Exhibit
      10.1

     

    THE
      SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
      WITH
      THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      ADMINISTRATOR OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
      REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
      “SECURITIES ACT”). THIS AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A
      SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH
      SUCH
      OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE “RESTRICTED
      SECURITIES” UNDER RULE 144 PROMULGATED PURSUANT TO THE SECURITIES ACT, AND MAY
      NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
      REGISTRATION OR EXEMPTION THEREFROM.

    


    10%
      CONVERTIBLE NOTE PURCHASE AGREEMENT

     

    NEOPROBE
      CORPORATION


    


    THIS
      AGREEMENT is made this 3rd day of July, 2007, between NEOPROBE
      CORPORATION (the
      “Company”),
      incorporated under the laws of the State of Delaware, with its principal office
      at 425 Metro Place North, Suite 300, Dublin, OH 43017 and David C. Bupp,
      residing at 9095 Moors Place North, Dublin, Ohio 43017, Cynthia B. Gochoco,
      residing at 1550 Chapel Drive, York, Pennsylvania 17404, and Walter H. Bupp,
      residing at 2038 Wyntre Brook Drive, York, Pennsylvania 17403, as joint tenants
      with right of survivorship (each a “Purchaser,”
and
      collectively the “Purchasers”).
      

    


    In
      consideration of the mutual covenants contained in this Agreement, the Company
      and the Purchasers agree as follows:

    


    Section
      1. Certain
      Definitions.
      For
      purposes of this Agreement: 

    


    “Act”
has
      the
      meaning specified in the legend appearing on the first page.

    


    “Agreement”
means
      this 10% Convertible Note Purchase Agreement including all Exhibits and
      Attachments hereto, as the same may be amended, modified or supplemented from
      time to time in accordance with the terms hereof.

    


    “Average
      Closing Price”
has
      the
      meaning specified in Section 9.6(b).

    


    “Average
      Market Price”
means
      125% of the average Closing Price of the Common Stock for the five (5)
      consecutive Trading Days immediately preceding the Closing Date.

    


    “Business
      Day”
means
      any day on which banks in the City of Columbus, Ohio are open for
      business.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Closing”
means
      the completion of the purchase and sale of the Note and Warrant on the Closing
      Date. 

    


    “Closing
      Date”
means
      the date of the Closing. 

    


    “Closing
      Price”
means
      for each Trading Day, the last transaction price as reported on the principal
      national securities exchange on which the Common Stock is listed or admitted
      for
      quotation, or if the Common Stock is not listed or quoted on an exchange, the
      closing bid price for the Common Stock on such day in the over-the-counter
      market as reported by Bloomberg, the National Quotation Bureau or
      NASDAQ.

    


    “Common
      Stock”
means
      the Common Stock of the Company, $.001 par value.

    


    “Conversion
      Amount”
has
      the
      meaning specified in Section 9.1.

    


    “Conversion
      Date”
has
      the
      meaning specified in Section 9.2.

    


    “Conversion
      Notice”
has
      the
      meaning specified in Section 9.2

    


    “Conversion
      Price”
has
      the
      meaning specified in Section 9.1

    


    “Conversion
      Shares”
has
      the
      meaning specified in Section 9.1.

    


    “Event
      of Default”
has
      the
      meaning specified in Section 7.1.

    


    “Exchange
      Act”
has
      the
      meaning specified in Section 3.5.

    


    “Holder”
means
      the Purchasers and any transferee of the Note in a transfer permitted under
      Section 8.2.

    


    “Maturity
      Date”
has
      the
      meaning specified in Section 2.1.

    


    “Note”
means
      the 10% Convertible Note of the Company, due July 8, 2008, in the Principal
      Sum
      that is issued pursuant to this Agreement (including any notes issued in
      substitution therefor), as the same may be amended, modified or supplemented
      from time to time in accordance with the terms thereof.

    


    “Person”
shall
      mean any individual, corporation, partnership, limited liability company, trust,
      incorporated or unincorporated organization, joint venture, joint stock company,
      or a government or any agency or political subdivision thereof or other entity
      of any kind.

    


    “Principal
      Sum”
has
      the
      meaning specified in Section 2.1.

    


    “Reports”
has
      the
      meaning specified in Section 3.6.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    


    “Registration
      Rights Agreement”
has
      the
      meaning specified in Section 2.4.

    


    “SEC”
has
      the
      meaning specified in Section 3.7.

    


    “Securities
      Act”
has
      the
      meaning specified in the legend on the first page of this
      Agreement.

    


    “Senior
      Indebtedness”
means
      all liabilities and obligations of the Company to Biomedical Value Fund, L.P.,
      Biomedical Offshore Value Fund, Ltd. and David C. Bupp under the Series A
      Convertible Promissory Notes Due January 7, 2009, in the aggregate original
      principal amount of $8,100,000, as amended, modified or supplemented from time
      to time.

    


    “Special
      Committee”
has
      the
      meaning specified in Section 4.9.

    


    “Trading
      Day”
means
      any day on which transactions are effected on the New York Stock Exchange,
      the
      American Stock Exchange, or the NASDAQ Stock Market.

    


    “Transaction
      Documents”
has
      the
      meaning specified in Section 2.1.

    


    “Warrant”
or
      “Warrants”
means
      the Warrant purchased from the Company on the Closing Date and any subsequent
      Warrant or Warrants issued in exchange or replacement thereof pursuant to the
      terms of the original Warrant.

    


    “Warrant
      Shares”
means
      shares of Common Stock issuable on exercise of the Warrant.

    


    Section
      2. Authorization
      and Sale of Note.

