Agreement and for other general corporate purposes.

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ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

Except as set forth on the Company Disclosure Schedule, the Company hereby represents, warrants and covenants to each Purchaser as follows:

3.1 Corporate Existence and Power.

The Company (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) has all requisite corporate power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently, or is currently proposed to be, engaged; (c) is licensed and in good standing under the laws of each jurisdiction to which its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent the failure to do so would not have a Material Adverse Effect; and (d) has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Transaction Documents.

3.2 Authorization; No Contravention.

The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limitation, the sale, issuance and delivery of the Purchased Shares (a) have been duly authorized by all necessary corporate action of the Company; (b) do not contravene the terms of the Certificate of Incorporation or the Bylaws; and (c) do not violate, conflict with or result in any breach or contravention of, or the creation of any Lien under, any Contractual Obligation or the judgment, injunction, writ, award, decree or order of any nature (collectively, “Orders”) of any Governmental Authority against, or binding upon, the Company, in each case in this clause (c), individually or in the aggregate, as would have a Material Adverse Effect.

3.3 Governmental Authorization; Third Party Consents.

Except as set forth on Schedule 3.3 of the Company Disclosure Schedule and except for the filing of the Securities Filings and the filing and acceptance of the Certificate of Designation, no approval, consent, exemption, authorization or other action by, or notice to, or filing with, any Governmental Authority or any other Person in respect of any Requirement of Law, and no lapse of a waiting period under a Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the sale, issuance and delivery of the Purchased Shares) by, or enforcement against the Company of this Agreement and the other Transaction Documents or the transactions contemplated hereby and thereby.

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3.4 Binding Effect.

This Agreement and each of the other Transaction Documents have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity relating to enforceability (regardless of whether considered in a proceeding at law or in equity).

3.5 Litigation.

There are no actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations (collectively, “Claims”) pending or, to the Knowledge of the Company, threatened, at law, in equity, in arbitration or before any Governmental Authority against the Company.  To the Knowledge of the Company, there is no fact, event or circumstance that is likely to give rise to any Claim.  The Company has not received notice of any Order and no Order has been issued by any court or other Governmental Authority against the Company purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any of the other Transaction Documents to which it is a party.

3.6 Compliance with Laws.

(a) The Company is in compliance in all respects with all Requirements of Law and all Orders issued by any court or Governmental Authority, except where the failure to be in compliance would not have a Material Adverse Effect.

(b) The Company has all licenses, permits, orders and approvals of any Governmental Authority (collectively, “Permits”) that are necessary for the conduct of the business of the Company taken as a whole; such Permits are in full force and effect; and no violations are or have been recorded in respect of any Permit, except in each case, individually or in the aggregate, as would not have a Material Adverse Effect.

(c) No material expenditure is presently required by the Company to comply with any existing Requirement of Law or Order.

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(d) None of the Company, any subsidiary or any director, officer, or employee of, or, to the Knowledge of the Company, any agent or other person associated with or acting on behalf of the Company or any subsidiary has, directly or indirectly: (a) used any funds of the Company or any subsidiary for unlawful contributions, unlawful gifts, unlawful entertainment or other unlawful expenses relating to political activity; (b) made any unlawful payment to foreign or domestic governmental officials or employees or to foreign or domestic political parties or campaigns from funds of the Company or any subsidiary; (c) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, rule or regulation issued by the U.S. Office of Foreign Assets Control (“OFAC”) of the U.S. Treasury Department, the Financial Action Task Force on Money Laundering (“FATF”)  or the U.S. Secretary of the Treasury under Section 311 or 312 of the USA PATRIOT Act or any similar Requirements of Law; (d) established or maintained any unlawful fund of monies or other assets of the Company or any subsidiary; (e) made any fraudulent entry on the books or records of the Company or any subsidiary; or (f) made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other unlawful payment to any person, private or public, regardless of form, whether in money, property or services, to obtain favorable treatment in securing business, to obtain special concessions for the Company or any subsidiary, to pay for favorable treatment for business secured or to pay for special concessions already obtained for the Company or any subsidiary.

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3.7 Capitalization.

On the Closing Date, after giving effect to the issuance of the Purchased Shares to each of the Purchasers in accordance with the terms hereof, the authorized Capital Stock shall consist of (a) 100,000,000 shares of Common, of which 49,289,672 will be outstanding and issued; and (b) 15,000,000 shares of Series A Preferred, of which 2,586,205 shares will be outstanding and issued.  Set forth on Schedule 3.7 of the Company Disclosure Schedule is a true and complete list of (i) the stockholders of record of the Company, and, opposite the name of each such stockholder of record, the amount of all Capital Stock owned by such stockholder and (ii) the holders of all outstanding options, warrants, conversion privileges, or other rights to purchase or otherwise acquire any authorized but unissued shares of Capital Stock or other proprietary interests (collectively, “Options”) and, opposite the name of each such holder, the amount of all Options of the Company owned by such holder.  The Company has reserved a sufficient number of shares of Series A Preferred for issuance of the Warrant Shares and a sufficient number of shares of Common for issuance upon conversion of the Purchased Shares and the Warrant Shares, plus such additional number of shares of Common as may be necessary upon the application of the anti-dilution provisions of the Series A Preferred set forth in the Certificate of Designation.  The Purchased Shares and the Warrant Shares are duly authorized, and, assuming the accuracy of the representations and warranties of the Purchasers set forth in Article IV and the Warrants, as applicable, when issued to the Purchasers pursuant to the terms of this Agreement and the Warrants, as applicable, will be validly issued, fully paid and nonassessable and, assuming the accuracy of the representations and warranties of the Purchasers in Sections 4.5, 4.6, and 4.7 hereof and the Warrants, as applicable, will be issued in compliance with (or pursuant to exemptions under) the registration and qualification requirements of all applicable securities laws.  The shares of Common issuable upon conversion of the Purchased Shares and the Warrant Shares are duly authorized and, when issued in compliance with the provisions of the Certificate of Incorporation, including the Certificate of Designation, will be validly issued, fully paid and nonassessable and, assuming the accuracy of the representations and warranties of the Purchasers in Sections 4.5, 4.6, and 4.7 hereof, will be issued in compliance with (or pursuant to exemptions under) the registration and qualification requirements of all applicable securities laws.  If at any time after the date hereof, the Company does not have a sufficient number of Common authorized and available for issuance upon conversion of the Purchased Shares and/or the Warrant Shares, the Company and the Purchasers will jointly cooperate with one another in obtaining the necessary stockholder approval to increase the number of authorized shares of Common at the Company’s next annual meeting of stockholders; provided, however, that if the Purchasers so request in writing, in lieu of waiting until the next annual meeting of stockholders, the Company shall call and hold a special meeting of its stockholders within sixty (60) days of the date such writing is given by the Purchasers for the sole purpose of increasing the number of authorized shares of Common (such meeting, a “Special Meeting”), and the Company and the Purchasers will jointly cooperate with one another in obtaining the necessary stockholder approval at such Special Meeting.  Notwithstanding the foregoing, the Company will not be required to hold a Special Meeting within 3 months of (i) the Company's most recent annual meeting of stockholders or (ii) the one-year anniversary of the Company's most recent annual meeting of stockholders.  The outstanding shares of Capital Stock of the Company are all duly authorized, validly issued, fully paid and nonassessable, and were issued in compliance with (or pursuant to exemptions under) the registration and qualification requirements of all applicable securities laws.  The Company does not own directly or indirectly, nor has it made any investment in, any Capital Stock of or ownership interest in any other Person.

3.8 No Default or Breach; Contractual Obligations.

The Company has not received notice of, and is not in default under, or with respect to, any Contractual Obligation in any respect, which, individually or together with all such defaults, would have a Material Adverse Effect.  All Contractual Obligations of the Company are valid, in full force and effect and binding upon the Company, and to the Knowledge of the Company, the other parties thereto except in each case, individually or in the aggregate, as would not have a Material Adverse Effect.  To the Knowledge of the Company, no other party to any such Contractual Obligation is in default thereunder, nor does any condition exist that with notice or lapse of time or both would constitute a default thereunder, except in each case, individually or in the aggregate, as would not have a Material Adverse Effect.

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3.9 Title to Real Property.

The Company has good, record and marketable title in fee simple to, or holds interests as lessee under leases in full force and effect in, all real property used in connection with its business or otherwise owned or leased by it, except for such defects in title as would not, individually or in the aggregate, have a Material Adverse Effect.

3.10 FIRPTA.

The Company is not a “foreign person” within the meaning of Section 1445 of the Code.

3.11 SEC Documents; Financial Statements.

The Common is registered pursuant to Section 12(b) of the Exchange Act.  During the two-year period preceding the Closing Date, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (the “SEC Documents”).  At the times of their respective filings, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents.  At the times of their respective filings, the SEC Documents did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The Company currently meets the “registrant eligibility” requirements set forth in the general instructions to Form S-3 to enable the registration of the Common.  As of their respective dates, the financial statements of the Company included in the SEC Documents (the “Financial Statements”) complied in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto.  Such financial statements have been prepared in accordance with GAAP (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

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3.12 Taxes.

(a) The Company has paid all federal, state, county, local, foreign and other taxes, including, without limitation, income taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, employment and payroll related taxes, property taxes and import duties, whether or not measured in whole or in part by net income (hereinafter, “Taxes” or, individually, a “Tax”) that have come due and are required to be paid by it through the date hereof, and all deficiencies or other additions to Tax, interest and penalties owed by it in connection with any such Taxes, and shall timely pay any Taxes including additions, interest and penalties, required to be paid by it on, before or after the date hereof;

(b) the Company has timely filed returns for Taxes that it is required to file on and through the date hereof and all information set forth in such Tax returns is correct and complete in all material respects;

(c) with respect to all Tax returns of the Company, (i) except as set forth in Schedule 3.12, there is no unassessed tax deficiency proposed or to the Knowledge of the Company threatened against the Company and (ii) except as set forth in Schedule 3.12, no audit is in progress and no extension of time is in force with respect to any date on which any return for Taxes was or is to be filed and no waiver or agreement is in force for the extension of time for the assessment or payment of any Tax;

(d) except as set forth in Schedule 3.12, the Company has neither agreed to nor is required to make any adjustments under Section 481(a) of the Code by reason of a change in accounting methods or otherwise; Schedule 3.12 sets forth the status of federal income tax audits and state, local and foreign tax audits of the Tax returns of the Company for each taxable year for which the statute of limitations has not expired; and

(e) all liabilities for Taxes of the Company attributable to periods prior to the date hereof have been adequately provided for in the Financial Statements and the liability of the Company for Taxes has not and will not increase at any time up to the Closing Date other than in the ordinary course of business.

3.13 Changes.

Except as disclosed in the SEC Documents, since December 31, 2009 there has not been:

(a) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not caused, in the aggregate, a Material Adverse Effect;

(b) any damage, destruction or loss, whether or not covered by insurance, causing a Material Adverse Effect;

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(c) any waiver or compromise by the Company of a valuable right or of a material debt owed, except in the ordinary course of business;

(d) any satisfaction or discharge of any Lien by the Company, except in the ordinary course of business;

(e) any material change or amendment to an Obligation, except in the ordinary course of business;

(f) receipt of notice that there has been a loss of, or material order cancellation by, any material customer of the Company or to the Knowledge of the Company any threatened termination, cancellation or limitation of, or any adverse modification or change in the business relationship of the Company, or the business of the Company, with any material customer or material supplier and, to the Knowledge of the Company, there exists no present condition or state of fact circumstances that would have a Material Adverse Effect or prevent the Company from conducting such business relationships or such business with any such material customer or material supplier in the same manner as heretofore conducted by the Company;

(g) any Lien, created by the Company, with respect to any of its material properties or assets, except Liens for taxes not yet due or payable or Liens arising in the ordinary course of business;

(h) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than advances made in the ordinary course of business;

(i) any resignation or termination of employment of any Key Employee;

(j) any declaration, setting aside or payment or other distribution in respect of any of the Company’s Capital Stock (except for the reservation of shares of Capital Stock pursuant to this Agreement and the Transaction Documents), or any direct or indirect redemption, purchase or other acquisition of any such stock by the Company; or

(k) any binding agreement or commitment by the Company to do any of the things described in this Section 3.13.

3.14 Investment Company.

The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

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3.15 Private Offering.

No form of general solicitation or general advertising was used by the Company or its representatives in connection with the offer or sales of the Purchased Shares.  Assuming the accuracy of the representations and warranties of the Purchasers, no registration of the Purchased Shares, pursuant to the provisions of the Act or any state securities or “blue sky” laws, will be required by the offer, sale or issuance of the Purchased Shares.

3.16 Employee Matters.

(a) Schedule 3.16 contains a list of all of the individuals who are in the employ of the Company (“Employees”), including the names, titles and compensation of each.  Schedule 3.16 lists (i) all increases in compensation of such Employees during the previous 12 months other than increases in salary in the ordinary course of business consistent with the Company’s policies and (ii) any increases in compensation of such Employees that have not yet been effected but which are valid Contractual Obligations of the Company.  To the Company’s Knowledge, no Employee is a party to or is otherwise bound by any agreement or arrangement (including, without limitation, any license, covenant or commitment of any nature), or subject to any Order, (i) that would conflict with such Employee’s obligation diligently to promote and further the interests of the Company or (ii) that would conflict with the Company’s business as now conducted.  The Company has complied with all Requirements of Law relating to the employment of labor, including provisions relating to wages, hours, equal opportunity, collective bargaining and payment of Social Security and other taxes, except in each case, individually or in the aggregate, as would not have a Material Adverse Effect.

(b) Schedule 3.16(b) contains a complete and accurate list of all written employment agreements for the Employees.  The employment agreements include, without limitation, employee leasing agreements, employee services agreements and non-competition agreements.

(c) No unwritten amendments have been made, whether by oral communication, pattern of conduct or otherwise, with respect to any Compensation Plans or employment agreements for the Employees.

(d) None of the Employees listed on Schedule 3.16(d) of the Company Disclosure Schedule (the “Key Employees”) has any plans to terminate his or her employment with the Company to the Company’s Knowledge, and the Company has no intention of terminating the employment of any Key Employee.

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3.17 Labor Relations.

(a) The Company is not engaged in any unfair labor practice under any Requirement of Law;

(b) there is (i) no grievance or arbitration proceeding arising out of or under collective bargaining agreements pending or, to the Knowledge of the Company, threatened against the Company, and (ii) no strike, labor dispute, slowdown or stoppage pending or, to the Knowledge of the Company, threatened against the Company;

(c) the Company is not a party to any collective bargaining agreement or contract;

(d) there is no union representation question existing with respect to the employees of the Company; and

(e) to the Knowledge of the Company, no union organizing activities are taking place with respect to the employees of the Company.

3.18 Employee Benefit Plans.

The Company has no actual or contingent, direct or indirect, liability in respect of any employee benefit plan or arrangement, including any plan subject to ERISA, other than to administer and make contributions under or pay benefits pursuant to the plans listed on Schedule 3.18 (collectively, the “Plans”).  All of the Plans are in compliance with all applicable Requirements of Law except to the extent that noncompliance with such Requirements of Law would not have a Material Adverse Effect.  No Plan (a) is subject to Title IV of ERISA, or is otherwise a Defined Benefit Plan, or is a multiple employer plan (within the meaning of Section 413(c) of the Code); or (b) provides for post-retirement welfare benefits except to the extent any such benefits are required by law or a “parachute payment” (within the meaning of Section 280G(b) of the Code) except as set forth on Schedule 3.18.  The execution and delivery of this Agreement and each of the other Transaction Documents, the purchase and sale of the Purchased Shares and the consummation of the transactions contemplated hereby and thereby will not result in any prohibited transaction by the Company within the meaning of Section 406 of ERISA or Section 4975 of the Code.  Schedule 3.18 also sets forth all Compensation Plans of the Company, other than compensation disclosed on Schedule 3.16.

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3.19 Title to Assets.

The Company owns and has good and valid title to all of its properties and assets used in its business and reflected as owned in the Financial Statements or so described in any Schedule hereto (collectively, the “Assets”), in each case free and clear of all Liens, except for (a) Liens specifically described in the notes to the Financial Statements, (b) Liens that would not, individually or in the aggregate, have a Material Adverse Effect, or (c) Liens for Taxes that have not yet become delinquent.

