Convertible Promissory Note – Transgenomic Inc.

NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT“), OR UNDER THE SECURITIES LAWS OF APPLICABLE
STATES. THIS NOTE AND SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THIS NOTE AND ANY SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ALL APPLICABLE STATE SECURITIES LAWS.

CONVERTIBLE PROMISSORY NOTE

TRANSGENOMIC, INC.

Principal Amount: $1,200,000	Issue Date:	December 30, 2011
	Maturity Date:	March 31, 2012

For value received, Transgenomic, Inc., a Delaware
corporation (the “Company“), with principal offices at
12325 Emmet Street, Omaha, Nebraska 68164, hereby promises to pay in lawful
money of the United States to Third Security Senior Staff 2008
LLC, or permitted registered assigns (“Registered
Holder“), the principal amount set forth above, together with
simple interest on the unpaid principal balance at a rate equal to sixteen
percent (16%) per annum, computed on the basis of the actual number of days
elapsed and a year of 365 days from the “Issue Date”
of this Note set forth above, until the principal amount and all interest
accrued thereon are paid. Provided that this Note has not been earlier converted
into Conversion Securities pursuant to the terms and conditions of Section 2,
the unpaid principal amount of this Note, together with any then unpaid accrued
interest (collectively, the “Note Amount“), shall be
due and payable by the Company on the Maturity Date or such earlier time as
provided for in Section 2; provided, further, however, that notwithstanding the
foregoing or the provisions of Section 2, the Note Amount shall be due and
payable upon the occurrence of an Event of Default (as defined below).

This Note is executed and delivered by the Company pursuant to the terms and
conditions of that certain Convertible Promissory Note Purchase Agreement by and
among the Company, Registered Holder and certain other parties specified
therein, dated as of the date hereof (as amended, restated, amended and
restated, supplemented or otherwise modified from time to time, the
“Purchase Agreement“), and is subject to the terms and
conditions of the Purchase Agreement. The following, together with the Purchase
Agreement, is a statement of the rights of Registered Holder and the conditions
to which this Note is subject, and to which Registered Holder hereof, by the
acceptance of this Note, agrees:

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1. DEFINITIONS. The following definitions shall apply
for all purposes of this Note:

(a) “Common Stock” means shares of the Company153s
common stock, $0.01 par value per share.

(b) “Conversion Price” means the
per equity security price paid by the investors for the Company153s equity
securities issued in the Qualified Financing.

(c) “Conversion Securities” means equity securities of the
Company of the same class(es) and series as the equity securities of the Company
sold in the Qualified Financing which, for the avoidance of doubt, shall include
any warrant(s) and/or other securities convertible into or exercisable for
capital stock of the Company issued in the Qualified Financing.

(d) “Maturity Date” means March 31, 2012.

(e) “Qualified Financing” means the Company153s first
sale or issuance of its equity securities after the date hereof in one
transaction or a series of related transactions (which, for the avoidance of
doubt, may include warrant(s) or other securities convertible into or
exercisable for capital stock of the Company) for an aggregate purchase price
paid in cash (not including the Note Amount converted pursuant to Section 2) of
at least $3,000,000.

(f) “Note” means this Convertible Promissory Note
(and all Convertible Promissory Notes issued in exchange, transfer or
replacement hereof).

2. CONVERSION, PAYMENT AND TERMINATION OF
RIGHTS.

(a) Conversion or Payment

(i) Qualified Financing. At the closing of the
Qualified Financing the Note Amount shall automatically, and without further
action or consent of Registered Holder, convert into that number of Conversion
Securities that results from dividing the Note Amount by the applicable
Conversion Price (plus, for the avoidance of doubt, any warrant(s) and/or other
equity securities convertible into or exercisable for capital stock of the
Company that would be issuable in connection with an investment in the Qualified
Financing of the Note Amount). Registered Holder will deliver the original Note
to the Company and will execute and deliver to the Company at the closing as an
“investor” thereunder such stock purchase agreement, investors153 rights agreement
and/or any other agreements as are entered into by the investors in the
Qualified Financing generally; provided that the Company agrees such agreements
shall be in a form acceptable to Registered Holder acting reasonably.

(ii) Maturity Date. Provided that this Note has not
previously been converted or paid pursuant to Section 2.1(a), the Note Amount
shall be due and payable by the Company on the Maturity Date.

(iii) Termination of Rights. All rights with respect
to this Note shall terminate upon the issuance of the Conversion Securities to
Registered Holder upon conversion of the Note Amount, whether or not this Note
has been surrendered and whether or not all stock purchase, investors153 rights,
co-sale, voting or other agreements have been executed and delivered by
Registered Holder to the Company. Notwithstanding the foregoing, Registered
Holder agrees to surrender this Note to the Company for cancellation as soon as
is possible following conversion of this Note. Registered Holder shall not be
entitled to receive the stock certificate and/or other instruments representing
the Conversion Securities to be issued upon conversion of this Note until the
original of this Note is surrendered to the Company or an affidavit of loss is
executed and provided to the Company and the agreements referenced in this
Section 2 have been executed and delivered to the Company.