    


    2.1 Authorization.
      Subject
      to the terms and conditions of this Agreement, the Company has authorized the
      execution and delivery to Purchasers of (a) this Agreement, (b) the Note in
      the
      principal amount of $1,000,000 (the “Principal
      Sum”),
      with
      a maturity date on July 8, 2008 (the “Maturity
      Date”),
      (c)
      the Warrant, (d) the Registration Rights Agreement, and (e) all other
      agreements, documents, instruments and certificates to be delivered by the
      Company under the foregoing (the “Transaction
      Documents”).
      The
      Company promises to pay to the Holder the Principal Sum plus any accrued and
      unpaid interest in cash on the Maturity Date. Simple interest shall accrue
      on
      the unpaid Principal Sum at the rate of 10% per annum from the Closing Date,
      and
      shall be payable in arrears on the last day of each calendar quarter in cash,
      provided that from and after an Event of Default the rate of interest shall
      increase to 12% per annum until the Event of Default is cured. The form of
      the
      Note is annexed hereto as Exhibit
      A.
      The
      Company, if not then in default hereunder, shall have the right to prepay at
      any
      time and from time to time before the Maturity Date any amount or amounts due
      under the Note, subject to the terms of Section 9.3 of this Agreement. Any
      partial prepayment shall be in the minimum amount of $100,000 or any integral
      multiple thereof.

    


    2.2 Agreement
      to Sell and Purchase the Note.
      Subject
      to the terms and conditions of this Agreement, the Company will issue and sell
      the Note to Purchasers and Purchasers will purchase the Note from the Company,
      at the Closing provided for in Section 2.5, at the purchase price of 100% of
      the
      Principal Sum.

    


    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    2.3 Warrant
      Issuable Upon Closing.
      As
      additional consideration for the purchase of the Note, at the Closing the
      Company will issue to Purchasers a warrant to purchase a total of 500,000 shares
      of the Company’s Common Stock, pursuant to the terms of a separate Warrant, the
      form of which is attached hereto as Exhibit
      B
      (the
“Warrant”).
      The
      Warrant shall have an exercise price equal to the Average Market
      Price.

    


    2.4 Registration
      Rights.
      At the
      Closing, the Company will enter into a Registration Rights Agreement with
      Purchasers in the form attached hereto as Exhibit
      C,
      providing for the filing of a registration statement under the Act with respect
      to resales of the Warrant Shares and Conversion Shares.

    


    2.5 Time
      and Place of Closing.
      The
      Closing shall be held at the offices of Porter, Wright, Morris & Arthur, 41
      South High Street, Columbus, Ohio 43215 on or before July 6, 2007.

    


    2.6 Payment
      and Delivery.
      At the
      Closing, the following shall occur:

    


    (a) The
      Company shall deliver or cause to be delivered to Purchaser 

    


    (i)
      an
      original Note and Warrant, substantially in the form set forth in Exhibits
      A and
      B hereto, each bearing the original signatures of a duly authorized officer
      of
      the Company; 

    


    (ii)
      a
      Registration Rights Agreement in the form set forth in Exhibit C each bearing
      the original signatures of a duly authorized officer of the
      Company;

    


    (iii)
      a
      certificate, dated the Closing of the Secretary of the Company certifying (x)
      that complete and accurate copies of the resolutions of the board of directors
      of the Company approving the execution, delivery and performance of this
      Agreement and the consummation of the transactions contemplated hereby are
      attached thereto, (y) that such resolutions are in full force and effect and
      have not been amended or repealed and (z) the names and titles of the officers
      of the Company who have executed the documents, certificates and instruments
      delivered at the Closing and their signatures; and

    


    (iv)
      a
      copy of the Certificate of Incorporation of the Company (certified by the
      Secretary of State of the State of Delaware).

    


    (b) Purchasers
      shall cause payment to be made to the Company in immediately available U.S.
      funds of the Principal Sum.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    
      2.7 Usury.
        All
        agreements which either now are or which shall become agreements between
        the
        Company and Purchasers are hereby limited so that in no contingency or event
        whatsoever shall the total liability for payments in the nature of interest,
        additional interest and other charges exceed the applicable limits imposed
        by
        any applicable usury laws. If any payments in the nature of interest, additional
        interest and other charges made under this Agreement or the Note are held
        to be
        in excess of the limits imposed by any applicable usury laws, it is agreed
        that
        any such amount held to be in excess shall be considered payment of principal
        hereunder, and the indebtedness evidenced hereby shall be reduced by such
        amount
        so that the total liability for payments in the nature of interest, additional
        interest and other charges shall not exceed the applicable limits imposed
        by any
        applicable usury laws, in compliance with the desires of the Company and
        Purchasers. This provision shall never be superseded or waived and shall
        control
        every other provision of the Transaction Documents and all agreements between
        the Company and Purchasers, or their successors and assigns.

      


      Section
        3. General
        Representations and Warranties of the Company.
        The
        Company hereby represents and warrants to Purchasers that the following are
        true
        and correct as of the date hereof and as of the Closing Date.

      


      3.1 Organization;
        Qualification.
        The
        Company is a corporation duly organized and validly existing under the laws
        of
        the State of Delaware and is in good standing under such laws. The Company
        has
        all requisite corporate power and authority to own, lease and operate its
        properties and assets, and to carry on its business as presently conducted.
        The
        Company is qualified to do business as a foreign corporation in each
        jurisdiction in which the ownership of its property or the nature of its
        business requires such qualification, except where failure to so qualify
        would
        not have a material adverse effect on the condition (financial or otherwise)
        or
        on the earnings, business affairs, properties or assets of the
        Company.

      


      3.2 Capitalization.
        The
        Company has authorized 150,000,000 shares of Common Stock, of which 62,869,731
        are currently issued and outstanding, and 22,858,182 are currently reserved
        for
        issuance under outstanding warrants and options. The Company also has authorized
        5,000,000 shares of preferred stock, $.001 par value, of which no shares
        are
        issued or outstanding. All issued and outstanding shares of Common Stock
        have
        been duly authorized and validly issued and are fully paid and nonassessable
        and
        no outstanding shares of Common Stock are subject to, or have been issued
        in
        violation of, preemptive or similar rights. As of the Closing Date, the Company
        covenants that it will from its authorized but unissued shares of Common
        Stock
        reserve a sufficient number of shares of Common Stock for issuance upon
        conversion of the Note and exercise of the Warrant. The Company is not subject
        to any obligation (contingent or otherwise) to repurchase or otherwise acquire
        or retire any shares of its Common Stock or any warrants, options or other
        rights to acquire its Common Stock. Except as disclosed in the Reports and
        excluding outstanding options to employees and directors, and except for
        the
        securities issuable under this Agreement, the Note and the Warrant, there
        are no
        contracts relating to the issuance, sale or transfer of any equity securities,
        phantom stock or appreciation rights, profit participation, or other securities
        (whether or not convertible) of the Company, including options, warrants,
        puts,
        or calls.