3.20 Liabilities.

The Company has no material liabilities other than (i) liabilities fully and adequately reflected or reserved against in the Financial Statements, (ii) liabilities not required by GAAP to be set forth in the Financial Statements and (iii) liabilities incurred since December 31, 2009 in the ordinary course of business and that will not have a Material Adverse Effect.

3.21 Intellectual Property.

(a) Except as provided on Schedule 3.21(a) or in the agreements listed in Schedule 3.21(c), the Company is the owner of or has the license or right to use, sell, license or dispose of all of the Intellectual Property Rights that are used in connection with the business of the Company as presently conducted, free and clear of all Liens.

(b) Schedule 3.21(b) sets forth all of the registered Copyrights, Patents, patent applications, registered Trademarks, and domain names owned or licenses by the Company that are material to the business of the Company as currently conducted.  None of the Intellectual Property Rights that are material to the business of the Company as currently conducted (the “Material Company IP”) is subject to any outstanding Order, and no Claim is pending or, to the Knowledge of the Company, threatened, which challenges the validity, enforceability, use or ownership of the item.

(c) Schedule 3.21(c) sets forth all licenses, sublicenses and other agreements under which the Company is either a licensor or licensee of any Material Company IP.  The Company has performed all material obligations imposed upon it thereunder, and the Company is not, nor to the Knowledge of the Company is any party thereto in breach of or default thereunder in any material respect, nor is there any event which with notice or lapse of time or both would constitute a default thereunder.  All of the licenses listed on Schedule 3.21(c) are valid, enforceable and in full force and effect with respect to the Company and, to the Knowledge of the Company, with respect to the other party or parties to such licenses, and will continue to be so on identical terms immediately following the Closing, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity related to enforceability (regardless of whether considered in a proceeding at law or in equity).

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(d) To the Knowledge of the Company none of the Material Company IP currently sold or licensed by the Company to any Person or used by or licensed to the Company infringes upon or otherwise violates any Intellectual Property Rights of others.

(e) No litigation is pending and no Claim has been made against the Company or, to the Knowledge of the Company, is threatened, contesting the right of the Company to sell or license the Material Company IP to any Person or use the Material Company IP presently sold or licensed to such Person or used by the Company.

(f) To the Knowledge of the Company, no Person is infringing upon or otherwise violating the Material Company IP.

(g) No former employer of any Employee, and no current or former client of any consultant of the Company, has made a claim, or to the Knowledge of the Company threatened to make a claim, against the Company that such Employee or such consultant is utilizing proprietary information of such former employer or client.

(h) To the Knowledge of the Company, no Employee is in material violation of any term of any employment agreement, patent or invention disclosure agreement or other contract or agreement relating to the relationship of such Employee with the Company.

(i) None of the Company’s Trade Secrets has been disclosed to any Person other than (i) employees, representatives and agents of the Company, (ii) as required pursuant to any filings with a Governmental Authority, (iii) when disclosure to a Person is pursuant to provisions in non-disclosure, consultant, license or other confidentiality agreements entered into by the Company or (iv) in connection with discussions with possible sources of financing for the Company subject to customary non-disclosure arrangements.

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3.22       Potential Conflicts of Interest.

Except as disclosed in the SEC Documents or as set forth on Schedule 3.22, during the two-year period preceding the Closing Date, no event has occurred that would be required to be reported by the Company pursuant to Item 404(d)(1) of Regulation S-K promulgated by the SEC.

3.23       Trade Relations.

Except as set forth on Schedule 3.23, there exists no actual or, to the Knowledge of the Company, threatened termination, cancellation or material limitation of, or any adverse modification or change in, the business relationship of the Company, or the business of the Company, with any customer or any group of customers whose purchases are individually or in the aggregate material to the Company, or with any material supplier of the Company, and, to the Knowledge of the Company, there exists no present condition or state of fact or circumstances that would have a Material Adverse Effect or prevent the Company from conducting such business relationships or such business with any such customer, such group of customers or such material supplier substantially in the same manner as heretofore conducted by the Company.

3.24       Outstanding Borrowing.

Schedule 3.24 sets forth (a) the amount of all Indebtedness with respect to the Company as of the date hereof, (b) the Liens that relate to such Indebtedness and that encumber the Assets and (c) the name of each lender thereof.

3.25       Insurance.

The Company maintains insurance with insurance companies in such amounts and covering such risks as are usually and customarily carried by Persons engaged in the business conducted by the Company.  Such policies and binders are valid and enforceable in accordance with their terms and are in full force and effect.  None of such policies will be affected by, or terminate or lapse by reason of, any transaction contemplated by this Agreement or any of the other Transaction Documents.

3.26       Minute Records.

All minutes and written consents since January 1, 2008 of the Board of Directors and stockholders of the Company have been provided or made available to each of the Purchasers.  The minutes and written consents contain a complete summary of all meetings of the Board of Directors and stockholders since January 1, 2008 and reflect all transactions referred to in such minutes and written consents accurately in all material respects.

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3.27       Environmental Matters.

The Company is and has been in compliance in all respects with all applicable Environmental Laws except for failures to be in compliance that would not, individually or in the aggregate, have a Material Adverse Effect.  There is no Claim pending or, to the Knowledge of the Company, threatened against the Company pursuant to Environmental Laws that would reasonably be expected to result in a fine, penalty or other obligation, cost or expense that would have a Material Adverse Effect; and, there are no past or present events, conditions, circumstances, activities, practices, incidents, agreements, actions or plans which may prevent compliance with, or which have given rise to or will give rise to liability under, Environmental Laws except in each case, individually or in the aggregate, as has not had or would not have a Material Adverse Effect.

3.28       Broker’s, Finder’s or Similar Fees.

Except as set forth on Schedule 3.28, there are no brokerage commissions, finder’s fees or similar fees or commissions payable by the Company in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company or any action taken by any such Person.

3.29       Accountants.

McGladrey & Pullen, LLP, whose report on the financial statements of the Company is filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, were, at the time such report was issued, independent registered public accountants as required by the Act.  Except as described in the SEC Documents and as preapproved in accordance with the requirements set forth in Section 10A of the Exchange Act, to the Knowledge of the Company, McGladrey & Pullen, LLP has not engaged in any non-audit services prohibited by subsection (g) of Section 10A of the Exchange Act on behalf of the Company.

3.30       Internal Controls.

The Company has established and maintains a system of internal accounting controls sufficient to provide reasonable assurances that:  (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

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3.31       Corporate Governance.

The Board of Directors meets the independence requirements of, and has established an audit committee that meets the independence requirements of, the rules and regulations of the SEC.  The Audit Committee has reviewed the adequacy of its charter within the past 12 months.

3.32       Disclosure Controls.

The Company has established and maintains disclosure controls and procedures (as such term is defined in Rules 13a-15 and 15d-15 under the Exchange Act).  Since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.  The Company is in compliance in all material respects with all provisions currently in effect and applicable to the Company of the Sarbanes-Oxley Act of 2002, and all rules and regulations promulgated thereunder or implementing the provisions thereof.

3.33       No Undisclosed Events or Circumstances.

Except as disclosed in the SEC Documents, since December 31, 2009, except for the consummation of the transactions contemplated herein, to the Company’s Knowledge, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, prospects, operations or financial condition, which, under any Requirement of Law, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

3.34       Application of Takeover Provisions.

The issuance of the Series A Preferred and Warrants pursuant hereto and the Purchasers’ ownership thereof is not prohibited by the business combination statutes of the state of Delaware or the Certificate of Incorporation.  The Company has not adopted any stockholder rights plan, “poison pill” or similar arrangement that would trigger any right, obligation or event as a result of the issuance of such securities and the Purchasers’ ownership of such securities and there are no similar anti-takeover provisions under the Certificate of Incorporation.  In addition, the Company covenants and agrees that, from and after the Closing Date, it will not adopt any such anti-takeover provisions, whether under its Certificate or otherwise, that would be applicable to the Purchasers or any of their respective Affiliates.

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3.35       No Stockholder Approval.

No approval of the stockholders of the Company is required under law or otherwise for the Company to issue and deliver to the Purchasers the shares of Series A Preferred and the Warrants as contemplated hereby.

3.36       Disclosure.

(a) Agreement and Other Documents.  This Agreement and the documents and certificates furnished to the Purchasers by the Company, including but not limited to the SEC Documents, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein or therein, in the light of the circumstances under which they were made, not misleading.

(b) Material Adverse Effects.  To the Knowledge of the Company, there is no fact which the Company has not disclosed to each of the Purchasers in writing which would have a Material Adverse Effect.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

Each Purchaser hereby represents and warrants to the Company as follows:

4.1 Existence and Power.

The Purchaser is duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has the power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Transaction Documents.

4.2 Authorization; No Contravention.

The execution, delivery and performance by the Purchaser of this Agreement and each of the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, including, without limitation, the purchase of the Purchased Shares, (a) have been duly authorized by all necessary action, (b) do not contravene the terms of the Purchaser’s organizational documents, or any amendment thereof, and (c) do not violate, conflict with or result in any breach or contravention of or the creation of any Lien under, any Contractual Obligation of the Purchaser, or any Orders of any Governmental Authority or Requirement of Law applicable to the Purchaser in each case, individually or in the aggregate, as would have a material adverse effect on (i) the ability of the Purchaser to perform its material obligations under this Agreement or any of the other Transaction Documents or (ii) the legality, validity or enforceability of this Agreement or any of the other Transaction Documents.

4.3 Governmental Authorization; Third Party Consents.

No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other person with respect to any Requirement of Law, and no lapse of a waiting period under any Requirement of Law, is necessary or required in connection with the execution, delivery or performance (including, without limitation, the purchase of the Purchased Shares) by, or enforcement against, the Purchaser of this Agreement and each of the other Transaction Documents to which the Purchaser is a party or the transactions contemplated hereby and thereby.

4.4 Binding Effect.

This Agreement and each of the other Transaction Documents to which the Purchaser is a party have been duly executed and delivered by the Purchaser and constitute the legal, valid and binding obligations of the Purchaser, enforceable against the Purchaser in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by equitable principles relating to enforceability (regardless of whether considered in a proceeding at law or in equity).

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4.5 Purchase for Own Account.

The Purchased Shares, Warrants and the shares of Capital Stock issuable upon conversion thereof that are being acquired by the Purchaser pursuant to this Agreement are being or will be acquired for its own account and with no intention of distributing or reselling such securities or any part thereof in any transaction that would be in violation of the securities laws of the United States of America, or any state, without prejudice, however, to the rights of the Purchaser at all times to sell or otherwise dispose of all or any part of such securities under an effective registration statement under the Act, or under an exemption from such registration available under the Act.  If the Purchaser should in the future decide to dispose of any of such securities, the Purchaser understands and agrees that it may do so only in compliance with the Act and applicable state securities laws, as then in effect.

4.6 Restricted Securities.

The Purchaser understands that the Purchased Shares will not be registered at the time of their issuance under the Act for the reason that the sale provided for in this Agreement is exempt pursuant to Section 4(2) of the Act and that the reliance of the Company on such exemption is predicated in part on the Purchaser’s representations set forth herein.  The Purchaser represents that it is experienced in evaluating companies such as the Company, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to suffer the total loss of its investment.  The Purchaser further represents that it has had the opportunity to ask questions of and receive answers from the Company concerning the terms and conditions of the offering and to obtain additional information to such Purchaser’s satisfaction.

4.7 Accredited Investor Status.

The Purchaser is an “accredited investor” as that term is defined by Rule 501 of Regulation D promulgated under the Act.

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4.8 Litigation.

There are no Claims pending or, to the knowledge of the Purchaser, threatened, at law, in equity, in arbitration or before any Governmental Authority against the Purchaser that, individually or in the aggregate, would have a material adverse effect on (i) the ability of the Purchaser to perform its material obligations under this Agreement or any of the other Transaction Documents or (ii) the legality, validity or enforceability of this Agreement or any of the other Transaction Documents.  No Order has been issued by any court or other Governmental Authority against the Purchaser purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any of the other Transaction Documents.

4.9 Broker’s, Finder’s or Similar Fees.

There are no brokerage commissions, finder’s fees or similar fees or commissions payable by the Purchaser, in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Purchaser or any action taken by the Purchaser.

4.10 Inquiries and Access; No Reliance.

The Company has provided the Purchaser the opportunity to ask questions of the Company and has provided full access to its facilities and personnel in response to any request therefor that the Purchaser and his or its purchaser representative(s), if any, have made, concerning the Company and its activities, and all other matters relating to the operations of the Company and the offering and sale of the Purchased Shares.  Such Purchaser acknowledges that he or it is not relying upon any other investor or any officer, director, stockholder, employee, agent, partner or Affiliate of any such investor in making his or its investment, or decision to invest, in the Company or in monitoring such investment.  In addition, the purchase of the Purchased Shares and the consummation of the transactions contemplated hereunder by the Purchaser are not done in reliance upon any warranty or representation by, or information from, the Company of any sort, oral or written, except the warranties and representations specifically set forth in this Agreement (including the schedules and exhibits hereto) and in any certificates required to be delivered to the Purchaser by the Company hereunder and thereunder.  Such purchase and consummation are instead done entirely on the basis of the Purchaser’s own investigation, analysis, judgment and assessment of the present and potential value and earning power of the Company as well as those representations and warranties by the Company specifically set forth in this Agreement (including the schedules and exhibits hereto) and in any certificates required to be delivered to the Purchaser by the Company hereunder and thereunder.  In no respect does this Section 4.10 limit the representations and warranties contained in Article III of this Agreement.

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ARTICLE V

CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO CLOSE

The obligation of each of the Purchasers (i) to purchase the Purchased Shares and Warrants pursuant to the terms of this Agreement and (ii) to perform any obligations hereunder with respect to the Closing shall be subject to the satisfaction as reasonably determined by, or waiver by, each of the Purchasers of the following conditions on or before the Closing Date.

5.1 Representations and Warranties.

The representations and warranties of the Company contained in Article III hereof shall be true and correct at and on the Closing Date as if made at and on such date.

5.2 Compliance with this Agreement.

The Company shall have performed and complied with all of its agreements and conditions set forth herein that are required to be performed or complied with by the Company on or before the Closing Date.

5.3 Secretary’s Certificate.

The Secretary of the Company shall deliver to each of the Purchasers a certificate certifying from the Company, in form and substance satisfactory to each of the Purchasers, dated the Closing Date and signed by the Secretary of the Company, certifying (a) that the attached copies of the Certificate of Incorporation, Certificate of Designation, the Bylaws and resolutions of the Board of Directors approving this Agreement and each of the other Transaction Documents to which the Company is a party and the transactions contemplated hereby and thereby, are all true, complete and correct and remain unamended and in full force and effect and (b) as to the incumbency and specimen signature of each officer of the Company executing this Agreement, each other Transaction Document and any other document delivered in connection herewith on behalf of the Company.

5.4 Filing of the Certificate of Designation.

The Certificate of Designation shall have been duly filed by the Company with and accepted by the Delaware Secretary of State and be in full force and effect.

5.5 Registration Rights Agreement.

As of the Closing Date, the Company and the Purchasers shall have duly executed and delivered the Registration Rights Agreement.

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5.6 Consents and Approvals.

Except for the Securities Filings or with respect to the matters set forth on Schedule 3.3 of the Company Disclosure Schedule, all consents, exemptions, authorizations, or other action by, or notices to, or filings with, Governmental Authorities and other Persons required in respect of all Requirements of Law and with respect to those Contractual Obligations of the Company that are necessary in connection with the execution, delivery or performance by, or enforcement against, the Company of this Agreement and each of the other Transaction Documents shall have been obtained and be in full force and effect, and each of the Purchasers shall have been furnished with appropriate evidence thereof.

5.7 No Application of Anti-Takeover Provisions.

The Company’s Board of Directors, to the extent permissible under Delaware law, shall have taken all necessary action such that any provisions contained in the Certificate of Incorporation or Delaware law that may apply to business combinations or other transactions with affiliated stockholders or impact the voting rights of affiliated stockholders shall not apply to the Purchasers or their Affiliates, including but not limited to Section 203 of the Delaware General Corporation Law.  The Company shall not have adopted any stockholder rights plan, “poison pill” or similar arrangement, or any anti-takeover provisions under its charter documents, that would trigger any right, obligation or event as a result of the issuance of the Series A Preferred or Warrants pursuant hereto to the Purchasers or the Purchasers’ ownership of such securities, or the accumulation of Company securities acquired in the market by the Purchasers or their respective Affiliates.