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3. ISSUANCE OF CONVERSION SECURITIES. Subject
to Section 2, as soon as practicable after conversion of this Note, the Company
at its expense will cause to be issued in the name of and delivered to
Registered Holder, a stock certificate or stock certificates and/or additional
instruments for the Conversion Securities to which Registered Holder shall be
entitled upon such conversion (bearing such legends as may be required by
applicable United States and state and federal securities laws in the reasonable
opinion of legal counsel of the Company, by the Company153s Certificate of
Incorporation or Bylaws, or by any agreement between the Company and Registered
Holder). Such conversion shall be deemed to have been made on the date of the
closing of the Qualified Financing and Registered Holder shall be treated for
all purposes as the record holder of such Conversion Securities as of such date.
No fractional shares will be issued upon conversion of this Note. If upon any
conversion of this Note, a fraction of a share would otherwise result, then in
lieu of such fractional share the Company will pay the cash value of that
fractional share, calculated on the basis of the applicable Conversion Price.

4. NO RIGHTS AS STOCKHOLDER. This Note does
not entitle Registered Holder to any voting rights or other rights as a
stockholder of the Company, unless and until (and only to the extent that) this
Note is actually converted into Conversion Securities in accordance with its
terms. In the absence of conversion of this Note, no provisions of this Note,
and no enumeration herein of the rights or privileges of Registered Holder,
shall cause Registered Holder to be a stockholder of the Company for any
purpose.

5. DEFAULT.

(a) An “Event of Default” will be deemed to have
occurred upon any of the following events:

(i) the Company153s failure to pay to Registered Holder any amount of principal
or interest when and as due under this Note, upon receipt of written notice of
such failure from Registered Holder;

(ii) a receiver is appointed for any material part of the Company153s property,
the Company makes a general assignment for the benefit of creditors, the Company
voluntarily initiates an action under the U.S. Bankruptcy Code as a debtor, or
the Company is involuntarily made the subject (as a debtor or alleged debtor) of
an action under the U.S. Bankruptcy Code or becomes the subject of any other
bankruptcy or similar proceeding for the general adjustment of its debts, which
involuntary action is not terminated or otherwise disposed of without a judgment
against the Company within thirty (30) days of its initiation; or

(iii) the Company breaches any material representation, warranty, covenant or
other term or condition of this Note or the Purchase Agreement, except, in the
case of a breach of a covenant which is curable, only if such breach continues
for a period of at least fifteen (15) calendar days.

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(b) From and after the occurrence of an Event of Default, the Note Amount
shall bear simple interest at a rate equal to twenty percent (20%) per annum,
until the Note Amount shall have been paid in full. Upon the occurrence of any
Event of Default, Registered Holder may, at such Registered Holder153s sole
option, declare all or any portion of the Note Amount due and payable in full;
provided, that in the event of an Event of Default under Section 5.1(b) above,
the Note Amount and all other sums payable hereunder shall become and be
immediately due and payable in full without any action on the part of Registered
Holder.

6. NO PREPAYMENT. The Company may not, at any time
prior to conversion of this Note under Section 2, prepay in whole or in part the
unpaid balance of this Note, without the prior written consent of Registered
Holder.

7. WAIVERS. No failure or delay on the part of
Registered Holder 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. To the maximum extent permitted by law,
the Company and all endorsers of this Note hereby waive demand, notice,
presentment, protest, notice of dishonor, and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note.

8. TRANSFER. This Note, any Conversion Securities
issued upon conversion of this Note and any capital stock of the Company
issuable upon the conversion or exercise thereof may be offered, sold, assigned
or transferred by Registered Holder without the consent of the Company, subject
only to applicable securities laws. The rights and obligations of the Company
and Registered Holder under this Note shall be binding upon and benefit their
respective permitted successors, assigns, heirs, administrators and transferees.

9. Representations and Warranties of the Company. The
Company hereby represents and warrants to Registered Holder as follows:

(a) 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; and (c) has the corporate
power and authority to execute, deliver and perform its obligations under this
Note.

(b) The execution, delivery and performance by the Company of this Note (a)
have been duly authorized by all necessary corporate action of the Company; (b)
do not contravene the terms of the Company153s 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 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 on the Company.