      


      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      3.3 Authorization.
        The
        Company has all requisite corporate right, power and authority to execute
        and
        deliver the Transaction Documents and to consummate the transactions
        contemplated thereby. All corporate action on the part of the Company, its
        directors and stockholders necessary for the authorization, execution, delivery
        and performance of the Transaction Documents by the Company has been taken.
        Each
        Transaction Document has been duly executed and delivered by the Company
        and
        constitutes a legal, valid and binding obligation of the Company enforceable
        in
        accordance with its terms, subject to laws of general application relating
        to
        bankruptcy, insolvency and the relief of debtors and rules of law governing
        specific performance, injunctive relief or other equitable remedies, and
        to
        limitations of public policy as they may apply to the indemnification provisions
        set forth in the Registration Rights Agreement. Upon their issuance and delivery
        (a) pursuant to the Warrant, the Warrant Shares, and (b) pursuant to the
        Note,
        the Conversion Shares, will be validly issued, fully paid and nonassessable
        and
        will be free of any liens or encumbrances except for those imposed by or
        on
        behalf of Purchasers, their creditors or agents. 

      


      3.4 No
        Conflict.
        The
        execution and delivery of each Transaction Document does not, and the
        consummation of the transactions contemplated thereby will not, conflict
        with,
        or result in any violation of, or default (with or without notice or lapse
        of
        time, or both), or give rise to a right of termination, cancellation or
        acceleration of any obligation or to a loss of a material benefit, under,
        any
        provision of the certificate of incorporation, and any amendments thereto,
        bylaws and any amendments thereto of the Company or any material mortgage,
        indenture, lease or other agreement or instrument, permit, concession,
        franchise, license, judgment, order, decree statute, law, ordinance, rule
        or
        regulation applicable to the Company, its properties or assets.

      


      3.5 Accuracy
        of Reports and Information.
        The
        Company is in compliance, to the extent applicable, with all reporting
        obligations under Section 12(g) of the Securities Exchange Act of 1934, as
        amended (the “Exchange
        Act”),
        except where the failure to so comply would not have a material adverse effect
        on the condition (financial or otherwise) or on the earnings, business affairs,
        properties or assets of the Company. The Company has registered its Common
        Stock
        pursuant to Section 12 of the Exchange Act and the Common Stock is admitted
        for
        quotation on the OTC Bulletin Board.

      


      3.6 Absence
        of Undisclosed Liabilities.
        The
        Company has no material liabilities or obligations, absolute or contingent
        (individually or in the aggregate), except as disclosed in the reports filed
        by
        the Company under Section 13 of the Exchange Act in the twelve month period
        prior to the Closing Date (collectively, the “Reports”),
        as
        incurred in the ordinary course of business after the date of the Reports,
        and
        obligations to Purchasers incurred under the Transaction Documents.

      


      3.7 Governmental
        Consent, etc.
        No
        consent, approval or authorization of or designation, declaration or filing
        with
        any governmental authority on the part of the Company is required in connection
        with the valid execution and delivery of this Agreement or any other Transaction
        Document, or the offer, sale or issuance of the Note or Warrant, or the
        consummation of any other transaction contemplated hereby or thereby, except
        the
        filing with the United States Securities and Exchange Commission (“SEC”)
        of a
        registration statement for the purpose of registering under the Securities
        Act
        resales by Purchasers of the Conversion Shares and Warrant Shares as provided
        in
        the Registration Rights Agreement.

      


      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      3.8 Litigation.
        Except
        as disclosed in the Reports, there is no action, proceeding or investigation
        pending, or to the Company's knowledge threatened, against the Company which
        might result, either individually or in the aggregate, in any material adverse
        change in the business, prospects, conditions, affairs or operations of the
        Company. The Company is not a party to or subject to the provisions of any
        order, writ, injunction, judgment or decree of any court or government agency
        or
        instrumentality. There is no action, suit, proceeding or investigation by
        the
        Company currently pending or which the Company currently intends to initiate
        which will materially affect the Company.

      


      3.9 Title
        to Assets.
        Except
        as disclosed in the Reports, the Company has good and marketable title to
        all
        properties and material assets described in the Reports as owned by it, free
        and
        clear of any pledge, lien, security interest, encumbrance, claim or equitable
        interest other than such as are not material to the business of the
        Company.

      


      3.10 Required
        Governmental Permits.
        The
        Company is in possession of and operating in material compliance with all
        authorizations, licenses, certificates, consents, orders and permits from
        state,
        federal and other regulatory authorities which are material to the conduct
        of
        its business, all of which are valid and in full force and effect.

      


      3.11 Other
        Outstanding Securities.
        Except
        as disclosed in the Reports and excluding outstanding options to employees
        and
        directors, and except for the securities issuable under this Agreement, the
        Note
        and the Warrant, there are no other outstanding debt or equity securities
        of the
        Company presently convertible into or exercisable for shares of Common Stock.
        

      


      Section
        4. Representations,
        Warranties and Covenants of Purchasers.
        Each of
        the Purchasers represents and warrants to, and covenants with, the Company
        that
        the following are true and correct as of the date hereof and as of the Closing
        Date.

      


      4.1 Authority.
        Such
        Purchaser has all requisite right, power, authority and capacity to execute
        and
        deliver this Agreement and to consummate the transactions contemplated hereby.
        This Agreement has been duly executed and delivered by such Purchaser and
        constitutes the legal, valid and binding obligation of such Purchaser,
        enforceable in accordance with its terms, subject to laws of general application
        relating to bankruptcy, insolvency and the relief of debtors and rules of
        law
        governing specific performance, injunctive relief or other equitable remedies,
        and to limitations of public policy as they may apply to the indemnification
        provisions set forth in the Registration Rights Agreement.