5.8 No Material Judgment or Order.

There shall not be on the Closing Date any Order of a court of competent jurisdiction or any ruling of any Governmental Authority or any condition imposed under any Requirement of Law that, in the reasonable judgment of the Purchasers, would prohibit the purchase of the Purchased Shares or subject any of the Purchasers to any penalty or other onerous condition under or pursuant to any Requirement of Law if the Purchased Shares and Warrants were to be purchased hereunder.

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5.9 No Litigation.

No action, suit proceeding, claim or dispute shall have been brought or otherwise arisen at law, in equity, in arbitration or before any Governmental Authority against the Company that, if adversely determined, would have, individually or in the aggregate, a material adverse effect on (i) the ability of the Company to perform its material obligations under this Agreement or any of the other Transaction Documents or (ii) the legality, validity or enforceability of this Agreement or any of the other Transaction Documents.

5.10 Opinion of Company Counsel.

Purchasers and the Company shall have received from Paul, Hastings, Janofsky & Walker LLP, counsel to the Company, an opinion, dated as of the Closing, in the form attached hereto as Exhibit F.

5.11 Board of Directors.

Immediately after the Closing, the authorized number of directors of the Company shall be five, who shall be (a) Rod Markin, (b) Antonius Schuh, (c) Craig Tuttle, (d) Robert Patzig and (e) Doit L. Koppler.

5.12 Preemptive Rights.

All stockholders of the Company having any preemptive, first refusal or other rights with respect to the issuance of the Purchased Shares and Warrants shall have irrevocably waived the same in writing.

5.13 No Suspension of Trading.

Trading in the Common shall not have been suspended by the SEC or otherwise.

ARTICLE VI

CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO CLOSE

The obligation of the Company to issue and sell the Purchased Shares and Warrants and the obligation of the Company to perform its other obligations hereunder shall be subject to the satisfaction as reasonably determined by, or written waiver by, the Company of the following conditions on or before the Closing Date.

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6.1 Representations and Warranties.

The representation and warranties of each of the Purchasers contained in Article IV hereof shall be true and correct at and on the Closing Date as if made at and on such date.

6.2 Compliance with this Agreement.

Each Purchaser shall have performed and complied with all of the agreements and conditions set forth herein that are required to be performed or complied with by such Purchaser on or before the Closing Date.

6.3 Registration Rights Agreement.

Each Purchaser shall have duly executed and delivered the Registration Rights Agreement.

6.4 No Material Judgment or Order.

There shall not be on the Closing Date any Order of a court of competent jurisdiction or any ruling of any Governmental Authority or any condition imposed under any Requirement of Law that, in the reasonable judgment of the Company, would prohibit the sale of the Purchased Shares or Warrants or subject the Company to any penalty or other onerous condition under or pursuant to any Requirement of Law if the Purchased Shares or Warrants were to be purchased hereunder.

6.5 No Litigation.

No action, suit proceeding, claim or dispute shall have been brought or otherwise arisen at law, in equity, in arbitration or before any Governmental Authority against the Purchasers that, if adversely determined, would have, individually or in the aggregate, a material adverse effect on (i) the ability of the Purchasers to perform their respective material obligations under this Agreement or any of the other Transaction Documents or (ii) the legality, validity or enforceability of this Agreement or any of the other Transaction Documents.

6.6 Consents and Approvals.

Except for the Securities Filings, all consents, exemptions, authorizations, or other action by, or notices to, or filings with, Governmental Authorities and other Persons required in respect of all Requirements of Law and with respect to those Contractual Obligations of the Purchasers that are necessary in connection with the execution, delivery or performance by, or enforcement against, the Purchasers of this Agreement shall have been obtained and be in full force and effect, and the Company shall have been furnished with appropriate evidence thereof.

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ARTICLE VII

MISCELLANEOUS

7.1           Survival of Representations and Warranties.

All of the representations and warranties made herein shall survive the execution and delivery of this Agreement and expire twenty-four (24) months after the Closing Date, except for (a) Sections 3.1, 3.2, 3.4, 3.7, 4.1, 4.2, 4.4, and 4.5 which representations and warranties shall survive indefinitely, and (b) Section 3.12, which shall survive until the later to occur of (i) the lapse of the statue of limitations with respect to the assessment of any Tax to which such representation and warranty related (including any extensions or waivers thereof) and (ii) 60 days after the final administrative or judicial determination of the Taxes to which such representation and warranty relates, and no Claim with respect to Section 3.12 may be asserted thereafter with the exception of Claims arising out of any fact, circumstance, action or proceeding to which the party asserting such Claim shall have given notice to the other parties to this Agreement prior to the termination of such period of reasonable belief that a tax liability will subsequently arise therefrom.

7.2           Notices.

All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery:

(a) if to the Company:

Transgenomic, Inc.

12325 Emmet Street

Omaha, Nebraska 68164

Attention: Craig J. Tuttle

Facsimile:  402-452-5461

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with a copy to:

Paul, Hastings, Janofsky & Walker LLP

4747 Executive Drive, 12th Floor

San Diego, CA 92121

Attention:  Carl R. Sanchez

Facsimile:  858-458-3130

and

(b) if to the Purchasers:

c/o Third Security, LLC

1881 Grove Avenue

Radford, Virginia 24141

Attention: Tad Fisher

Facsimile: 540-633-7939

with a copy to:

Troutman Sanders LLP

Troutman Sanders Building

1001 Haxall Point

Richmond, Virginia 23219

Attention: John Owen Gwathmey

Facsimile: 804-698-5174

All such notices and communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied.

7.3         Successors and Assigns; Third Party Beneficiaries.

This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto.  Subject to applicable securities laws the Purchasers may assign any of their rights under any of the Transaction Documents to any of their Affiliates.  The Company may not assign any of their rights under this Agreement without the written consent of the Purchasers.  No person other than the parties hereto and their successors are intended to be beneficiaries of the provisions of this Agreement.

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7.4         Amendment and Waiver.

(a) No failure or delay on the part of the Company or Purchasers in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or the Purchasers at law, in equity or otherwise.

(b) Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by the Company or the Purchasers from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by the Company and the Purchasers, and (ii) only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other further notice or demand in similar or other circumstances.

7.5         Counterparts; Facsimile.

This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement, and may be delivered to the other parties hereto by facsimile or similar electronic means.

7.6         Headings.

The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

7.7         Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof.

7.8         Severability.

If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provision held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

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7.9         Rules of Construction.

Unless the context otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement.

7.10       Entire Agreement.

This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.  There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein or therein.  This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents supersede all prior agreements and understandings between the parties with respect to such subject matter.

7.11       Publicity; Confidentiality.

None of the parties hereto shall issue a publicity release or public announcement or otherwise make any disclosure concerning this Agreement or the transactions contemplated hereby or the Purchasers without prior approval by the other parties hereto; provided, however, that nothing in this Agreement shall restrict the Purchasers or the Company from disclosing information (a) that is already publicly available, (b) that was known to the Purchasers on a non-confidential basis prior to its disclosure by the Company, (c) that may be required or appropriate in response to any summons or subpoena or in connection with any litigation, provided that the parties will use reasonable efforts to notify the other party in advance of such disclosure so as to permit such party to seek a protective order or otherwise contest such disclosure, and such other party will use reasonable efforts to cooperate, at the expense of the party trying to prevent such disclosure, with such party in pursuing any such protective order, (d) to the Purchaser’s or the Company’s officers, directors, agents, employees, members, partners, controlling persons, auditors or counsel, (e) to Persons from whom releases, consents or approvals are required, or to whom notice is required to be provided, pursuant to the transactions contemplated by the Transaction Documents or (f) to the prospective transferee in connection with any contemplated transfer of any of the Purchased Shares or Warrants.  If any announcement is required by law or the rules of any securities exchange or market on which shares of Common are traded to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other party and shall give the other party reasonable opportunity to comment thereon.

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7.12       Further Assurances.

Each of the parties shall execute such documents and perform such further acts, at the expense of the requesting party, (including, without limitation, obtaining any consents, exemptions, authorizations or other action by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.

7.13 Expenses.  Each party hereto shall be responsible for its own fees and expenses associated with this Agreement and the closing of the transactions contemplated hereby; provided, however, that at the Closing the Company shall reimburse the Purchasers for all reasonable documented fees and expenses (including attorney’s fees) incurred by the Purchasers in connection with the transactions contemplated by this Agreement, up to a maximum of $75,000.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized on the date first above written.

COMPANY:	TRANSGENOMIC, INC.
	By:	/s/ Craig J. Tuttle
		Craig J. Tuttle
		Chief Executive Officer and President
PURCHASERS:	THIRD SECURITY SENIOR STAFF 2008 LLC
	By:	/s/ Randal J. Kirk
		Randal J. Kirk
		Manager
	THIRD SECURITY STAFF 2010 LLC
	By:	/s/ Randal J. Kirk
		Randal J. Kirk
		Manager
	THIRD SECURITY INCENTIVE 2010 LLC
	By:	/s/ Randal J. Kirk
		Randal J. Kirk
		Manager

[Signature Page to Series A Convertible Preferred Stock Purchase Agreement]

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EX-4.2

Exhibit 4.2

NONE OF THIS WARRANT, THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK TO BE ISSUED UPON EXERCISE HEREOF OR THE SHARES OF COMMON STOCK TO BE ISSUED UPON CONVERSION OF THE SERIES A CONVERTIBLE PREFERRED STOCK HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR “BLUE SKY” LAWS, AND THE HOLDER OF THIS WARRANT REPRESENTS AND WARRANTS THAT THIS WARRANT HAS BEEN, AND THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK TO BE ISSUED UPON EXERCISE HEREOF WILL BE, ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RELEASE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF.  NO SALE, ASSIGNMENT, TRANSFER, GIFT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THIS WARRANT OR THE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK TO BE ISSUED UPON EXERCISE HEREOF MAY BE MADE EXCEPT AS SPECIFICALLY SET FORTH IN THIS WARRANT.

WARRANT TO PURCHASE SHARES

OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

TRANSGENOMIC, INC.

Warrant No. A-[__]

Issue Date: December 29, 2010

THIS IS TO CERTIFY THAT, FOR VALUE RECEIVED, [_________](“Holder”) is entitled, subject to the terms set forth below, to purchase from Transgenomic, Inc., a Delaware corporation (the “Company”), [____________] shares of the Company’s Series A Convertible Preferred Stock, $0.01 par value per share (the “Series A Preferred”), subject to adjustment as provided in Section 9 (the “Warrant Shares”), at the Purchase Price set forth in Section 3.

1.           Issuance.  This Warrant is issued to Holder by the Company pursuant to that certain Series A Convertible Preferred Stock Purchase Agreement, dated December 29, 2010 (the “Purchase Agreement”).

2.           Covenants as to Warrant Shares.  The Company has reserved, and at all times during the period this Warrant is outstanding shall reserve, a sufficient number of shares of Series A Preferred for issuance upon the exercise of this Warrant.  The Company has reserved, and at all times during the period this Warrant is outstanding shall reserve, a sufficient number of shares of its Common Stock, $0.01 par value per share (the “Common Stock”), for issuance upon conversion of the Warrant Shares (the “Underlying Common”).  The Warrant Shares are duly authorized, and, when issued to the Holder pursuant to the terms of this Warrant and the Purchase Agreement, will be validly issued, fully paid and nonassessable and, assuming the accuracy of the representations and warranties of Holder in the Purchase Agreement, will be issued in compliance with the registration and qualification requirements of all applicable securities laws.  The shares of Underlying Common are duly authorized and, when issued in compliance with the provisions of the Company’s Certificate of Incorporation (the “Certificate”), will be validly issued, fully paid and nonassessable and will be issued in compliance with the registration and qualification requirements of all applicable securities laws.

3.           Purchase Price; Number of Shares; Notice of “Triggering Event.”  Subject to the terms and conditions hereinafter set forth, the Holder is entitled, at any time from the date hereof to the Expiration Date (as defined in Section 8), upon surrender of this Warrant, the delivery of the Exercise Notice attached hereto as Attachment I (the “Exercise Notice”), fully completed and duly executed, and the delivery of an agreement to be bound by the terms and conditions of that certain Registration Rights Agreement, dated as of December 29, 2010, among the Company, Holder and certain of the Company’s stockholders (as such agreement may be amended from time to time pursuant to the terms thereof) (the “Registration Rights Agreement”), each at the office of the Company, or such other address as the Company shall notify the Holder of in writing, to purchase from the Company the Warrant Shares (as adjusted pursuant to Section 9) at a fixed price per share of $2.32 (the “Purchase Price”).  Until such time as this Warrant is exercised in full or expires pursuant to the terms hereof, the Purchase Price and the number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment pursuant to Section 9.  Notwithstanding anything to the contrary set forth in this Warrant, unless waived in writing by the Holder, the Company shall provide written notice to Holder if any Triggering Event (defined below) occurs.  A “Triggering Event” shall be deemed to have occurred if:  (i) the Company’s Board of Directors (the “Board”) adopts a resolution approving a plan of merger or share exchange or a transaction involving the sale of all or substantially all of the Company’s assets (each, an “Extraordinary Transaction”) and proposes to submit such Extraordinary Transaction to the Company’s stockholders for approval, (ii) any tender offer or exchange offer (whether by the Company or another person or entity) is commenced pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iii) there is a Change in Control (as defined in the Certificate of Designation with respect to the Series A Preferred).

4.           Payment of Purchase Price.

(a)           Subject to the conditions set forth in Section 3, this Warrant may be exercised in full or in part by the Holder by payment in cash, by wire transfer or by certified or official bank check payable to the order of the Company, for the purchase price of the Warrant Shares to be purchased hereunder.

(b)           The Holder may elect to receive, without the payment by the Holder of any additional consideration, Warrant Shares equal to the value of this Warrant or any portion hereof by the surrender of this Warrant or such portion to the Company, with the redemption notice attached hereto as Attachment II (the “Redemption Notice”) duly executed, at the office of the Company.  Thereupon, the Company shall issue to the Holder such number of fully paid and nonassessable Warrant Shares as is computed using the following formula:

X = Y (A-B)

     A

2

where     X = the number of Warrant Shares to be issued to the Holder pursuant to this Section 4(b).

Y = the number of shares covered by this Warrant in respect of which the net issue election is made pursuant to this Section 4(b).

A = the fair market value (“FMV”) of one share of Series A Preferred on an as converted to Common Stock basis, as determined below, at the time the net issue election is made pursuant to this Section 4(b).

B = the Purchase Price in effect under this Warrant at the time the net issue election is made pursuant to this Section 4(b).

For the purposes of this Section 4(b), FMV shall be determined at the time of exercise and shall mean the fair market value of the shares of Common Stock determined as follows:

(x)           if the Common Stock is traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the ten (10) trading day period ending three (3) days prior to the date of determination;

(y)           if the Common Stock is actively traded over-the-counter, the value shall be deemed to be the average of the closing bid over the ten (10) trading day period ending three (3) days prior to the date of determination; or

(z)           if there is no active public market for the Common Stock, the value shall be the fair market value thereof, as determined in good faith by the Board.

The Board shall promptly respond in writing to a reasonable inquiry by the Holder as to the FMV of the Series A Preferred for purposes of this Section 4(b).

5.           Partial Exercise.  For any partial exercise or redemption pursuant to Section 4(a) or 4(b) hereof, the Holder shall designate in the Exercise Notice or Redemption Notice (as the case may be) the number of Warrant Shares that it wishes to purchase or the aggregate number of underlying Warrant Shares represented by the portion of this Warrant it wishes to redeem (as the case may be).  On any such partial exercise or redemption, the Company at its expense shall forthwith issue and deliver to the Holder a new warrant of like tenor, in the name of the Holder, which shall be exercisable for such number of Warrant Shares which have not been purchased upon such exercise or redemption.

6.           Issuance; Issuance Date.  As soon as practicable after the exercise of this Warrant, and in any event within five (5) business days thereafter, the Company at its expense will cause to be issued in the name of and delivered to the Holder, a certificate or certificates for the number of Warrant Shares purchased or acquired by the Holder as a result of such exercise, rounded down to the nearest whole number.  The person or entity or persons or entites in whose name or names any certificate representing shares of Series A Preferred is issued hereunder shall be deemed to have become the holder of record of the shares represented thereby at the close of business on the date this Warrant is exercised with respect to such shares, whether or not the transfer books of the Company shall be closed.