10. Representations and Warranties of Registered
Holder. Registered Holder hereby represents and warrants to the
Company as follows:

(a) This Note, and the Conversion Securities issuable upon conversion thereof
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 Registered
Holder 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 Registered Holder
should in the future decide to dispose of any of such securities, Registered
Holder understands and agrees that it may do so only in compliance with the Act
and applicable state securities laws, as then in effect.

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(b) Registered Holder understands that this Note and the Conversion
Securities 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 Registered Holder153s representations set forth
herein. Registered Holder 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.
Registered Holder 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
Registered Holder153s satisfaction.

(c) Registered Holder is an “accredited investor”
as that term is defined by Rule 501 of Regulation D promulgated under the Act.

11. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER
COSTS. If (a) this Note is placed in the hands of an attorney for
collection or enforcement or is collected or enforced through any legal
proceeding or Registered Holder otherwise takes action to collect amounts due
under this Note or to enforce the provisions of this Note, or (b) there occurs
any bankruptcy, reorganization, receivership of the Company or other proceedings
affecting Company creditors153 rights and involving a claim under this Note, then
the Company shall pay the reasonable costs incurred by Registered Holder for
such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including but not limited to
reasonable attorneys fees and disbursements.

12. RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
The Company hereby agrees that, in connection with soliciting board and/or
stockholder approval with respect to the Qualified Financing while this Note
remains outstanding, the Company shall reserve a sufficient number of shares of
its capital stock for issuance upon conversion of this Note and the exercise
and/or conversion of the Conversion Securities, as applicable, and a sufficient
number of shares of Common Stock for issuance upon conversion of such shares of
capital stock, if applicable. In connection therewith, (i) such shares of the
Company153s capital stock shall be duly authorized and, when issued or delivered
upon (x) conversion of this Note in accordance with the terms of this Note or
(y) exercise or conversion of the Conversion Securities in accordance with their
terms, shall be validly issued, fully paid and non-assessable, and (ii) if
applicable, such shares of Common Stock, when issued or delivered upon the
conversion of such capital stock in accordance with the terms of the Company153s
Certificate of Incorporation, shall be validly issued, fully paid and
non-assessable.

13. GOVERNING LAW. This Agreement shall be construed
and enforced in accordance with, and governed by, the internal laws of the State
of Delaware, excluding that body of law applicable to conflicts of laws.

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14. NOTICES. Any and all notices required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given (i) at the time of personal delivery, if delivered in person;
(ii) at the time of transmission by facsimile, addressed to the other party at
its facsimile number specified herein (or hereafter modified by subsequent
notice to the parties hereto), with confirmation of receipt made by printed
confirmation sheet verifying successful transmission of the facsimile; (iii) at
the time of transmission by electronic mail, with confirmation of receipt; (iv)
one business day after deposit with an express overnight courier for United
States deliveries, or two business days after deposit with an international
express air courier for deliveries outside of the United States, with proof of
delivery from the courier requested; or (v) three business days after deposit in
the United. States mail by certified mail (return receipt requested) for United
States deliveries.

All notices not delivered personally or by facsimile will be sent with
postage and/or other charges prepaid and properly addressed to the party to be
notified at the address or facsimile number as follows, or at such other address
or facsimile number as such other party may designate by one of the indicated
means of notice herein to the other parties hereto as follows:

(i) if to Registered Holder:

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, Esq.

Facsimile: 804-698-5174

(ii) if to the Company:

Transgenomic, Inc.

12325 Emmet Street

Omaha, Nebraska 68164

Attention: Craig J. Tuttle

Facsimile: 402-452-5461

with a copy to:

Husch Blackwell LLP

1620 Dodge Street; Suite 2100

Omaha, Nebraska 68102

Attention: David E. Gardels, Esq.

Facsimile: 402-964-5050

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15. AMENDMENTS AND WAIVERS. Any term of this Note may
be amended and the observance of any term of this Note waived (either generally
or in a particular instance and either retroactively or prospectively),
including without limitation an amendment to extend the Maturity Date, by
Registered Holder and the Company. Any amendment or waiver effected in
accordance with this section shall be binding upon any future Registered Holder
of this Note, regardless of whether or not such person consents thereto.

16. SEVERABILITY. If one or more provisions of this
Note are held to be unenforceable under applicable law, such provision(s) shall
be excluded from this Note and the balance of this Note shall be interpreted as
if such provision(s) were so excluded and shall be enforceable in accordance
with its terms.

[Remainder of Page Intentionally Left Blank]

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

THE COMPANY:
TRANSGENOMIC, INC.
By:	/s/ Craig J. Tuttle
	Craig J. Tuttle, Chief Executive Officer

ACKNOWLEDGED AND AGREED:

HOLDER:

THIRD SECURITY SENIOR STAFF 2008 LLC

By: Third Security, LLC, Manager

By:	/s/ Randal J. Kirk
	Randal J. Kirk, Manager

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