      


      4.2 Investment
        Experience.
        Such
        Purchaser is an “accredited investor” as defined in Rule 501(a) under the Act,
        and resides in the state described as his or her state of residence in the
        first
        paragraph of this Agreement. Such Purchaser acknowledges that David C. Bupp
        (“Mr.
        Bupp”),
        the
        chief executive officer and a director of the Company, has acted as such
        Purchaser’s representative and advisor in connection with the purchase of the
        Note and Warrant, that Mr. Bupp is aware of the Company’s business affairs and
        financial condition, has had access to and has acquired sufficient information
        about the Company, including the Reports, and has communicated that information
        to such Purchaser, so as to allow such Purchaser to reach an informed and
        knowledgeable decision to acquire the Note and Warrant. Such Purchaser
        independently has such business and financial experience as is required to
        give
        him or her the capacity to protect his or her own interests in connection
        with
        the purchase of the Note and Warrant.

      


      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      4.3 Investment
        Intent.
        Without
        limiting the ability to resell the Conversion Shares and Warrant Shares pursuant
        to an effective registration statement, or upon any exemption from registration
        that may be legally available, such Purchaser represents that he or she is
        purchasing the Note and Warrant, and will acquire the Conversion Shares and
        Warrant Shares, for such Purchaser’s own account as principal for investment
        purposes, and not with a view to a distribution. Such Purchaser understands
        that
        the acquisition of the Note and Warrant has not been registered under the
        Act or
        registered or qualified under any state securities law in reliance on specific
        exemptions therefrom, which exemptions may depend upon, among other things,
        the
        bona fide nature of such Purchaser’s investment intent as expressed herein. Such
        Purchaser will not, directly or indirectly, offer, sell, pledge, transfer
        or
        otherwise dispose of (or solicit any offers to buy, purchaser or otherwise
        acquire or take a pledge of) any of the Note, Warrant, Conversion Shares
        or
        Warrant Shares, except in compliance with the Act and any applicable state
        securities laws, and the rules and regulations promulgated
        thereunder.

      


      4.4 Registration
        or Exemption Requirements.
        Such
        Purchaser further acknowledges and understands that the Note, Warrant,
        Conversion Shares and Warrant Shares may not be resold or otherwise transferred
        except in a transaction registered under the Act and any applicable state
        securities laws or unless an exemption from such registration is available.
        Such
        Purchaser understands that the Note and Warrant, as well as any certificate
        for
        the Conversion Shares or Warrant Shares, will be imprinted with a legend
        that
        prohibits the transfer of such securities unless (a) it is registered or
        such
        registration is not required pursuant to an exemption therefrom, and (b)
        if the
        transfer is pursuant to an exemption from registration other than Rule 144
        under
        the Act and an opinion of counsel reasonably satisfactory to the Company
        is
        obtained to the effect that the transaction is so exempt.

      


      4.5 No
        Legal, Tax or Investment Advice.
        Such
        Purchaser understands that nothing in this Agreement or any other materials
        presented to Purchasers in connection with the purchase and sale of the Note
        and
        Warrant constitutes legal, tax or investment advice from the Company, or
        on its
        behalf by any director, officer, employee, agent or representative of the
        Company. Such Purchaser has consulted such legal, tax and investment advisors
        as
        such Purchaser, in his or her sole discretion, has deemed necessary or
        appropriate in connection with the purchase of the Note and the
        Warrant.

      


      4.6 Purchaser
        Review.
        Such
        Purchaser hereby represents and warrants that he or she has carefully examined
        the Reports, and the financial statements contained therein. Such Purchaser
        acknowledges that the Company has made available to him or her all documents
        and
        information that such Purchaser has requested relating to the Company and
        has
        been provided answers to all of his or her questions concerning the Company,
        the
        Note and the Warrant.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    

    


    4.7 Certain
      Risks.
      Such
      Purchaser recognizes that the purchase of the Note and Warrant, and if issued,
      the Conversion Shares and Warrant Shares, involves a high degree of risk in
      that:

    


    (a)
      an
      investment in the Company is highly speculative and only investors who can
      afford the loss of their entire investment should consider investing in the
      Company and the Note, Warrant, Conversion Shares and Warrant
      Shares;

    


    (b)
      such
      Purchaser may not be able to liquidate this investment;

    


    (c)
      transferability of the Note, Warrant, Conversion Shares and Warrant Shares
      is
      extremely limited;

    


    (d)
      such
      Purchaser could sustain the loss of his or her entire investment in the Note,
      Warrant Conversion Shares and Warrant Shares;

    


    (e)
      no
      return on investment, whether through distributions, appreciation,
      transferability or otherwise, and no performance by, through or of the Company,
      has been promised, assured, represented or warranted by the Company, or by
      any
      director, officer, employee, agent or representative thereof;
      and

    


    (f)
      while
      the Common Stock is presently quoted on the OTC Bulletin Board and while such
      Purchaser is the beneficiary of certain registration rights provided herein:
      (i)
      the issuance of the Note, Warrant, and Warrant Shares are not registered under
      applicable federal or state securities laws, and thus may not be sold, conveyed,
      assigned or transferred unless such transaction is registered under such laws
      or
      unless an exemption from registration is available under such laws, as more
      fully described below; and (i) the Note and Warrant are not quoted, traded
      or
      listed for trading or admitted for quotation on any organized market or
      quotation system, and there is therefore no present public or other market
      for
      such Note or Warrant, and (iii) there can be no assurance that the Common Stock
      will continue to be quoted, traded or listed for trading or authorized for
      quotation on the OTC Bulletin Board or on any other organized market or
      quotation system.

    


    4.8 No
      Registration, Review or Approval.
      Such
      Purchaser acknowledges and understands that the limited private offering and
      sale of the Note and Warrant pursuant to this Agreement, and the offering and
      sale of the Conversion Shares and Warrant Shares, have not been reviewed or
      approved by the SEC or by any state securities commission, authority or agency,
      and is not registered under the Act or under the securities or “blue sky” laws,
      rules or regulations of any state. Purchaser acknowledges, understands and
      agrees that the Note, Warrant, and Warrant Shares are being offered and sold
      hereunder pursuant to (a) a private placement exemption to the registration
      provisions of the Act pursuant to Section 3(b) or Section 4(2) of such Act
      and
      Regulation D promulgated under such Act, and (b) a similar exemption to the
      registration provisions of applicable state securities laws.