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7.           Warrant Shares.  The Holder understands and agrees that all certificates evidencing the shares to be issued to the Holder may bear the following legend:

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

8.           Expiration Date; Automatic Exercise.  This Warrant shall expire at the close of business on December 28, 2015 (the “Expiration Date”) and shall be void thereafter; provided, however, that in the event that, upon the Expiration Date, the FMV of one Warrant Share (or other security issuable upon the exchange hereof) as determined in accordance with Section 4(b) is greater than the Purchase Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exchanged pursuant to Section 4(b) as to all Warrant Shares (or such other securities) for which it shall not previously have been exchanged or converted into Series A Preferred (or if not then outstanding, into such other class and series of securities into which the Warrant Shares are then convertible), and the Company shall promptly deliver a certificate representing such Warrant Shares (or such other securities) issued upon such conversion to the Holder.

9.           Adjustment of Number of Warrant Shares Issuable Pursuant to this Warrant.

(a)           Adjustment for Stock Splits and Combinations.  If the Company shall at any time or from time to time after the date that the first share of Series A Preferred is issued (the “Original Issue Date”) effect a subdivision of the outstanding Series A Preferred, the number of Warrant Shares issuable hereunder shall be proportionately increased and the Purchase Price shall be proportionately decreased.  Conversely, if the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Series A Preferred into a smaller number of shares, the number of Warrant Shares issuable hereunder shall be proportionately decreased and the Purchase Price shall be proportionately increased.  Any adjustment under this Section 9(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(b)           Adjustment for Common Stock Dividends and Distributions.  If the Company at any time or from time to time after the Original Issue Date makes, or fixes a record date for the determination of holders of Series A Preferred entitled to receive, a dividend or other distribution payable in additional shares of Series A Preferred, in each such event the number of Warrant Shares issuable hereunder shall be proportionately increased and the Purchase Price shall be proportionately decreased, as of the close of business on such record date; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the number of Warrant Shares issuable hereunder and the Purchase Price shall be recomputed accordingly as of the close of business on such record date and thereafter shall be adjusted pursuant to this Section 9(b) to reflect the actual payment of such dividend or distribution.

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(c)           Adjustment for Reclassification, Exchange and Substitution.  If at any time or from time to time after the Original Issue Date, the Series A Preferred is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than as a result of a subdivision or combination of shares or stock dividend or a reorganization, merger or consolidation in which the Company is the continuing entity and which does not result in any change in the Series A Preferred) in any such event this Warrant shall be exercisable for the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the maximum number of shares of Series A Preferred for which this Warrant could have been exercised immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided herein or with respect to such other securities or property by the terms thereof.

(d)           Reorganizations, Mergers, Consolidations or Sales of Assets.  If at any time or from time to time after the Original Issue Date, there is a Change in Control transaction or other capital reorganization of the Series A Preferred (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares), as a part of such Change in Control transaction or capital reorganization, this Warrant shall be deemed exercised and provision shall be made so that the Holder shall thereafter be entitled to receive the number of shares of stock or other securities or property to which a holder of the number of shares of Series A Preferred deliverable upon exercise of this Warrant would have been entitled on such Change in Control transaction or capital reorganization, subject to adjustment in respect of such stock or securities by the terms thereof.  In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 9 with respect to the rights of the Holder after the Change in Control transaction or capital reorganization to the effect that the provisions of this Section 9 shall be applicable after that event and be as nearly equivalent as practicable.

(e)           Adjustments to Series A Conversion Price. The number of shares of Common Stock issuable upon conversion of the Warrant Shares, shall be subject to adjustment from time to time in the manner set forth in the Certificate.  For so long as this Warrant is outstanding and exercisable for shares of Series A Preferred, the Company shall deliver to the Holder each certificate of adjustment sent to the holders of the Company’s Series A Preferred pursuant to Section 4(h) of the Certificate of Designation with respect to the Series A Preferred.

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10.         Conversion or Redemption of Common Stock.  Should all of the Company’s Common Stock be, or if outstanding would be, at any time prior to the expiration of this Warrant or any portion thereof, redeemed or converted into another class shares of the Company’s stock, or if there shall be any reclassification, capital reorganization or change of the Common Stock, or any consolidation of the Company with, or merger of the Company into, another corporation or other business organization (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the outstanding Common Stock), or any sale or conveyance to another corporation or other business organization of all or substantially all of the assets of the Company or any of its subsidiaries, taken as a whole, then the Company shall mail or cause to be mailed to the Holder a notice specifying the date on which any such record is to be taken for the purpose of such event and stating the material provisions of such event, including the date upon which such event shall be consummated.  Such notice shall be mailed at least ten (10) days prior to the earlier of the record date or the date specified in such notice on which any such action is to be taken.

11.         Fractional Shares.  No fractional shares shall be issuable upon exercise or conversion of this Warrant and the number of shares to be issued shall be rounded down to the nearest whole share.  If a fractional share interest arises upon any exercise or conversion of this Warrant, the Company shall eliminate such fractional share interest by paying the Holder an amount computed by multiplying the fractional interest by the FMV of a full Warrant Share.

12.         Notices of Record Date, Etc.  In the event of:  (1) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive a dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property; (2) any reclassification or recapitalization of capital stock; or (3) any voluntary or involuntary dissolution, liquidation or winding-up of the Company, then and in each such event the Company will mail or cause to be mailed to the Holder a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character of such dividend, distribution or right, or (B) the date on which any such reclassification, reorganization, consolidation, merger, sale or conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders of record shall be entitled to exchange their shares for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, consolidation, merger, dissolution, liquidation or winding-up, and (C) the amount and character of any stock or other securities, or rights or options with respect thereto, proposed to be issued or granted, the date of the proposed issue or grant and the person or class of persons to whom such proposed issue or grant is to be offered or made.  Such notice shall be mailed at least ten (10) days prior to the date specified in such notice on which any such action is to be taken.

13.         No Stockholder Rights.  This Warrant in and of itself shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

14.         Amendment.  The terms of this Warrant may be amended, modified or waived only with the written consent of the Company and the Holder hereof.

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15.         Transfers, Substitute Warrant.

(a)           This Warrant may only be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of (each, a “Transfer”) by the Holder (a) pursuant to an effective registration statement under the Securities Act or (b) to an Affiliate (as defined below) of the Holder, provided that the Holder or the Holder’s Affiliate delivers to the Company an opinion of qualified counsel in form and substance satisfactory to the Company setting forth that such Transfer is exempt from the registration requirements of the Securities Act and does not otherwise violate federal or state securities laws (the “Opinion”) and the Holder’s Affiliate delivers a representation letter (the “Representation Letter”) in form and substance satisfactory to the Company.  In furtherance of the foregoing, in order to affect the Transfer, the Holder shall deliver to the Company this Warrant, the assignment form attached hereto as Attachment III properly endorsed, and the Opinion and the Representation Letter. Upon delivery of the foregoing, for Transfer of this Warrant in its entirety by the Holder, the Company shall issue a new warrant of the same denomination to the assignee.  Upon delivery of the foregoing, for Transfer with respect to a portion of the Warrant Shares purchasable hereunder, the Company shall issue a new warrant to the assignee, in such denomination as shall be requested by the Holder hereof, and shall issue to the Holder a new warrant covering the number of shares in respect of which this Warrant shall not have been Transferred.

(b)           In case this Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue a new warrant of like tenor and denomination and deliver the same (i) in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost, stolen or destroyed, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant (including a reasonably detailed affidavit with respect to the circumstances of any loss, theft or destruction) and of indemnity reasonably satisfactory to the Company.

16.         Governing Law.  The provisions and terms of this Warrant shall be governed by and construed in accordance with the laws of the State of Delaware.

17.         Successors and Assigns.  This Warrant shall be binding upon and inure to the benefit of the Company’s successors and assigns and shall be binding upon and inure to the benefit of the Holder’s successors, legal representatives and permitted assigns.

18.         Business Days.  If the last or appointed day for the taking of any action required or the expiration of any right granted herein shall be a Saturday or Sunday or a federal holiday, then such action may be taken or right may be exercised on the next succeeding day which is not a Saturday or Sunday or such a federal holiday.

19.         Notices.  All notices, requests, claims, demands, disclosures and other communications required or permitted by this Warrant shall be in writing and shall be deemed to have been given at the earlier of the date (a) when delivered personally or by messenger, or (b) upon confirmed delivery as evidenced by the delivery receipt of an nationally recognized overnight delivery service or registered or certified United States mail, postage prepaid, return receipt requested, in all cases addressed to the person or entity for whom it is intended at his address set forth below or to such other address as a party shall have designated by notice in writing to the other party in the manner provided by this Section 19:

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If to Holder:

c/o Third Security, LLC

1881 Grove Avenue

Radford, VA 24141

Attention: Tad Fisher

Facsimile: 540-633-7939

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

Troutman Sanders LLP

Troutman Sanders Building

1001 Haxall Point

Richmond, Virginia 23219

Attention: John Owen Gwathmey

Facsimile: 804-698-5174

If to Company:

Transgenomic, Inc.

12325 Emmet Street

Omaha, Nebraska 68164

Attention: Craig J. Tuttle

Facsimile:  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

Attention:  Carl R. Sanchez, Esq.

Facsimile:  (858) 458-3005

23.           Counterparts.   This Warrant may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

{Signature Page Follows}

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Dated:  December 29, 2010

TRANSGENOMIC, INC.
By:
	Craig J. Tuttle
	Chief Executive Officer and President

{Signature Page To Warrant}

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Attachment I

[FORM OF EXERCISE NOTICE]

(TO BE SIGNED ONLY ON EXERCISE OF WARRANT)

To:  Transgenomic, Inc. Date:___________________

The undersigned, the Holder of the within Warrant, hereby irrevocably elects to exercise this Warrant for, and to purchase and subscribe for, _________ shares of Series A Convertible Preferred Stock of Transgenomic, Inc. (the “Company”) covered by this Warrant.  The undersigned herewith makes payment of $_______ thereof.  The certificate(s) for such shares (the “Shares”) shall be issued in the name of the undersigned as is specified below:

(Name)

(Address)

The undersigned represents that: (i) the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares; (ii) the undersigned is aware of the Company’s business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision regarding its investment in the Company; (iii) the undersigned is experienced in making investments of this type and has such knowledge and background in financial and business matters that the undersigned is capable of evaluating the merits and risks of this investment and protecting the undersigned’s own interests; (iv) the undersigned understands that the Shares issuable upon exercise of this Warrant have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), by reason of a specific exemption from the registration provisions of the Act, which exemption depends upon, among other things, the bona fide nature of the investment intent as expressed herein, and, because such securities have not been registered under the Securities Act, they must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available; (v) the undersigned is aware that the aforesaid Shares may not be sold pursuant to Rule 144 adopted under the Securities Act unless certain conditions are met and until the undersigned has held the shares for the number of years prescribed by Rule 144, that among the conditions for use of Rule 144 is the availability of current information to the public about the Company and the Company has not made such information available and has no present plans to do so; and (vi) the undersigned agrees not to make any disposition of all or any part of the aforesaid Shares unless and until there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with said registration statement, or the undersigned has provided the Company with an opinion of counsel satisfactory to the Company, stating that such registration is not required.

Signature (must conform to name of Holder as

specified on the face of the Warrant)

Fed Tax ID # __________________________

[Signature Pate to Exercise Notice]

Attachment II

[FORM OF REDEMPTION NOTICE]

(TO BE SIGNED ONLY ON REDEMPTION OF WARRANT)

TO:  Transgenomic, Inc.

The undersigned, the Holder of the within Warrant, hereby irrevocably elects, in accordance with and subject to the provisions of Section 4(b) of such Warrant, to redeem, and to cause the Company to redeem for shares of Series A Convertible Preferred Stock of Transgenomic, Inc. (“Series A Preferred”), such Warrant with respect to that portion of such Warrant representing __________ * underlying shares of Series A Preferred.The undersigned requests that the certificates for the shares of Series A Preferred issuable upon redemption be issued in the name of, and delivered to ___________________________________,

whose address is ____________________________________________.

(Signature must conform in all

respects to name of Holder as

specified on the face of the

Warrant)

(Address)

Dated:

*Insert here the number of underlying shares with respect to which the Warrant is being redeemed.

Attachment III

[FORM OF ASSIGNMENT]

(TO BE SIGNED ONLY ON TRANSFER OF WARRANT)

For value received the undersigned hereby desires to sell, assign and transfer unto

_________________________________________________________________

_________________________________________________________________

Please print or typewrite name and address of Assignee and include Fed Tax ID # of Assignee

_________________________________________________________________

the within Warrant, and does hereby irrevocably constitute and appoint ______________________________ its attorney to transfer the within Warrant on the books of the within named Company with full power of substitution on the premises.

Dated:_________________________

(Signature must conform to name of Holder as

specified on the face of the Warrant)

Signed in the Presence of:

EX-4.3

Exhibit 4.3

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made as of this 29th day of December, 2010 among Transgenomic, Inc., a Delaware corporation (the “Company”), Third Security Senior Staff 2008 LLC, a Virginia limited liability company (“Senior Staff LLC”), Third Security Staff 2010 LLC, a Virginia limited liability company (“Staff LLC”), and Third Security Incentive 2010 LLC, a Virginia limited liability company (“Incentive LLC” and, together with Senior Staff LLC and Staff LLC, the “Investors”).

WHEREAS, the Investors and the Company are parties to the Series A Convertible Preferred Stock Purchase Agreement, dated as of December 29, 2010 (the “Purchase Agreement”), pursuant to which the Investors purchased from the Company shares of Series A  Convertible Preferred Stock of the Company (the “Series A Preferred”); and

WHEREAS, pursuant to the terms of the Purchase Agreement, in order to induce the Investors to invest funds in the Company, the Company has agreed to enter into this Agreement concurrently with the issuance of the Series A Preferred; and

WHEREAS, the Investors and the Company agree to enter into this Agreement to set forth the circumstances pursuant to which the Holders (as herein defined) can cause the Company to register shares of the Common (as herein defined) issuable to the Holders as set forth herein.

NOW, THEREFORE, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1. Definitions.

In addition to the terms defined elsewhere herein, when used herein, the following terms shall have the meaning indicated hereunder for purposes of this Agreement:

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute and the rules and regulations thereunder, as the same shall be in effect from time to time.

“Act” means the Securities Act of 1933, as amended, or any similar successor federal statute and the rules and regulations thereunder, as the same shall be in effect from time to time.

“Affiliate” shall mean, with respect to any Person, any other Person who controls, is controlled by or is under common control with such Person.

“Agreement” means this Agreement as the same may be amended, supplemented or modified in accordance with the terms hereof.

“Board” means the Board of Directors of the Company.

“Common” means Common Stock, $0.01 par value per share, of the Company.

“Company” has the meaning assigned to such term in the recitals to this Agreement.

“Form S-3” means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC in lieu of Form S-3 that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.

“Holder” means any Person who owns of record Registrable Securities as of the date hereof (for and so long as such Person continues to own of record any Registrable Securities) or any assignee or transferee thereof in accordance with Section 2.11.

“Investors” has the meaning assigned to such term in the recitals to this Agreement.

“Person” means any individual or group of individuals, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, governmental authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.

“Purchase Agreement” has the meaning assigned to such term in the recitals to this Agreement.

“Register”, “Registered”, and “Registration” refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document.

“Registrable Securities” means (i) the Common issuable or issued upon conversion of the Series A Preferred owned or acquired after the date hereof through the exercise of the Warrants or otherwise by the Holders, and (ii) any Common issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i) above.  For the purposes of any determination under this Agreement, the number of shares of Registrable Securities shall be determined by the number of shares of Common outstanding that are, and the number of shares of Common issuable pursuant to then exercisable or convertible securities that are exercisable or convertible into, Registrable Securities.  Registrable Securities issuable upon exercise of an option to purchase equity securities of the Company or upon conversion of another security shall be deemed outstanding for the purposes of this Agreement.

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“SEC” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Act.

“Series A Preferred” has the meaning assigned to such term in the recitals to this Agreement.

“Shares” means any of the Common, Series A Preferred or any other class of capital stock of the Company or other securities convertible into or exercisable for any shares of any class of capital stock of the Company or any combination thereof.

“Transaction Documents” means collectively, this Agreement, the Purchase Agreement and the Warrants.

“Warrants” means the warrants to purchase shares of Series A Preferred issued to the Investors as of the date hereof pursuant to the terms of the Purchase Agreement.