    


    
      
         

      

      
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    4.9 Disclosure
      by Purchaser.
      Such
      Purchaser represents and warrants that all material facts as to Mr. Bupp’s
      relationship or interest in the transactions contemplated by this Agreement
      have
      been disclosed to the special committee of the Board of Directors (the
“Special
      Committee”)
      that
      negotiated the terms of this Agreement with Purchasers, and that Mr. Bupp has
      disclosed to the Special Committee and to the Board of Directors all contracts,
      negotiations, events, corporate developments, results of operations and other
      facts of which he has knowledge that a reasonable person would consider likely
      to have a material effect, whether positive or adverse, on the business, assets,
      liabilities, operations, prospects, and condition (financial or otherwise)
      of
      the Company, including without limitation all acquisition and financing
      proposals from third parties and the substance of any discussions relating
      thereto in which he participated.

    


    4.10 Purchaser’s
      Knowledge of Breach.
      Such
      Purchaser is not aware of any facts or circumstances that would be sufficient,
      in the absence of other facts or circumstances not currently known to such
      Purchaser, to constitute a breach of any of the representations and warranties
      of the Company contained in this Agreement or in any of the Transaction
      Documents. Such Purchaser shall be deemed to have waived in full any breach
      of
      any of the Company’s representations and warranties of which any Purchaser has
      knowledge at the Closing.

    


    Section
      5. Conditions
      to Purchaser’s Obligation to Purchase.
      The
      Company understands that Purchasers’ obligation to purchase the Note and Warrant
      is conditioned upon the truth and accuracy of the representations and warranties
      of the Company in Section 3 as of the Closing Date, and:

    


    (a) Execution
      and delivery by the Company of the original Note and Warrant to Purchaser;
      and

    


    (b) Execution
      and delivery by the Company of the Registration Rights Agreement, in the form
      of
Exhibit
      C.

    


    Section
      6. Conditions
      to Company’s Obligation to Sell.
      Purchasers understand that the Company’s obligation to sell the Note and Warrant
      is conditioned upon the truth and accuracy of the representations and warranties
      of Purchasers in Section 4 as of the Closing Date, and:

    


    (a) Delivery
      by Purchasers to the Company of good funds as payment in full for the purchase
      of the Note and Warrant; and

     

    (b) Execution
      and delivery by Purchasers of the Registration Rights Agreement, in the form
      of
Exhibit
      C.

    


    Section
      7. Default.

    


    7.1 Events
      of Default.
      An
“Event of Default” shall
      exist if any of the following conditions or events shall occur and be
      continuing:

    


    (a) the
      Company defaults in the payment of any principal on the Note when the same
      becomes due and payable, whether at maturity or at a date fixed for prepayment
      or by declaration or otherwise; or

    


    
      
         

      

      
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    (b) the
      Company defaults in the payment of any interest on the Note for more than five
      Business Days after the same becomes due and payable; or

    


    (c) the
      Company defaults in the performance of or compliance with any term contained
      herein (other than those referred to in paragraphs (a) and (b) of this Section
      7.1) and such default is not remedied within 30 days after the Company receives
      written notice of such default from any Holder (any such written notice to
      be
      identified as a “notice of default” and to refer specifically to this paragraph
      (c) of Section 7.1); or

    


    (d) one
      or
      more defaults under any bond, debenture, note or other evidence of indebtedness
      of the Company owed to any Person other than Purchaser, or under any indenture
      or other instrument under which any such evidence of indebtedness has been
      issued or by which it is governed, or under any lease of any asset, in any
      case
      in which the aggregate amount of all such defaults are in excess of $100,000.00,
      and the expiration of the applicable period of grace, if any, specified in
      such
      evidence of indebtedness, indenture, other instrument or lease; or

    


    (e) any
      representation or warranty made in writing by or on behalf of the Company or
      by
      any officer of the Company in this Agreement or in any writing furnished in
      connection with the transactions contemplated hereby proves to have been false
      or incorrect in any material respect on the date as of which made, and no
      Purchaser had knowledge at the Closing that such representation or warranty
      was
      false or incorrect; or

    


    (f) the
      rendering against the Company of one or more final judgments, decrees or orders
      for the payment of money which in the aggregate exceed $100,000.00 and the
      continuance of such judgments, decrees or orders unsatisfied and in effect
      for
      any period of 30 consecutive days without a stay of execution; or

    


    (g) the
      Company (i)
      is
      generally not paying, or admits in writing its inability to pay, its debts
      as
      they become due, (ii) files, or consents by answer or otherwise to the filing
      against it of, a petition for relief or reorganization or arrangement or any
      other petition in bankruptcy, for liquidation or to take advantage of any
      bankruptcy, insolvency, reorganization, moratorium or other similar law of
      any
      jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv)
      consents to the appointment of a custodian, receiver, trustee or other officer
      with similar powers with respect to it or with respect to any substantial part
      of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi)
      takes corporate action for the purpose of any of the foregoing; or

    


    (h) a
      court
      or governmental authority of competent jurisdiction enters an order appointing,
      without consent by the Company, a custodian, receiver, trustee or other officer
      with similar powers with respect to it or with respect to any substantial part
      of its property, or constituting an order for relief or approving a petition
      for
      relief or reorganization or any other petition in bankruptcy or for liquidation
      or to take advantage of any bankruptcy or insolvency law of any jurisdiction,
      or
      ordering the dissolution, winding-up or liquidation of the Company, or any
      such
      petition shall be filed against the Company and such petition shall not be
      dismissed within 60 days; or

    


    
      
         

      

      
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    (i) an
      event
      of default shall occur under any other Transaction Document; or

    


    (j) the
      sale,
      exchange, or other disposition (in a single transaction or a series of related
      transactions) of all or substantially all of the assets of the Company that
      is
      subject to Section 271(a) of the Delaware General Corporation Law, without
      the
      consent of the Holder;
      or

    


    (k) a
      merger
      or consolidation of the Company without the consent of the Holder, other than
      a
      merger or consolidation in which the voting equity securities of the Company
      immediately prior to the merger or consolidation continue to represent (either
      by remaining outstanding or being converted into securities of the surviving
      entity) more than fifty percent (50%) of the combined voting power of the
      Company or surviving entity immediately after the merger or consolidation with
      another entity.

    


    7.2. Acceleration
      and Remedies.

    


    (a) If
      any
      Event of Default has occurred and is continuing, the Holder may at any time
      at
      its option, by notice or notices to the Company, declare the Note to be
      immediately due and payable.

    


    (b) Upon
      the
      Note becoming due and payable under this Section 7.2, the Note will forthwith
      mature, and the entire unpaid Principal Sum, plus all accrued and unpaid
      interest thereon, shall all be immediately due and payable, in each and every
      case without presentment, demand, protest or further notice, all of which are
      hereby waived.

    


    (c) If
      any
      Event of Default has occurred and is continuing, and irrespective of whether
      the
      Note has been declared immediately due and payable under paragraph (a) of this
      Section 7.2, the Holder may proceed to protect and enforce its rights by an
      action at law, suit in equity or other appropriate proceeding, whether for
      the
      specific performance of any agreement contained herein or in the Note, or for
      an
      injunction against a violation of any of the terms hereof or thereof, or in
      aid
      of the exercise of any power granted hereby or thereby or by law or
      otherwise.

    


    8.
      Registration;
      Exchange; Substitution of Note.

    


    8.1. Registration
      of Note.
      The
      Company shall keep at its principal executive office a register for the
      registration and registration of transfers of the Note. The name and address
      of
      each Holder, each transfer of the Note and the name and address of each
      transferee shall be registered in such register. Prior to due presentment for
      registration of transfer, the Person in whose name the Note shall be registered
      shall be deemed and treated as the owner and holder thereof for all purposes
      hereof, and the Company shall not be affected by any notice or knowledge to
      the
      contrary.

     

    
      
         

      

      
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    8.2. Transfer
      and Exchange of Note.
      Upon
      surrender of the Note at the principal executive office of the Company for
      registration of transfer or exchange (and in the case of a surrender for
      registration of transfer, duly endorsed or accompanied by a written instrument
      of transfer duly executed by the registered Holder or the Holder’s attorney duly
      authorized in writing and accompanied by the address for notices of each
      transferee of such Note or part thereof), the Company shall execute and deliver,
      at the Company’s expense (except as provided below), a new Note (as requested by
      the Holder thereof) in exchange therefor, in an aggregate principal amount
      equal
      to the unpaid principal amount of the surrendered Note. Each such new Note
      shall
      be payable to such Person as such Holder may request and shall be substantially
      in the form of Exhibit
      A.
      Each
      such new Note shall be dated and bear interest from the date to which interest
      shall have been paid on the surrendered Note or dated the date of the
      surrendered Note if no interest shall have been paid thereon. The Company shall
      not be required to register or otherwise recognize any transfer that purports
      to
      be for less than the entire unpaid principal amount of the Note. Any transferee,
      by its acceptance of a Note registered in its name (or the name of its nominee),
      shall be required to make in writing the representations set forth in Sections
      4.2 through 4.8, and shall be bound by the provisions of this Agreement to
      the
      same extent as if the transferee were originally a party to this Agreement.
      Notwithstanding any provision of this Agreement to the contrary, the Company
      may
      refuse to register the transfer of the Note to any Person that is not an
“accredited investor” as defined in Rule 501 of Regulation D.

    


    8.3. Replacement
      of Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to it of the
      ownership of and the loss, theft, destruction or mutilation of any Note, and
      (a)
      in the case of loss, theft or destruction, of indemnity reasonably satisfactory
      to it or (b) in the case of mutilation, upon surrender and cancellation thereof,
      then in either case, the Company at its own expense shall execute and deliver,
      in lieu thereof, a new Note, dated and bearing interest from the date to which
      interest shall have been paid on such lost, stolen, destroyed or mutilated
      Note
      or dated the date of such lost, stolen, destroyed or mutilated Note if no
      interest shall have been paid thereon.

    


    Section
      9. Conversion
      of Note to Common Stock.

    


    9.1
      Optional
      Conversion.
      At the
      option of the Holder, at any time following July 30, 2007 and prior to the
      Maturity Date, the Principal Sum then outstanding (or any portion thereof equal
      to or greater than $100,000), plus accrued and unpaid interest (the
“Conversion
      Amount”),
      may
      be converted, either in whole or in part, into shares of Common Stock (the
      “Conversion
      Shares”)
      (calculated as to each such conversion to the nearest whole share), at any
      time,
      and from time to time at a price per share (the “Conversion
      Price”)
      equal
      to the Average Market Price. The number of Conversion Shares due upon conversion
      shall be determined by dividing the Conversion Amount by the Conversion
      Price.

     

    
      
         

      

      
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    9.2
      Exercise
      of Conversion Privilege.
      The
      conversion right provided in Section 9.1 may be exercised by the Holder by
      delivering to the Company an executed and completed notice of conversion in
      the
      form of Exhibit
      D
      to this
      Agreement (the “Conversion
      Notice”),
      accompanied by the Note. Each date on which a Conversion Notice is delivered
      to
      the Company in accordance with the provisions of this Section 9.2 shall
      constitute a “Conversion
      Date.”
As
      promptly as practicable after the receipt of the Conversion Notice as aforesaid,
      but in any event not more than five Business Days after the Company’s receipt of
      such Conversion Notice, the Company shall, at its sole cost and expense (i)
      issue the Conversion Shares (together with any other securities or property
      to
      which the Holder is entitled upon such exercise) in accordance with the
      provisions of Section 9.1 in such denominations as the Holder may request,
      each registered in the name of the Holder or such other name as may be
      designated by the Holder, and (ii) cause to be mailed for delivery by overnight
      courier to the Holder (x) a certificate or certificate(s) representing the
      number of Conversion Shares to which the Holder is entitled by virtue of such
      conversion, (y) cash, as provided in Section 9.3, in respect of any
      fraction of a share issuable upon such conversion, and (z) if less than all
      of
      the outstanding Principal Sum shall have been converted, a new Note in the
      remaining unconverted Principal Sum, identical in form to the Note, duly
      executed by an officer of the Company. The Conversion Notice shall constitute
      a
      contract between the Holder and the Company, whereby the Holder shall be deemed
      to subscribe for the number of Conversion Shares which it will be entitled
      to
      receive upon such conversion and, in payment and satisfaction of such
      subscription (and for any cash adjustment or new Note to which it is entitled
      pursuant to Section 9.3), to surrender the Note and to release the Company
      from
      all liability under the Note.