ARTICLE II

REGISTRATION RIGHTS

2.1 General; Securities Subject to this Agreement.

(a) The Company hereby grants registration rights to the Holders upon the terms and conditions set forth in this Agreement.

(b) For the purposes of this Agreement, Registrable Securities will cease to be Registrable Securities when (i) a registration statement covering such Registrable Securities has been declared effective under the Act by the SEC and such Registrable Securities have been disposed of pursuant to such effective registration statement or (ii) the entire amount of Registrable Securities proposed to be sold by a Holder, in the opinion of counsel satisfactory to the Company and the Holder, each in their reasonable judgment, may be distributed to the public within any 90-day period pursuant to Rule 144 (or any successor provision then in effect) under the Act.

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2.2 Demand Registration.

(a) If the Company shall receive at any time within five (5) years after the date hereof a written request from the Holders holding at least a majority of the Registrable Securities held by all Holders (the “Initiating Holders”) that the Company register (a “Demand Registration”) that number of Registrable Securities held by such Holders stated in such request (which amount of Registrable Securities shall have a fair market value of at least $2,000,000 in the aggregate, based upon the last sales price of the Common on a national exchange or over-the-counter market, as applicable, on the day immediately preceding the date of such request), then the Company shall (i) within ten (10) days of receipt thereof, give written notice of such request to all other Holders of such request for a Demand Registration  and (ii) take such steps as are necessary to prepare for the registration of the Registrable Securities and file as soon as practicable, and in any event within ninety (90) days of the receipt of such request, a registration statement under the Act covering all Registrable Securities that the Holders request to be registered, including any Registrable Securities requested to be included in such registration by Holders other than the Initiating Holders via the delivery to the Company of written notice of such request no later than ten (10) days following the Company’s delivery of written notice of the Demand Registration, subject to the limitations contained herein.  Notwithstanding the foregoing, the Company shall not be obligated to effect more than two (2) Demand Registrations pursuant to this Section 2.2 nor shall the Company be obligated to effect more than one (1) Demand Registration within any period of twelve (12) consecutive months.  If at the time of any request to register Registrable Securities pursuant to this Section 2.2, the Company is engaged in any other activity that, in the good faith determination of the Board, would make it materially detrimental to the Company and its stockholders for such Demand Registration to be effected at such time, then the Company may, at its option, direct that such request be delayed for a reasonable period not in excess of one hundred twenty (120) days from the date of such request, such right to delay a request to be exercised by the Company not more than once in any twelve (12) month period.  In addition, the Company shall not be required to effect any registration within ninety (90) days after the effective date of any other registration statement of the Company (other than a registration statement on Form S-4 or S-8 or any successor thereto).  Each request for a Demand Registration by the Holders shall specify the number of Registrable Securities proposed to be registered and sold in connection with such Demand Registration and the intended method of disposition thereof.

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(b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.2(a).  The underwriter or underwriters shall be selected by the Company and shall be reasonably acceptable to the Initiating Holders.  All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 2.6(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting.  Notwithstanding any other provision of this Section 2.2, if the underwriter advises the Holders in writing that market factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among the Holders in proportion to the amount of Registrable Securities owned by each such Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  If any Holder that has requested inclusion in such registration in accordance with the terms hereof does not agree to the terms of any such underwriting agreed to by the Company, the underwriter and the Initiating Holders, such Holder shall be excluded therefrom by written notice from the Company, the underwriter or the Initiating Holders and the Registrable Securities held by such Holder will be withdrawn from the registration.  If shares are so withdrawn from the registration and if the number of shares to be included in such registration was previously reduced as a result of marketing factors pursuant to this Section 2.2(b), then the Company shall offer to all Holders who have retained the right to include Registrable Securities in the registration the right to include additional securities in the registration in an amount equal to the number of shares so withdrawn, with such shares to be allocated in proportion to the amount of Registrable Securities owned by each Holder.

(c) The Company shall use its reasonable best efforts to cause any Demand Registration to become and remain effective as soon as practicable.  A registration shall not constitute a Demand Registration until it has become effective and remains continuously effective for the lesser of (i) the period during which all Registrable Securities registered in the Demand Registration are sold or (ii) one hundred eighty (180) days; provided, however, that a registration shall not constitute a Demand Registration if (x) after such Demand Registration has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is prevented by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason not attributable to the Holders and such interference is not thereafter eliminated in a reasonable period of time, (y) the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Demand Registration are not satisfied or waived, other than by reason of a failure by the Holders or (z) if the request for such Demand Registration is withdrawn by the Holders and such Holders reimburse the Company for any expenses incurred in relation thereto.

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2.3 Company Registration.

If (but without any obligation to do so) the Company proposes to register any of its Common under the Act in connection with an underwritten offering of such Common for its own account (other than a registration statement on Form S-4 or S-8 or any successor thereto), then the Company shall give written notice of such proposed filing to the Holders at least ten (10) days before the anticipated filing date, and such notice shall describe the proposed registration and distribution and offer such Holders the opportunity to register the number of Registrable Securities as the Holders may request.  Upon the written request of any Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.5, the Company shall, subject to the terms of this Agreement, cause to be registered under the Act all of the Registrable Securities that the Holders requested to be registered.

2.4 Form S-3 Registration.

(a) In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 with respect to all or a part of the Registrable Securities owned by such Holders (which amount of Registrable Securities shall have a fair market value of at least $500,000 in the aggregate, based upon the last sales price of the Common on a national exchange or over-the-counter market, as applicable, on the day immediately preceding the date of such request), the Company will (i) promptly give notice of the proposed registration to all other Holders and (ii) as soon as practicable, use its reasonable best efforts to effect the registration of all or such portion of such Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holders joining in such request as are specified in a written request given within ten (10) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration pursuant to this Section 2.4: (w) if Form S-3 is not available for such offering by the Holders; (x) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (after deduction of any underwriters’ discounts or commissions) of less than $500,000; (y) if the Company has, within the twelve (12) month period preceding the date of such request, already effected one (1) such registration on Form S-3 for the Holders pursuant to this Section 2.4; or (z) if the Company shall furnish to the initiating Holders a certificate signed by the Chief Executive Officer or President of the Company stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than ninety (90) days after receipt of the request of the Holders under this Section 2.4.

(b) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable (and in any event within forty-five (45) days) after receipt of the request or requests of the Holders.

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(c) No registration requested by any Holder pursuant to this Section 2.4 shall be deemed a Demand Registration pursuant to Section 2.2.

2.5 Restrictions on Sales.

(a) The Company agrees not to effect any public sale or distribution of any Shares (except (i) pursuant to registrations on Form S-4 or S-8 or any successor thereto or (ii) for those securities being sold by the Company pursuant to a registration statement in which the Holders of Registrable Securities are participating) during the period beginning on the effective date of any registration statement in which the Holders of Registrable Securities are participating and ending on the earlier of (x) the date on which all Registrable Securities registered on such registration statement are sold or (y) one hundred eighty (180) days after the effective date of such registration statement.

(b) Each Holder agrees that, if requested by the underwriters for an offering of equity securities by the Company, such Holder shall not sell, transfer, pledge, make any short sale of, grant any option for the purchase of or enter into any hedging or similar transaction with the same economic effect as a sale of any Registrable Securities held by such Holder (other than those included in the offering pursuant to the terms hereof) for a period specified by such underwriters not to exceed one hundred eighty (180) days (or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but not limited to, the restrictions contained in Financial Industry Regulatory Authority (“FINRA”) Rule 2711(f)(4) or New York Stock Exchange Rule 472(f)(4), or any successor provisions or amendments thereto) following the effective date of the registration statement relating to such offering (or, in the case of an offering pursuant to an effective shelf registration statement pursuant to Rule 415 of the Act, the pricing date for such underwritten offering); provided, however, that all officers and directors of the Company and holders of at least five percent (5%) of the Company’s voting securities enter into similar agreements. The Company may impose stop-transfer instructions with respect to any Registrable Securities subject to the foregoing restriction until the end of the period referenced above.  The underwriters of the Company’s equity securities are intended third-party beneficiaries of this Section 2.5(b) and shall have the right, power and authority to enforce the provisions hereof as though they were parties hereto.

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2.6 Obligations of the Company.

Whenever required under this Article II to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the votes then represented by the Registrable Securities held by the Holders registered thereunder, keep such registration statement effective for a period of time required for the distribution of the Registrable Securities; provided, however, that such period of time will not exceed one hundred eighty (180) days after the effective date of such registration statement (the “Effectiveness Period”); provided, further, that (i) the Effectiveness Period shall be extended for a period of time equal to the period the Holders refrain from selling any securities included in such registration at the request of an underwriter of Common (or other securities) of the Company; and (ii) in the case of any registration of Registrable Securities on Form S-3 that are intended to be offered on a continuous or delayed basis, the Effectiveness Period shall be extended, if necessary, to keep the registration statement effective for up to one (1) year or, if earlier, until all such Registrable Securities are sold, provided that Rule 415, or any successor rule under the Act, permits an offering on a continuous or delayed basis, and provided further that applicable rules under the Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment that (x) includes any prospectus required by Section 10(a)(3) of the Act or (y) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (x) and (y) above to be contained in periodic reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the registration statement.  In the event that, in the good faith and reasonable judgment of the Company, it is advisable to suspend use of the prospectus relating to such registration statement for a discrete period of time (a “Deferral Period”) due to pending material corporate developments or similar material events that have not yet been publicly disclosed and as to which the Company believes public disclosure will be prejudicial to the Company, the Company shall deliver a certified resolution of the Board, signed by a duly authorized officer of the Company, to each Holder of Registrable Securities covered by such registration statement, to the effect of the foregoing and, upon receipt of such certificate, such Holders agree not to dispose of such Holders’ Registrable Securities covered by such registration or prospectus (other than in transactions exempt from the registration requirements under the Act); provided, however, that such Deferral Period shall be no longer than ninety (90) days and that there may be only one Deferral Period during any twelve (12) month period.  The Effectiveness Period shall be extended for a period of time equal to such Deferral Period.

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(b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement.

(c) Furnish to the Holders of Registrable Securities covered by such registration statement such numbers of copies of a prospectus, including a preliminary prospectus, and any amendment or supplement thereto and a reasonable number of copies of the then-effective registration statement and any post-effective amendment thereto, all in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of such Registrable Securities.

(d) Use its reasonable best efforts to register and qualify the securities covered by such registration statement under such other securities or “blue sky” laws of such jurisdictions, and to continue such qualification in effect in such jurisdictions, as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering; provided that each Holder participating in such underwriting shall also enter into and perform its obligations under such underwriting agreement.

(f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and at the request of any such Holder prepare and furnish to such Holder a reasonable number of copies of a supplement or an amendment to such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

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(g) Use its reasonable best efforts to cause all such Registrable Securities registered pursuant hereto to be listed on each securities exchange or automated quotation system on which similar securities issued by the Company are then listed.

(h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(i) Permit a single firm of counsel designated as selling stockholders’ counsel (the “Holder Counsel”) by the Holders participating in such registration to review, at the expense of the Holders, the registration statement and all amendments and supplements thereto a reasonable period of time prior to their filing with the SEC and state authorities, and shall not file any document in a form to which such counsel reasonably objects.

(j) Subject to reasonable confidentiality arrangements, make available for inspection, upon reasonable notice during the Company’s regular business hours, by any seller of Registrable Securities covered by a registration statement, any managing underwriter participating in any disposition pursuant to such registration statement, the Holder Counsel and any accountant retained by any such seller or any managing underwriter (each, an “Inspector” and collectively, the “Inspectors”), all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”) as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees, and the independent public accountants of the Company, to supply all information reasonably requested by any such Inspector in connection with such registration statement.  Records that the Company determines, in good faith, to be confidential and of which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (x) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in the registration statement, (y) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (z) the information in such Records was known to the Inspectors on a non-confidential basis prior to its disclosure by the Company or has been made generally available to the public.  Each seller of Registrable Securities agrees that it shall, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

(k) If such sale is pursuant to an underwritten offering, use its reasonable best efforts to obtain a “cold comfort”  letter from the Company’s independent public accountants in customary form and covering such matters of the type customarily covered by “cold comfort” letters as Holders’ counsel or the managing underwriter reasonably request.

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(l) Use its reasonable best efforts to furnish, on the date Registrable Securities are delivered to the underwriters for sale pursuant to an underwritten registration, an opinion, dated such date, of counsel representing the Company for the purposes of such registration, addressed to the underwriters, covering such legal matters with respect to the registration in respect of which such opinion is being given as are customarily included in such opinions and are reasonably acceptable to counsel representing the Company.

(m) Use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable but no later than fifteen (15) months after the effective date of the registration statement, an earnings statement covering a period of twelve (12) months beginning after the effective date of the registration statement, in a manner which satisfies the provisions of Section 11(a) of the Act and Rule 158 thereunder.

(n) Cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the FINRA.

(o) Use its reasonable best efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby.

2.7 Furnish Information.

It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Article II with respect to the Registrable Securities that any selling Holder shall timely furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Registrable Securities.

2.8 Expenses of Registration.

(a) Except as set forth in Section 2.8(b), the Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities pursuant to this Agreement, including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, “blue sky” fees and expenses, including fees and disbursements of counsel related to all “blue sky” matters, fees and expenses of listing any Registrable Securities on any securities exchange or automated quotation system on which shares of Common are then listed, fees and disbursements of counsel for the Company but excluding stock transfer taxes that may be payable by the selling Holders and underwriting discounts and commissions relating to Registrable Securities covered by such registration, which shall be borne pro rata by the Holders.  Expenses for any and all registrations not specifically payable by the Company pursuant to this Section 2.8(a) shall be borne pro rata by the selling stockholders based on the number of shares of securities sold by each such selling stockholder in the offering.

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(b) Notwithstanding Section 2.8(a), the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.2 if the registration request is subsequently withdrawn at the request of the Initiating Holders (in which case all participating Holders shall bear such expenses), unless the Holders holding at least a majority of the Registrable Securities agree to forfeit their right to one of the demand registrations to which they are entitled pursuant to Section 2.2; provided, however, that if such withdrawal occurs prior to the date the registration statement shall have become effective and at the time of such withdrawal, the Holders have learned of a material adverse change in the financial condition, business, prospects, properties or results of operations of the Company from that known to the Holders at the time of their request and have withdrawn the request within five (5) business days following disclosure by the Company of such material adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their respective rights pursuant to Section 2.2.

2.9 Underwriting Requirements.

In connection with any offering involving an underwriting of shares being issued by the Company, the Company shall be required under Section 2.3 to include any securities held by the Holders in such underwriting on the same terms and conditions as the securities of the Company included therein, but only in such quantity as the underwriters determine in their reasonable and good faith judgment and written opinion will not jeopardize the success of the offering by the Company.  If such written opinion states that the registration of all or part of the Registrable Securities that the Holders have requested to be included would materially adversely affect such offering, then the Company shall be required to include in such registration, to the extent of the amount that the underwriters believe may be sold without jeopardizing the success of the offering, first, all of the securities to be offered for the account of the Company; second, the Registrable Securities to be offered for the account of the Holders, pro rata based upon the amount recommended by the underwriters; and third, any other securities required to be included in such underwriting and so requested to be included; provided, however, that the aggregate value of the Registrable Securities to be included in such registration by the Holders may not be so reduced to less than twenty-five percent (25%) of the total value of all securities included in such registration.  For purposes of the preceding sentence concerning apportionment, for any selling stockholder that is a Holder of Registrable Securities that is a partnership, limited liability company or corporation, the partners, retired partners, members and stockholders of such Holder, or the estates and family members of any such partners and retired partners or members and any trusts for the benefit of any of the foregoing persons and Affiliates of such Holder shall be deemed to be a single “selling stockholder,” and any pro rata reduction with respect to such “selling stockholder” shall be based upon the aggregate amount of Registrable Securities owned by all entities and individuals included in such “selling stockholder,” as defined in this sentence.

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2.10 Indemnification.

In the event any Registrable Securities are included in a registration statement under this Article II:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder and their respective officers, directors, trustees, partners, employees, any underwriter (as defined in the Act) for such Holder and each Person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act (each, a “Holder Indemnified Person”), against any losses, claims, damages, expenses or liabilities (joint or several) to which they may become subject under the Act or the 1934 Act, insofar as such losses, claims, damages, expenses or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively, a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, or any rule or regulation promulgated under the Act or the 1934 Act; and the Company will reimburse, as incurred, the Holder Indemnified Persons, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any Holder Indemnified Person.