    


    9.4 Fractional
      Shares.
      No
      fractional Conversion Shares or scrip representing fractional Conversion Shares
      shall be issued upon conversion of the Conversion Amount. Instead of any
      fractional Conversion Shares which otherwise would be issuable upon conversion
      of the Conversion Amount, the Company shall pay a cash adjustment in respect
      of
      such fraction in an amount equal to the same fraction times the Conversion
      Price.

    


    9.5 Certain
      Events.
      In case
      at any time prior to the conversion or payment of all of the principal of the
      Note, the Company:

    


    (a) declares
      any cash dividend (or authorizes any other distribution) on its Common Stock;
      

    


    (b) authorizes
      the granting to the holders of its Common Stock of rights to subscribe for
      or
      purchase any shares of its capital stock or assets, other than a dividend
      payable solely in shares of Common Stock; 

    


    (c) authorizes
      a reclassification, split or combination of the Common Stock, or a consolidation
      or merger to which the Company is a party or a sale or transfer of all or
      substantially all the assets of the Company that is subject to Section 271(a)
      of
      the Delaware General Corporation Law; or

    


    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    (d) authorizes
      a voluntary or involuntary dissolution, liquidation or winding up of the
      Company;

    


    then,
      in
      any one or more of said cases, the Company shall give, by certified or
      registered mail, postage prepaid, addressed to the Holder at the address of
      such
      Holder as shown on the books of the Company, (i) at least 30 days’ prior written
      notice of the date on which the books of the Company shall close or a record
      shall be taken for such dividend, distribution or subscription rights or for
      determining rights to vote in respect of any such dissolution, liquidation
      or
      winding-up; (ii) at least 10 days’ prior written notice of the date on which the
      books of the Company shall close or a record shall be taken for determining
      rights to vote in respect of any such reorganization, reclassification,
      consolidation, merger or sale, and (iii) in the case of any such reorganization,
      reclassification, consolidation; merger, sale, dissolution, liquidation or
      winding-up, at least 30 days’ written notice of the date when the same shall
      take place. Any notice given in accordance with clause (i) above shall also
      specify, in the case of any such dividend, distribution or option rights, the
      date on which the holders of Common Stock shall be entitled thereto. Any notice
      given in accordance with clause (iii) above shall also specify the date on
      which
      the holders of Common Stock shall be entitled to exchange their Common Stock
      for
      securities or other property deliverable upon such reorganization,
      reclassification, consolidation, merger, sale, dissolution, liquidation or
      winding-up, as the case may be. Anything herein to the contrary notwithstanding,
      the Holder may give a notice of conversion of all or a portion of the Note
      as
      contemplated in Section
      9.1,
      which
      may be conditioned upon the actual occurrence of the event which is the subject
      of the notice, it being the intention of Company and Holder that Holder shall
      be
      entitled to obtain the benefits of such conversion if such event actually
      occurs, but shall be entitled to retain this Note in full at its option if
      such
      event does not occur for any reason, and the Company agrees to take all such
      action, including issuing a new Note in order to assure to the Holder the
      benefits contemplated by this Section 9.5.

    


    9.6 Adjustment
      of Conversion Price.
      The
      Conversion Price shall be adjusted from time to time in the following manner
      upon the occurrence of the following events:

    


    (a) Dividend,
      Subdivision, Combination or Reclassification of Common Stock.
      If the
      Company shall, at any time or from time to time, (A) declare a dividend on
      the
      Common Stock payable in shares of its capital stock (including Common Stock),
      (B) subdivide the outstanding Common Stock into a larger number of shares of
      Common Stock, (C) combine the outstanding Common Stock into a smaller number
      of
      shares of its Common Stock, or (D) issue any shares of its capital stock in
      a
      reclassification of the Common Stock (including any such reclassification in
      connection with a consolidation or merger in which the Company is the continuing
      corporation), then in each such case, the Conversion Price in effect at the
      time
      of the record date for such dividend or of the effective date of such
      subdivision, combination or reclassification shall be adjusted so that the
      Holder upon conversion after such date shall be entitled to receive the
      aggregate number and kind of shares of capital stock which, if this Note had
      been converted immediately prior to such date, such holder would have owned
      upon
      such conversion and been entitled to receive by virtue of such dividend,
      subdivision, combination or reclassification. Any such adjustment shall become
      effective immediately after the record date of such dividend or the effective
      date of such subdivision, combination or reclassification. Such adjustment
      shall
      be made successively whenever any event listed above shall occur. If a dividend
      is declared and such dividend is not paid, the Conversion Price shall again
      be
      adjusted to be the Conversion Price, in effect immediately prior to such record
      date (giving effect to all adjustments that otherwise would be required to
      be
      made pursuant to this Section 9.6 from and after such record date).

     

    
      
         

      

      
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    (b) Certain
      Distributions.
      If the
      Company shall, at any time or from time to time, fix a record date for the
      distribution to all holders of Common Stock (including any such distribution
      made in connection with a consolidation or merger in which the Company is the
      continuing corporation) of evidences of indebtedness, assets or other property
      (other than regularly scheduled cash dividends or cash distributions payable
      out
      of consolidated earnings or earned surplus or dividends payable in capital
      stock
      for which adjustment is made under Section 9.6(a)) or subscription rights,
      options or warrants, upon conversion of the Note after that corporate event,
      the
      Holder will be entitled to receive the securities or assets the Holder would
      have received if the Holder had converted the Note immediately before the first
      such corporate event and not disposed of the securities or assets received
      as a
      result of the or any subsequent corporate event.

    


    (c) Issuance
      of Common Stock Below Conversion Price.