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(b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, its directors, its officers, its employees, each Person, if any, who controls the Company within the meaning of the Act and any underwriter (each, a “Company Indemnified Person”) against any losses, claims, damages, expenses or liabilities (joint or several) to which any of the foregoing Persons may become subject, under the Act or the 1934 Act insofar as such losses, claims, damages, expenses or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will reimburse, as incurred, any legal or other expenses reasonably incurred by any Company Indemnified Person, in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this Section 2.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld); provided further, that, in no event shall any indemnity under this Section 2.10(b) exceed the aggregate proceeds (net of underwriting discounts and commissions) from the sale of the Registrable Securities received by such Holder from the shares sold by such Holder in the offering in question.

(c) Promptly after receipt by an indemnified party under this Section 2.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.10, deliver to the indemnifying party a written notice of the commencement thereof; provided, however, that the failure to so notify the indemnifying party shall not relieve the indemnifying party of any liability that it may have to the indemnified party hereunder, except to the extent that the indemnifying party is materially prejudiced by such failure to notify.  The indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding.  An indemnifying party shall not, without the prior written consent of the indemnified parties, settle, compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder by such indemnified parties (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes a release of such indemnified parties reasonably acceptable to such indemnified parties from all liability arising out of such claim, action, suit or proceeding or unless the indemnifying parties shall confirm in a written agreement reasonably acceptable to such indemnified parties, that notwithstanding any federal, state or common law, such settlement, compromise or consent shall not adversely affect the right of any indemnified party to indemnification as provided in this Article II.

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(d) If the indemnification provided for in this Section 2.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.  Notwithstanding the foregoing, the liability of each Holder under this Section 2.10(d) shall be limited to an amount equal to the aggregate proceeds (net of underwriting discounts and commissions) from the sale of the Registrable Securities received by such Holder from the shares sold by such Holder in the offering in question.

(e) The obligations of the Company and the Holders under this Section 2.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Article II and otherwise.

2.11 Assignment of Registration Rights.

The rights to cause the Company to register Registrable Securities pursuant to this Article II may be assigned (but only with all related obligations hereunder) by (a) a Holder to a transferee or assignee of such securities who, after such assignment or transfer, holds at least 10% of the outstanding Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations and including for purposes of such calculation the shares of Common then issuable upon conversion of any securities of the Company), (b) a Holder to its partners, members, former partners or former members (or their estates) or Affiliates or (c) a Holder to any family member, family limited partnership, family limited liability company or trust for the benefit of the Holder; provided in each case that: (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement as a “Holder”; and (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act.

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2.12 Limitations on Subsequent Registration Rights.

From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders holding at least a majority of the outstanding Registrable Securities held by the Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 2.2, Section 2.3 or Section 2.4 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such prospective holder’s securities will not reduce the amount of the Registrable Securities of the existing Holders that are included or (b) to effect a registration that could result in such registration statement being declared effective within one hundred eighty (180) days of the effective date of any registration effected pursuant to Section 2.2 or Section 2.4.

2.13 Termination of Registration Rights.

This Agreement shall terminate and be of no further force or effect, and no Holder shall be entitled to exercise any right provided for in this Article II after the earlier of (i) five (5) years following the date hereof and (ii) as to each Holder, the date on which such Holder can sell all shares of its Registrable Securities without restriction pursuant to Rule 144 or any successor provision thereto, without regard to volume limitations or manner of sale.

ARTICLE III

MISCELLANEOUS

3.1 Successors and Assigns.

Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities).  Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

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3.2 Governing Law.

This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof.

3.3 Counterparts.

This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement, and may be delivered to the other parties hereto by facsimile or similar electronic means.

3.4 Headings.

The headings and subheadings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

3.5 Notices.

All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier, courier service or personal delivery:

(a) if to the Company:

Transgenomic, Inc.

12325 Emmet Street

Omaha, Nebraska 68164

Attention: Craig J. Tuttle

Facsimile:  (402) 452-5461

with a copy to:

Paul, Hastings, Janofsky & Walker, LLP

4747 Executive Drive, 12th Floor

San Diego, Ca  92121

Attention:  Carl R. Sanchez, Esq.

Facsimile:  (858) 458-3005

and

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(b) if to the Investors:

c/o Third Security, LLC

1881 Grove Avenue

Radford, Virginia 24141

Attention: Tad Fisher

Facsimile: 540-633-7939

with a copy to:

Troutman Sanders LLP

Troutman Sanders Building

1001 Haxall Point

Richmond, Virginia 23219

Attention: John Owen Gwathmey

Facsimile: 804-698-5174

 (c) if to any other Holders, to the address reflected in the stock ledger of the Company

All such notices and communications shall be deemed to have been duly given and received when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; and five days of business after being deposited in the mail, postage prepaid, if mailed.

3.6  Expenses.

If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

3.7  Amendments and Waivers.

(a) No failure or delay on the part of any party to this Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the parties hereto at law, in equity or otherwise.

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(b) Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by any of the parties to this Agreement from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by the Company and Holders holding at least a majority of the outstanding Registrable Securities, and (ii) only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Agreement, no notice to or demand on the Company in any case shall entitle the Company to any other further notice or demand in similar or other circumstances.

3.8 Severability.

If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provision held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

3.9 Rules of Construction.

Unless the context otherwise requires, references to sections or subsections refer to sections or subsections of this Agreement.

3.10 Entire Agreement.

This Agreement and the other Transaction Documents are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.  There are no restrictions, promises, representations, warranties or undertakings, other than those set forth or referred to herein or therein.  This Agreement, together with the exhibits and schedules hereto, and the other Transaction Documents, supersede all prior agreements and understandings between the parties with respect to such subject matter, of which any such agreements are hereby terminated and shall have no further force or effect.

[Signatures appear on the following page.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers hereunto duly authorized on the date first above written.

COMPANY:	TRANSGENOMIC, INC.
	By:	/s/ Craig J. Tuttle
		Craig J. Tuttle
		Chief Executive Officer and President
INVESTORS:	THIRD SECURITY SENIOR STAFF 2008 LLC
	By:	/s/ Randal J. Kirk
		Randal J. Kirk
		Manager
	THIRD SECURITY STAFF 2010 LLC
	By:	/s/ Randal J. Kirk
		Randal J. Kirk
		Manager
	THIRD SECURITY INCENTIVE 2010 LLC
	By:	/s/ Randal J. Kirk
		Randal J. Kirk
		Manager

[Signature Page to Registration Rights Agreement]

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EX-4.4

Exhibit 4.4

THIS SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

SECURED PROMISSORY NOTE

$8,639,650 December 29, 2010

For Value Received, Transgenomic, Inc., a Delaware corporation (the “Company”), hereby unconditionally promises to pay to the order of PGxHealth, LLC, a Delaware limited liability company (together with its successors or assigns, the “Lender”), in lawful money of the United States and in immediately available funds, the principal amount of $8,639,650 (the “Principal Amount”), together with accrued and unpaid interest thereon calculated as set forth in Section 1 (collectively, the “Note Balance”), which shall be due and payable on the dates and in the manner set forth in this Secured Promissory Note (this “Note”).

This Note has been issued to the Lender pursuant to that certain Asset Purchase Agreement, dated as of November 29, 2010, by and among the Lender, Clinical Data, Inc., a Delaware corporation, and the Company, as amended by that certain Amendment to Asset Purchase Agreement, dated December 29, 2010, by and among Lender, Clinical Data, Inc. and the Company (the “Purchase Agreement”).  Capitalized terms used and not otherwise defined herein are intended to have the meanings given to them in the Purchase Agreement.

1.            Installment Payments.

1.1           Principal.  The Company shall repay the outstanding Principal Amount in substantially equal quarterly installments commencing on the date that is eighteen (18) months following the Closing Date and continuing thereafter until the final payment date on December 29, 2013 (the “Final Payment Date”), all as set forth in greater detail on the payment schedule attached hereto as Exhibit A.

1.2           Interest.  The outstanding Principal Amount shall bear interest at the rate of ten percent (10%) per annum, from the date hereof until paid in full.  The aggregate amount of interest due under this Note pursuant to this Section 2 shall be calculated with respect to any given period by multiplying the then-outstanding Principal Amount by the product of: (i) the number of days in such period; multiplied by (ii) the applicable daily interest rate, calculated on the basis of a 365-day year.  All interest hereunder shall be due and payable in arrears on a quarterly basis commencing on the date that is three (3) months following the Closing Date and continuing until the Final Payment Date, all as set forth in greater detail on the payment schedule attached hereto as Exhibit A

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1.3           Business Days. Whenever payment of principal of, or interest on, this Note shall be due on a date that is not a Business Day, the date for payment thereof shall be the next succeeding Business Day and interest due on the unpaid principal shall accrue during such extension and shall be payable on such succeeding Business Day.  “Business Day” means any day except a Saturday, Sunday or other days on which commercial banks in Boston, Massachusetts are required or authorized by law to close.

2.           Method For Payments; Optional Prepayments.  All payments under this Note shall be made in lawful money of the United States by wire transfer or other form of immediately available funds acceptable to the Lender at the address of the Lender set forth on the signature page hereof or at such other place as the Lender shall have designated in writing.  All or any portion of the Note Balance may be repaid by the Company at any time prior to the Maturity Date, without penalty; provided, however, that in the event of any such prepayment in an amount less than the amount of the then-outstanding Note Balance, the payment schedule attached hereto as Exhibit A shall be appropriately amended to reflect adjusted quarterly payment amounts totaling the decreased then-outstanding Principal Amount due under this Note.

3.           Required Prepayment.

(a)           Notwithstanding anything to the contrary set forth herein, in the event of a closing of a Qualified Financing (as defined below) prior to the repayment in full of the Note Balance, the Company shall, within five (5) business days of such closing, pay to the Lender in respect of the then-outstanding Note Balance an amount equal to the lesser of: (a) twenty-five percent (25%) of the gross proceeds received by the Company pursuant to such Qualifying Financing; and (b) the then-outstanding Note Balance.  In the event that any such prepayment is for an amount less than the amount of the then-outstanding Note Balance, the payment schedule attached hereto as Exhibit A shall be appropriately amended to reflect adjusted quarterly payment amounts totaling the decreased then-outstanding Principal Amount due under this Note.  As used in this Agreement, the term “Qualified Financing” shall mean any equity-only financing that involves the receipt by the Company of net proceeds of not less than $6,000,000 (whether in a single or a series of transactions), excluding any amounts received in connection with the conversion of any then-outstanding indebtedness or securities of the Company.  For the avoidance of doubt: (x) if there are multiple closings in connection with a Qualified Financing, such Qualified Financing shall not be deemed to have occurred for purposes of this Note until such time as the aggregate net proceeds received by the Company in connection with the sale of equity securities pursuant to the Qualified Financing first equal or exceed $6,000,000; and (y) in no event shall the sale or issuance by the Company of any debt securities, regardless of the amount of capital raised by the Company pursuant to any such sale or issuance, be deemed to constitute a Qualified Financing (or any part thereof).

(b)           Notwithstanding anything to the contrary set forth herein, in the event of a sale of all or substantially all of the assets of the Company, whether by merger, stock sale, asset sale, exclusive license, or otherwise, prior to the repayment in full of the Note Balance (the “Sale of the Company”), the Company shall, within five (5) business days of such closing, pay to the Lender in respect of the then-outstanding Note Balance an amount equal to the lesser of: (a) one hundred percent (100%) of the proceeds, net of any financial advisor and legal fees, received by the Company pursuant to such Sale of the Company; and (b) the then-outstanding Note Balance.  In the event that any such prepayment is for an amount less than the amount of the then-outstanding Note Balance, the payment schedule attached hereto as Exhibit A shall be appropriately amended to reflect adjusted quarterly payment amounts totaling the decreased then-outstanding Principal Amount due under this Note.

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4.           Secured Note.  The Company's obligations under this Note are secured by the collateral identified and described as security therefor in the Security Agreement, as executed and delivered by the Company to the Lender as of the date hereof (the “Security Agreement”).  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, or any portion thereof, except as permitted pursuant to the Security Agreement.

5.           Event of Default.  Notwithstanding anything to the contrary set forth herein, the entire unpaid Note Balance due hereunder shall be immediately due and payable (and collectible by the Lender pursuant to any applicable law) if:  (a) the Company fails to pay timely any portion of the Note Balance due under this Note on the date the same becomes due and payable (as set forth on Exhibit A) or within three (3) business days thereafter; (b) the Company makes any assignment for the benefit of its creditors; (c) the Company files (or is the subject of the filing of) any petition or complaint pursuant to any federal or state bankruptcy, reorganization, insolvency or moratorium law or any other law seeking (i) the appointment of a receiver or trustee for any of its assets, (ii) the adjudication of the Company as bankrupt or insolvent, (iii) an “order for relief” under any such statute, or (iv) a reorganization of or a plan of arrangement for the Company, provided in each case where the Company is not the filing party that such petition or complaint is not dismissed within sixty (60) days after the filing thereof; or (d) any “Event of Default” as defined in the Security Agreement occurs (each of the foregoing being referred to herein as an “Event of Default”).

6.           Nature of Obligations.  The indebtedness evidenced by this Note and the Second Note is hereby agreed by the Company to be senior to any other indebtedness of the Company, except to the extent expressly consented to in writing by the Lender, which consent may be given, withheld or conditioned in its sole discretion.

7.           Waiver.  The Company waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses.

8.           Governing Law.  This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

9.           Lost Note.  In the event of any loss of this Note by the Lender, the Company shall execute a replacement promissory note in favor of the Lender on the same exact terms and conditions of this Note upon the receipt by the Company of an affidavit of lost note and indemnity, in form and substance reasonably satisfactory to the Company, duly executed and delivered by the Lender.

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10.         Assignment.  The rights and obligations of the Company and the Lender shall inure to the benefit of and be binding on any successors of the parties and shall extend to any holder hereof.

11.         Amendments.  None of the terms or provisions of this Note may be waived, altered, modified or amended except by an instrument in writing, duly executed by the Company and the Lender.

12.         Failure to Exercise Rights.  No failure or delay on the part of the Lender 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.

13.         Counterparts.  This Note may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]

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In Witness Whereof, the Company has caused this Secured Promissory Note to be issued on the day and year first written above.

COMPANY:
Transgenomic, Inc.
By:	/s/ Craig J. Tuttle
	Craig J. Tuttle
	President and Chief Executive Officer
LENDER:
PGxHealth, LLC
By: PGx Health Holdings, Inc.
Its:  Sole Member
By:	/s/ Caesar J. Belbel
	Caesar J. Belbel
	Executive Vice President and Chief Legal Officer
Address:    Five Science Park
New Haven, CT  06511

[Signature Page to Secured Promissory Note]

EXHIBIT A

	AmountDue
PaymentDueDate	Principal		InterestAccrued		Total
3/29/2011	$	0.00	$	213,032.47	$	213,032.47
6/29/2011	$	0.00	$	217,766.52	$	217,766.52
9/29/2011	$	0.00	$	217,766.52	$	217,766.52
12/29/2011	$	0.00	$	215,399.49	$	215,399.49
3/29/2012	$	0.00	$	215,399.49	$	215,399.49
6/29/2012	$	1,234,235.71	$	217,766.52	$	1,452,002.23
10/1/2012	$	1,234,235.71	$	190,714.78	$	1,424,950.49
12/31/2012	$	1,234,235.71	$	153,856.78	$	1,388,092.50
3/29/2013	$	1,234,235.71	$	119,027.66	$	1,353,263.38
7/1/2013	$	1,234,235.71	$	95,357.39	$	1,329,593.10
9/30/2013	$	1,234,235.71	$	61,542.71	$	1,295,778.43
12/30/2013	$	1,234,235.71	$	30,771.36	$	1,265,007.07
Total	$	8,639,650.00	$	1,948,401.69	$	10,588,051.69

EX-4.5

Exhibit 4.5

THIS SECURED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.

SECURED PROMISSORY NOTE

$988,500 December 29, 2010

For Value Received, Transgenomic, Inc., a Delaware corporation (the “Company”), hereby unconditionally promises to pay to the order of PGxHealth, LLC, a Delaware limited liability company (together with its successors or assigns, the “Lender”), in lawful money of the United States and in immediately available funds, the principal amount of $988,500 (the “Principal Amount”), together with accrued and unpaid interest thereon calculated as set forth in Section 1 (collectively, the “Note Balance”), which shall be due and payable on the dates and in the manner set forth in this Secured Promissory Note (this “Note”).

This Note has been issued to the Lender pursuant to that certain Asset Purchase Agreement, dated as of November 29, 2010, by and among the Lender, Clinical Data, Inc., a Delaware corporation, and the Company, as amended by that certain Amendment to Asset Purchase Agreement, dated December 29, 2010, by and among Lender, Clinical Data, Inc. and the Company (the “Purchase Agreement”).  Capitalized terms used and not otherwise defined herein are intended to have the meanings given to them in the Purchase Agreement.

1.           Installment Payments.

1.1           Interest; Payment of Principal and Interest.  The outstanding Principal Amount shall bear interest at the rate of six and one-half percent (6.5%) per annum (computed on the  basis of a 365 day year).  The Company shall repay the Principal Amount plus interest in twelve (12) monthly installments commencing on the date that is the last day of the first full month following the Closing Date and continuing thereafter until the final payment date on December 29, 2011 (the “Maturity Date”), all as set forth in greater detail on the payment schedule attached hereto as Exhibit A.

1.2           Business Days. Whenever payment of principal of, or interest on, this Note shall be due on a date that is not a Business Day, the date for payment thereof shall be the next succeeding Business Day and interest due on the unpaid principal shall accrue during such extension and shall be payable on such succeeding Business Day.  “Business Day” means any day except a Saturday, Sunday or other days on which commercial banks in Boston, Massachusetts are required or authorized by law to close.

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2.           Method For Payments; Optional Prepayments.  All payments under this Note shall be made in lawful money of the United States by wire transfer or other form of immediately available funds acceptable to the Lender at the address of the Lender set forth on the signature page hereof or at such other place as the Lender shall have designated in writing.  All or any portion of the Note Balance may be repaid by the Company at any time prior to the Maturity Date, without penalty; provided, however, that in the event of any such prepayment in an amount less than the amount of the then-outstanding Note Balance, the payment schedule attached hereto as Exhibit A shall be appropriately amended to reflect adjusted monthly payment amounts totaling the decreased then-outstanding Principal Amount due under this Note.

3.           Required Prepayment. Notwithstanding anything to the contrary set forth herein, in the event of a sale of all or substantially all of the assets of the Company, whether by merger, stock sale, asset sale, exclusive license, or otherwise, prior to the repayment in full of the Note Balance (the “Sale of the Company”), the Company shall, within five (5) business days of such closing, pay to the Lender in respect of the then-outstanding Note Balance an amount equal to the lesser of: (a) one hundred percent (100%) of the proceeds, net of any financial advisor and legal fees, received by the Company pursuant to such Sale of the Company; and (b) the then-outstanding Note Balance.  In the event that any such prepayment is for an amount less than the amount of the then-outstanding Note Balance, the payment schedule attached hereto as Exhibit A shall be appropriately amended to reflect adjusted quarterly payment amounts totaling the decreased then-outstanding Principal Amount due under this Note.

4.           Secured Note.  The Company's obligations under this Note are secured by the collateral identified and described as security therefor in the Security Agreement, as executed and delivered by the Company to the Lender as of the date hereof (the “Security Agreement”).  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, or any portion thereof, except as permitted pursuant to the Security Agreement.

5.           Event of Default.  Notwithstanding anything to the contrary set forth herein, the entire unpaid Note Balance due hereunder shall be immediately due and payable (and collectible by the Lender pursuant to any applicable law) if:  (a) the Company fails to pay timely any portion of the Note Balance due under this Note on the date the same becomes due and payable (as set forth on Exhibit A) or within three (3) business days thereafter; (b) the Company makes any assignment for the benefit of its creditors; (c) the Company files (or is the subject of the filing of) any petition or complaint pursuant to any federal or state bankruptcy, reorganization, insolvency or moratorium law or any other law seeking (i) the appointment of a receiver or trustee for any of its assets, (ii) the adjudication of the Company as bankrupt or insolvent, (iii) an “order for relief” under any such statute, or (iv) a reorganization of or a plan of arrangement for the Company, provided in each case where the Company is not the filing party that such petition or complaint is not dismissed within sixty (60) days after the filing thereof; or (d) any “Event of Default” as defined in the Security Agreement occurs (each of the foregoing being referred to herein as an “Event of Default”).

6.           Nature of Obligations.  The indebtedness evidenced by this Note and the First Note is hereby agreed by the Company to be senior to any other indebtedness of the Company, except to the extent expressly consented to in writing by the Lender, which consent may be given, withheld or conditioned in its sole discretion.

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7.           Waiver.  The Company waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorneys’ fees, costs and other expenses.

8.           Governing Law.  This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

9.           Lost Note.  In the event of any loss of this Note by the Lender, the Company shall execute a replacement promissory note in favor of the Lender on the same exact terms and conditions of this Note upon the receipt by the Company of an affidavit of lost note and indemnity, in form and substance reasonably satisfactory to the Company, duly executed and delivered by the Lender.

10.         Assignment.  The rights and obligations of the Company and the Lender shall inure to the benefit of and be binding on any successors of the parties and shall extend to any holder hereof.

11.         Amendments.  None of the terms or provisions of this Note may be waived, altered, modified or amended except by an instrument in writing, duly executed by the Company and the Lender.

12.         Failure to Exercise Rights.  No failure or delay on the part of the Lender 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.

13.         Counterparts.  This Note may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]

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In Witness Whereof, the Company has caused this Secured Promissory Note to be issued on the day and year first written above.

COMPANY:
Transgenomic, Inc.
By:	/s/ Craig J. Tuttle
	Craig J. Tuttle
	President and Chief Executive Officer
LENDER:
PGxHealth, LLC
By:  PGx Health Holdings, Inc.
Its:  Sole Member
By:	/s/ Caesar J. Belbel
	Caesar J. Belbel
	Executive Vice President and Chief Legal Officer

Address:	Five Science Park
	New Haven, CT  06511

[Signature Page to Secured Promissory Note]

 

EXHIBIT A

	Amount Due
Payment Due Date	Principal		Interest Accrued		Total
1/31/2011	$	82,375.00	$	5,809.13	$	88,184.13
2/28/2011	$	82,375.00	$	4,518.21	$	86,893.21
3/31/2011	$	82,375.00	$	4,547.55	$	86,922.55
5/2/2011	$	82,375.00	$	4,224.82	$	86,599.82
5/31/2011	$	82,375.00	$	3,403.33	$	85,778.33
6/30/2011	$	82,375.00	$	3,080.60	$	85,455.60
8/1/2011	$	82,375.00	$	2,816.55	$	85,191.55
8/31/2011	$	82,375.00	$	2,200.43	$	84,575.43
9/30/2011	$	82,375.00	$	1,760.34	$	84,135.34
10/31/2011	$	82,375.00	$	1,364.27	$	83,739.27
11/30/2011	$	82,375.00	$	880.17	$	83,255.17
12/29/2011	$	82,375.00	$	425.42	$	82,800.42
Total	$	988,500.00	$	35,030.82	$	1,023,530.82

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EX-10.1

Exhibit 10.1

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT made as of the 29th day of December, by and between CLINICAL DATA, INC., a Delaware corporation (hereinafter called "Sublandlord"), and TRANSGENOMIC, INC., a Delaware corporation (hereinafter called "Subtenant").

WITNESSETH THAT:

WHEREAS, Sublandlord, as tenant, and Science Park Development Corporation, as landlord (“Landlord”), entered into a lease dated January 12, 2006 (the “Original Lease”), as amended by (i) a letter agreement between Landlord and Sublandlord dated as of April 12, 2009, and (ii) a Lease Extension Agreement (the “Lease Extension Agreement”) between Landlord and Sublandlord dated as of November 30, 2010 (hereinafter, as amended, collectively called the "Lease") of certain premises containing approximately 37,423 rentable square feet (hereinafter called the "Leased Premises"), in Building 5, Winchester Avenue, Science Park, New Haven, Connecticut (hereinafter called the "Building"); and

WHEREAS, Subtenant wishes to sublease from Sublandlord, and Sublandlord wishes to sublease to Subtenant, a portion of the Leased Premises containing approximately 23,123 rentable square feet consisting of a portion of Floor 2 of the Building, and being shown on the plan attached hereto as Exhibit A (hereinafter called the "Subleased Premises");

NOW, THEREFORE, Sublandlord and Subtenant for good and valuable consideration hereby agree as follows:

ARTICLE I

General Provisions

This Sublease and Subtenant's rights hereunder are in all respects subject and subordinate to the terms of the Lease, a copy of which has been delivered to Subtenant, receipt of which is hereby acknowledged.  Any other provision hereof to the contrary notwithstanding, Subtenant shall have no right to, and Subtenant covenants that it shall not, violate any covenant of the Lease.  Subtenant agrees to be independently bound by and subject to all of the covenants, agreements, terms, provisions and conditions set forth in the Lease on the part of Sublandlord as tenant to be kept and performed (other than rental obligations and other like terms hereof which would by their nature or by their terms be applicable only to Sublandlord).  Subtenant shall have no rights to expand or contract the Leased Premises and/or Subleased Premises (except for Subtenant’s Right of First Offer contained in Article XIII hereof), or to terminate or extend the Term of the Lease and/or Sublease, nor any other right contained in the Lease.  This Sublease shall terminate upon the termination of the Lease for any reason.  Undefined capitalized terms used herein without definition shall have the meanings attributed to them under the Lease.

ARTICLE II

Demised Premises

Sublandlord, in consideration of the rents herein reserved and of the agreements, covenants and conditions herein contained and expressed on the part of the Subtenant to be kept, performed and observed, hereby demises and lets unto Subtenant, and Subtenant hereby leases from Sublandlord, the Subleased Premises.  The Subleased Premises are leased in an "as-is" condition, without any representations or warranties by Sublandlord regarding the condition or suitability of the Subleased Premises for Subtenant’s use and without any obligations on the part of Sublandlord to construct or prepare the Subleased Premises for Subtenant’s use or occupancy.  Subtenant shall have no right to any Tenant allowance or similar reimbursement under the Lease and any such provision shall not apply to this Sublease.

ARTICLE III

Term

1.           To have and to hold the Subleased Premises unto Subtenant for a term commencing on December 29, 2010 (the “Commencement Date”) and ending on March 31, 2013, unless sooner terminated as herein provided.

2.           Sublandlord and Subtenant each understand and acknowledge that this Sublease is expressly conditioned upon (i) Landlord’s written consent to this Sublease, a copy of said consent being attached hereto as Exhibit B-1, and (ii) written consent from Connecticut Innovations, Inc., a copy of said consent being attached hereto as Exhibit B-2.  Notwithstanding the provisions of Section 15.3C of the Lease, Subtenant shall not be required to assume the obligations and liabilities of Sublandlord under the Lease.

ARTICLE IV

Rent

1.           Commencing as of the Commencement Date, Subtenant covenants and agrees to pay directly to Sublandlord, at such a place as Sublandlord shall from time to time designate in writing, as rent during the term hereof:

A.           Base Rent as follows:

Time Period	Base Rent		Monthly installment
Commencement Date through January 31, 2011	$	254,353.00	$	21,196.00
February 1, 2011 through March 31, 2013	$	485,597.00	$	40,466.00

Such Base Rent shall be payable in equal monthly installments in advance on the first day of each and every calendar month during the term hereof (and a proportionate part for any part of a month); provided, however, that Subtenant shall not be required to pay Sublandlord Base Rent during any period that Base Rent may be abated pursuant to the provisions of Section 3.1.C of the Lease.

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B.           Subtenant’s pro rata share (defined below) of all other sums and money payments to be paid by Sublandlord to Landlord pursuant to the applicable provisions of the Lease (other than Base Rent and payments pursuant to Section 3.3 of the Lease), including, without limitation, prior to the effectiveness of the Lease Extension Agreement, payments on account of any Additional Rent (as defined in the Original Lease), and following the effectiveness of the  Lease Extension Agreement, payments on account of any Additional Rent (as defined in the Lease Extension Agreement) pursuant to the provisions of the Lease, such amounts to be paid to Sublandlord by the date they are due under the Lease.  “Subtenant’s pro rata share” for the purposes of this Sublease shall mean the fraction, the numerator of which is equal to the number of rentable square feet of Subleased Premises (23,123) and the denominator of which is equal to the number of rentable square feet of Leased Premises (37,423).  The parties agree that the Subtenant’s pro rata share is 61.79%.  In addition, Subtenant shall pay, to Sublandlord, Subtenant’s pro rata share of the property insurance carried by Sublandlord on improvements located in the Subleased Premises that were installed by Sublandlord.

C.           Subtenant’s pro rata share of all sums and money payments to be paid by Sublandlord to the City of New Haven or other governmental taxing authority levied against Sublandlord for leasehold improvements.  For the avoidance of doubt, Subtenant shall be solely responsible for and pay within the time provided by law all taxes and assessments imposed on its inventory, furniture, trade fixtures, apparatus, equipment and any other of Subtenant’s personal or other property.

2.           If Sublandlord has made any payments to Landlord on account of a period, part of which occurs after the Commencement Date of this Sublease, Subtenant shall pay to Sublandlord its pro rata share of the portion of such payment attributable to the period after the Commencement Date, and similarly if Subtenant is to make any payments to Sublandlord or Landlord on account of a period, part of which occurs prior to the Commencement Date of this Sublease, such payment shall be reduced by the portion thereof attributable to the period prior to the Commencement Date.

ARTICLE V

Subtenant's Covenants

1.           With respect to the Subleased Premises, Subtenant during the term hereof shall observe, perform or fulfill all of the terms, covenants and conditions of the Lease on Sublandlord/Tenant's part to be observed, performed or fulfilled and shall discharge all of Sublandlord/Tenant's obligations under the Lease, but only to the extent applicable to the Subleased Premises and except for the payment of rent (required by Article IV hereinabove to be paid to Sublandlord).  In the case of any default by Subtenant in the observance, performance, fulfillment or discharge of any such term, covenant, condition or obligation of the Lease, or of any term, covenant, condition or obligation of this Sublease, Sublandlord shall have all the rights against Subtenant as would be available to the Landlord against the Sublandlord as tenant under the Lease.  For the purpose of establishing notice and cure periods for any default of Subtenant under this Sublease, Article 17 of the Lease is hereby incorporated by reference, it being understood that the term “Tenant” in said section shall mean Subtenant and the term “Landlord” shall mean Sublandlord, except that (a) for the purposes of monetary default hereunder, the reference to “ten (10) days” in Section 17.1.A is changed to five (5) days, (b) for the purposes of any default of any other covenant, the reference to “thirty (30) days” in Section 17.1.H is changed to twenty (20) days, and the reference to “sixty (60)” days is changed to fifty (50) days.

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2.           Subtenant shall indemnify and hold harmless Sublandlord and Landlord against and from all claims, liabilities and damages which may be imposed upon or incurred by or asserted against Sublandlord by reason of any failure on the part of Subtenant to comply with any of the terms, covenants, conditions or obligations contained in this Sublease or the Lease, on its part to be performed or complied with.

3.           Subtenant agrees to use and occupy the Subleased Premises for general office and laboratory purposes only, subject to the limitations of the Lease.

4.           The only services with respect to the Subleased Premises to which Subtenant is entitled hereunder are those to which Sublandlord as tenant is entitled under the Lease.  It is expressly understood and agreed that Sublandlord does not assume, and shall have no liability for, the obligations, covenants, representations and/or warranties of Landlord under the Lease.  In application of the foregoing, Sublandlord shall have no liability or responsibility for furnishing electricity, heating, air conditioning, cleaning, window washing or any other service to the Building or Subleased Premises, or for any maintenance, repairs or alterations which are the responsibility or obligation of Landlord under the Lease.

5.           With respect to the Subleased Premises and to the extent applicable thereto, Subtenant shall perform and agrees to comply with Sublandlord’s insurance obligations under the Lease (to the extent modified herein).  Notwithstanding the foregoing, Subtenant’s obligation with regard to property insurance shall be limited to Subtenant maintaining all-risk property insurance for Subtenant’s furnishings, fixtures, equipment, effects and property of every kind, nature and description (including but not limited to leasehold improvements made by or on behalf of Subtenant) equal to 100% of the replacement cost value of such property (it being agreed that Sublandlord will be maintaining insurance on leasehold improvements previously installed in the Subleased Premises by Sublandlord, and Subtenant shall reimburse Sublandlord for such insurance pursuant to paragraph 1(B) of Article IV hereof).  Such insurance required of Subtenant shall include a waiver of subrogation in favor of Sublandlord and Landlord pursuant to Section 25.3 of the Lease.  Any liability policies which Subtenant is required to maintain as an obligation of Sublandlord under the Lease shall name both Landlord under the Lease and Sublandlord hereunder as additional insureds.  All insurance required to be maintained by Subtenant under this Sublease shall be maintained with insurance companies that have an A.M. Best rating of A VIII or higher, and all required insurance shall not be reduced or canceled without thirty (30) days written notice to Sublandlord.  Subtenant shall furnish to Sublandlord and Landlord a certificate of insurance which must evidence the required coverages and disclose any applicable deductibles and self-insured retentions prior to the Commencement Date, and thereafter on an annual basis throughout the term of this Sublease, and more frequently if reasonably requested by Sublandlord and/or Landlord.  Any deductibles and self-insured retentions must be reasonable and are subject to Sublandlord’s and Landlord’s prior approval.

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6.           Subtenant shall make no alterations, additions or improvements (collectively “Alterations”) to the Subleased Premises without the prior written approval of the Landlord required under the provisions of Article 6 of the Lease, and the prior written consent of Sublandlord, which consent of Sublandlord shall not be unreasonably withheld.  At the expiration or earlier termination of this Sublease, Subtenant shall surrender the Subleased Premises free of any lien or encumbrance made or suffered by Subtenant, and Subtenant shall remove such Alterations made by or on behalf of Subtenant as Sublandlord may request, repair any damage cause by such removal, and restore the Subleased Premises to substantially the condition it was delivered to Subtenant in, reasonable wear and tear and damage by casualty excepted.  The Subleased Premises shall otherwise be surrendered “broom clean” and in good condition and repair, the effects of reasonable wear and tear, fire and other casualty, and public taking excepted, and otherwise in accordance with the requirements of the Lease, including but not limited to Article 31 thereof.

7.           Subtenant acknowledges that electricity will be furnished to the Subleased Premises by the utility company and will be separately metered.  Subtenant shall pay, as additional rent in equal monthly installments in advance on the first day of each and every calendar month during the term hereof (and a proportionate part for any part of a month), Subtenant’s pro rata share of the electricity charges payable by Sublandlord.

8.           All of the furnishings, fixtures, equipment, effects and property of every kind, nature and description of Subtenant and of all persons claiming by, through or under Subtenant which, during the continuance of this Sublease or any occupancy of the Subleased Premises by Subtenant or anyone claiming under Subtenant, may be on the Subleased Premises, shall be at the sole risk and hazard of Subtenant and if the whole or any part thereof shall be destroyed or damaged by fire, water or otherwise, or by the leakage or bursting of water pipes, steam pipes, or other pipes, by theft or from any other cause, no part of said loss or damage is to be charged to or to be borne by Sublandlord.

ARTICLE VI

Fire and Casualty

In the event of a fire or casualty that does not result in termination of the Lease by the Landlord, Subtenant shall have the same rights hereunder as Sublandlord as tenant under Article 13 of the Lease with respect to termination and rent abatement.

ARTICLE VII

Sublandlord's Covenants and Representations

A.           Sublandlord represents that the Lease is presently in full force and effect and has not been modified except as set forth in this Sublease; Sublandlord as tenant has received no notice of any default on its part thereunder; and Sublandlord's monetary obligations as tenant under the Lease have been paid to the date hereof; and the term of the Lease is currently scheduled to expire on March 31, 2013.  There are no other representations, oral or written, that have been made by Sublandlord.  In no event shall any representations of Landlord under the Lease be deemed incorporated herein.

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B.           Sublandlord covenants and agrees, provided that this Sublease is in full force and effect and Subtenant is not in default hereunder:

1.           To pay Base Rent (as defined in the Lease) directly to Landlord at the times and in the manner provided in the Lease, and to otherwise perform all obligations of Sublandlord as tenant under the Lease with regard to the portion of the Leased Premises outside of the Subleased Premises.

2.           To give Subtenant prompt written notice of all notices, demands or requests from Landlord which are related to Subtenant’s use or occupancy of the Subleased Premises or its rights and obligations under this Sublease.

3.           If Landlord shall default in any of its obligations to Sublandlord with respect to the Subleased Premises, Sublandlord shall cooperate with Subtenant and use reasonable efforts to enforce Sublandlord’s rights against Landlord, all at Subtenant’s sole cost and expense.

4.           That Sublandlord shall not, without Subtenant’s consent, agree to any termination, surrender, cancellation, modification or amendment to the Lease that would have a material adverse effect upon Subtenant’s rights or increase Subtenant’s obligations under this Sublease, provided that Sublandlord shall have no obligation to exercise any Extension Option or rights to Expansion Space.

5.           That Subtenant shall quietly enjoy the Subleased Premises subject to (a) the terms, covenants and conditions of this Sublease and the Lease, (b) any mortgages now or hereafter affecting the Leased Premises, and (c) all renewals, modifications, consolidations, replacements and extensions thereof, to which this Sublease is subject and subordinate.  Notwithstanding the foregoing, in the event Subtenant is denied use or enjoyment of any portion of the Subleased Premises by reason of (i) Subtenant’s default of this Sublease or (ii) any action or omission of Subtenant or its agents, employees or licensees with respect to the Subleased Premises, then Sublandlord shall not be deemed to have breached this covenant of quiet enjoyment.

6.           Without guaranteeing the availability of space, Sublandlord shall request that Landlord provide Subtenant with a listing in the Building lobby directory, at no expense to Subtenant.  To the extent provided for in the Lease, Subtenant shall have the right to install signage on the walls of the elevator lobbies of the Subleased Premises and on entrance doors to the Subleased Premises, such signage subject to the consent of Landlord and Sublandlord, which consent on the part of Sublandlord shall not be unreasonably withheld.

ARTICLE VIII

Assignment or Subletting

Subtenant may not assign it rights hereunder or further sublet the Subleased Premises without the express written consent of Landlord and Sublandlord, which consent on the part of Sublandlord shall not be unreasonably withheld, it being agreed that in addition to such consents any such sub-sublease or assignment shall be subject to the restrictions contained in the Lease, including but not limited to those in Article 15 thereof.

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ARTICLE IX

Notices

All notices required or permitted hereunder shall be in writing and addressed, if to Sublandlord, to Clinical Data, Inc., One Gateway Center, Suite 702, Newton, MA, Attn:  Chief Legal Officer, or such other address as Sublandlord shall have last designated by notice in writing to Subtenant, and if to Subtenant, to the Subleased Premises, or such other address as Subtenant shall have last designated by notice in writing to Sublandlord.  Any notice shall be deemed delivered (a) three (3) days after being mailed to such address, postage prepaid, by registered or certified mail, return receipt requested, (b) one (1) day after being sent to such address via a nationally recognized overnight courier that routinely issues delivery receipts, (c) when delivered by hand, or (d) upon the recipient’s refusal to accept any notice served pursuant to (a), (b) or (c) above.

ARTICLE X

Binding Effect

It is further covenanted and agreed by and between the parties hereto that all the covenants, agreements and undertakings in this Sublease contained shall extend to and be binding upon the legal representatives, successors and assigns of the respective parties hereto, the same as if they were in every case named and expressed, but nothing herein shall be construed as a consent by Sublandlord to any assignment or subletting by Subtenant of any interest of Subtenant in this Sublease.  It is the intention of the parties hereto that the obligations of Subtenant hereunder shall be separate and independent covenants and agreements, that the Base Rent, additional rent and all other sums payable by Subtenant to Sublandlord shall continue to be payable in all events and that the obligations of Subtenant hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Sublease.

ARTICLE XI

Brokerage

Sublandlord and Subtenant each represent that it has not had any dealings with any broker in connection with the execution of this Sublease, and each party hereto agrees to indemnify and hold harmless the other from and against any and all claims made in connection with this Sublease by any broker that is predicated upon dealings with the indemnifying party.

ARTICLE XII

Parking

Sublandlord has certain parking rights pursuant to and governed by the Lease.  Subject to those rights, Sublandlord hereby agrees that Subtenant shall be permitted to use up to 56 of the unreserved parking spaces allotted to Sublandlord pursuant to the Lease, upon the terms and conditions that such spaces are made available to Sublandlord under the Lease.

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ARTICLE XIII

Right of First Offer

Subject to the terms of the Lease, Subtenant shall have a right of first offer to sublease any additional portion of the Leased Premises that Sublandlord is seeking to sublease (the “RFO Space”).  If any RFO Space becomes so available to sublease during the term of this Sublease, then prior to marketing such space, Sublandlord shall first notify Tenant of the opportunity to sublease such RFO Space, on the condition (i) that the initial Subtenant named herein occupies the entire Subleased Premises and, (ii) that Subtenant is not in default of its obligations under this Sublease at the time such RFO Space becomes available, and has not previously been in default beyond the expiration of any applicable grace period under this Sublease.  Within five (5) days after Sublandlord’s notification, Subtenant shall indicate to Sublandlord whether it is interested in the possibility of subleasing such RFO Space.  If Tenant timely so indicates interest in the offered space, Sublandlord shall, within five (5) days thereafter, notify Subtenant in writing of the terms on which Sublandlord intends to offer to sublease the RFO Space. The offering terms shall be upon the same terms and conditions as Sublandlord would offer to the general market.  Subtenant shall have twenty (20) days after the date of Sublandlord’s written offer to accept or reject such offer.  If Subtenant timely accepts any such offer and the condition precedent shall have been satisfied, and provided that Landlord consents to such sublease, then, except for Landlord’s consent to such sublease, no further documentation shall be necessary to effect the demise of the RFO Space.  However, Sublandlord and Subtenant shall execute an amendment to this Sublease modifying the Base Rent and Subtenant’s pro rata share and making such other changes to this Sublease as are necessary to account for the inclusion of the RFO Space.  If Subtenant fails to timely accept, or rejects such offer, or if the condition precedent is not satisfied, Sublandlord will then be free to offer the RFO Space to the general market and Subtenant shall have no further rights under this Article XII.  Time is of the essence of this Article XII.

ARTICLE XIV

Options to Extend Term

Sublandlord shall notify Subtenant whether it intends to exercise any Extension Option seven (7) months prior to the expiration of the Term and, if Sublandlord does exercise such Extension Option, Subtenant shall have twenty (20) days to elect to extend this Sublease for a corresponding Term.  In any event, Subtenant agrees to notify Sublandlord of its desire to extend the term of this Sublease on or before six (6) months prior to the expiration of the Term to allow Sublandlord to comply with the time periods set forth in the Lease.  Accordingly, upon any such extension by Sublandlord following Subtenant’s notice to Sublandlord of its desire to extend the term, this Sublease shall automatically extend on the same terms and conditions contained herein.

ARTICLE XV

Confidentiality

Sublandlord and Subtenant will maintain the confidentiality of this Sublease and will not divulge the economic or other terms of this Sublease, whether verbally or in writing, to any person, other than (a) Landlord, (b) Sublandlord’s and Subtenant’s officers, directors, partners or shareholders, (c) Sublandlord’s and Subtenant’s attorneys, brokers, accountants and other professional consultants, (d) any governmental agencies, or (e) pursuant to subpoena or other legal process.

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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Sublandlord and Subtenant have caused this Sublease Agreement to be executed by their respective officers hereunto duly authorized and their respective seals affixed as of the date first above written.

SUBLANDLORD:
CLINICAL DATA, INC.
By:	/s/ Caesar J. Belbel
Print Name:		Caesar J. Belbel
Print Title:		Executive Vice President, Chief Legal
		Officer and Secretary
SUBTENANT:
TRANSGENOMIC, INC.
By:	/s/ Craig J. Tuttle
Print Name:		Craig J. Tuttle
Print Title:		President and Chief Executive Officer

[Signature Page to Sublease Agreement]

EX-10.2

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.

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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]

EX-10.3

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 OF PAGE INTENTIONALLY LEFT BLANK]

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]

EX-99.1

Exhibit 99.1

Transgenomic Announces Closing of the Acquisition of Clinical Data’s Diagnostic Business and the Closing of a $6 Million Financing

OMAHA, Nebraska (December 29, 2010) — Transgenomic, Inc. (OTCBB: TBIO) announced today that it has closed the acquisition of Clinical Data, Inc.’s (NasdaqGM: CLDA) diagnostic business with a sales price of $15.5 million.  In addition, the company has closed on a $6.0 million financing from Third Security, LLC, a leading life sciences investment firm, to fund the cash portion of Transgenomic’s acquisition of Clinical Data’s diagnostic business.  This strategic acquisition provides Transgenomic with proprietary genetic commercial tests that have an established revenue base, proprietary biomarker assays, an additional a fully integrated CLIA-certified laboratory operation, and established test reimbursement and coverage policies that offer access to testing for an estimated 280 million patients.

Under the terms of the financing with Third Security, the Company has issued an aggregate of 2,586,205 shares of the Company’s newly created Series A convertible preferred stock to certain affiliates of Third Security for an aggregate purchase price of $6.0 million. Additionally, the Company issued such affiliates of Third Security warrants to purchase an aggregate of up to 1,293,102 shares of Series A preferred stock at an exercise price of $2.32 per share.  The Series A preferred shares issuable pursuant to the purchase agreement and upon exercise of the warrants are convertible into shares of the Company’s common stock at a conversion price of $0.58 per share, for an aggregate of 15,517,228 million shares of common stock.  Upon full exercise of the warrants, Transgenomic will receive approximately $3.0 million.

Commenting on the acquisition of Clinical Data’s diagnostic business, Craig Tuttle, Chief Executive Officer of Transgenomic, said, “We are very excited about the acquisition, which strengthens our molecular diagnostics position in the marketplace, expands our commercial operation with an accomplished team that will improve our competitive position, and enhances our customer support and patient care capabilities. We are also very excited about building a strategic relationship and having the support of such a respected investor as Third Security and Randal Kirk.  Their knowledge of our industry will be beneficial in catapulting Transgenomic into the top tier of diagnostic providers.”

Commenting on the investment, Randal Kirk, Senior Managing Director and Chief Executive Officer of Third Security, LLC said, “Transgenomic’s strong management team, broad product offering, and state-of-the-art technology position the Company for growth in a significant and underserved market. We look forward to working with Craig Tuttle and his management team to help Transgenomic expand and realize its growth plans."

Griffin Securities, Inc. acted as financial adviser and placement agent to Transgenomic, Inc. on this transaction.

About Transgenomic, Inc.

Transgenomic, Inc. develops and markets molecular diagnostic technologies, tests, and services for oncology, cardiology, hematology, inherited disorders, and diseases of aging.  The Company is advancing the analysis of DNA and RNA at the molecular level, making it possible to detect disease more accurately at earlier stages, bringing improvements in the quality of patient care and lowering the costs of disease management.  To learn more, please visit the Company’s website at www.transgenomic.com.

Forward Looking Statements

Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to a variety of matters, including but not limited to: the benefits and synergies expected to result from the asset acquisition; the anticipated customer base for Transgenomic following the completion of the asset acquisition; and other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of Transgenomic and are subject to significant risks and uncertainty.   Investors are cautioned not to place undue reliance on any such forward-looking statements.  All such forward-looking statements speak only as of the date they are made, and Transgenomic undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise.  Factors that could cause actual results to differ materially from the forward-looking statements contained herein include, but are not limited to: any operational or cultural difficulties associated with the integration of the assets being acquired; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the asset acquisition; unexpected costs, charges or expenses resulting from the  asset acquisition; litigation or adverse judgments relating to the  asset acquisition; risks relating to the consummation of the asset acquisition, including the failure to realize synergies and cost savings from the transaction or delay in realization thereof; any difficulties associated with requests or directions from governmental authorities resulting from their reviews of the transaction; and any changes in general economic and/or industry-specific conditions. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements are set forth in the Annual Report on Form 10-K of Transgenomic for the year ended December 31, 2009, which was filed with the Securities and Exchange Commission (“SEC”) on February 25, 2010, under the heading “Item 1A—Risk Factors” and in subsequent reports on Forms 10-Q and 8-K and other filings made with the SEC by Transgenomic.

Contact

Transgenomic, Inc.

Brett Frevert, 1-402-452-5400

Chief Financial Officer