    


    (i) If
      the
      Company shall, at any time and from time to time, after the date hereof,
      directly or indirectly, sell or issue shares of Common Stock (regardless of
      whether originally issued or from the Company’s treasury), or rights, options,
      warrants or convertible or exchangeable securities containing the right to
      subscribe for or purchase shares of Common Stock) at a price per share of Common
      Stock (determined, in the case of rights, options, warrants or convertible
      or
      exchangeable securities (collectively, “Securities”), by dividing (x) the total
      consideration received or receivable by the Company in consideration of the
      sale
      or issuance of such Securities, plus the total consideration payable to the
      Company upon exercise or conversion or exchange thereof, by (y) the total number
      of shares of Common Stock covered by such Securities) which is lower than the
      Conversion Price in effect immediately prior to such sale or issuance, then,
      subject to Section 9.6(c)(ii), the Conversion Price shall be reduced to a price
      determined by multiplying the Conversion Price in effect immediately prior
      thereto by a fraction, the numerator of which shall be the sum of the number
      of
      shares of Common Stock outstanding immediately prior to such sale or issuance
      plus the number of shares of Common Stock which the aggregate consideration
      received (in the case of Securities, determined as provided below) for such
      sale
      or issuance would purchase at the Conversion Price in effect immediately prior
      to such sale or issuance and the denominator of which shall be the total number
      of shares of Common Stock outstanding immediately after such sale or issuance.
      Such adjustment shall be made successively whenever such sale or issuance is
      made. For the purposes of such adjustments, the shares of Common Stock which
      the
      holder of any such Securities shall be entitled to subscribe for or purchase
      shall be deemed to be issued and outstanding as of the date of such sale or
      issuance of such Securities and the consideration “received” by the Company
      therefor shall be deemed to be the consideration actually received or receivable
      by the Company (plus any underwriting discounts or commissions in connection
      therewith) for such Securities, plus the consideration stated in such Securities
      to be payable to the Company for the shares of Common Stock covered thereby.
      If
      the Company shall sell or issue shares of Common Stock for a consideration
      consisting, in whole or in part, of property other than cash or its equivalent,
      then in determining the “price per share of Common Stock” and the
“consideration” received or receivable by or payable to the Company for purposes
      of the first sentence and the immediately preceding sentence of this Section
      9.6(c)(i), the fair value of such property shall be determined in good faith
      by
      the Board of Directors of the Company. Except as provided below, the
      determination of whether any adjustment is required under this Section 9.6(c)(i)
      by reason of the sale or issuance of Securities and the amount of such
      adjustment, if any, shall be made only at the time of such issuance or sale
      and
      not at any subsequent time. 

    


    
      
         

      

      
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    (ii) No
      adjustment shall be made to the Conversion Price pursuant to Section 9.6(c)(i)
      in connection with the (A) issuance of shares in any of the transactions
      described in Section 9.6(a), 9.6(b), or 9.6(e) hereof; (B) issuance of shares
      upon exercise of the Warrants; (C) issuance of shares upon conversion of the
      Notes; (D) issuance of shares of Common Stock upon the exercise of options
      or
      the grant of options provided that such options were or are issued pursuant
      to
      stock option plans approved by the stockholders of the Company; (E) issuance
      of
      shares of Common Stock or rights, options, warrants or convertible or
      exchangeable securities containing the right to subscribe for or purchase shares
      of Common Stock as part of a unit in connection with an arm’s length
      institutional debt financing, (F) issuance of shares of Common Stock upon the
      exercise or conversion of rights, options, warrants or convertible or
      exchangeable securities containing the right to subscribe for or purchase shares
      of Common Stock outstanding on the Effective Date; (G) issuance of shares of
      Common Stock or rights, options, warrants or convertible or exchangeable
      securities containing the right to subscribe for or purchase shares of Common
      Stock in connection with licenses, assignments or other transfers of
      intellectual property of the Company or Subsidiaries, or rights therein, in
      connection with cooperative research and development agreements, strategic
      alliances, or agreements providing for the manufacturing, distribution or sale
      of products or services of the Company or Subsidiaries; (H) issuance of shares
      of Common Stock pursuant to the Common Stock Purchase Agreement, dated December
      1, 2006, between the Company and Fusion Capital Fund II, LLC, and (I)
      contributions of Common Stock to the Company’s 401(k) Plan.

    


    (iii) In
      the
      event of any change in the number of shares of Common Stock deliverable or
      any
      change in the consideration payable to the Company upon exercise, conversion
      or
      exchange of any Securities (including, without limitation, by operation of
      the
      anti-dilution provisions of such Securities other than those anti-dilution
      provisions contained within the Securities that are substantially similar to
      the
      provisions of Section 9.6(a) hereof), any adjustment to the Conversion Price
      which was made upon the issuance of such Securities, and any subsequent
      adjustments based thereon, shall be recomputed to reflect such change, except
      as
      provided below, no further adjustment shall be made for the actual issuance
      of
      Common Stock or any payment of such consideration upon the exercise, conversion
      or exchange of any such Securities. The Company shall make all necessary
      adjustments (including successive adjustments if required) to the Conversion
      Price in accordance with Section 9.6. Upon the expiration or termination of
      the
      right to exercise, convert or exchange any Securities, any adjustment to the
      Conversion Price which was made upon the issuance of such Securities, and any
      subsequent adjustments based thereon, shall be recomputed to reflect the
      issuance of only the number of shares of Common Stock actually issued upon
      the
      exercise, conversion or exchange of such Securities and the actual consideration
      received therefor (as determined in this Section 9.6).

     

    
      
         

      

      
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    (d) De
      Minimis Adjustments.
      No
      adjustment shall be made under this Section 9.6 if the amount of such adjustment
      would result in a change in the Conversion Price of less than one percent (1%),
      but in such case any adjustment that would otherwise be required to be made
      shall be carried forward and shall be made at the time of and together with
      the
      next subsequent adjustment, which together with any adjustment so carried
      forward, would result in a change of at least one percent (1%). Notwithstanding
      the provisions of the first sentence of this Section 9.6(d), any adjustment
      postponed pursuant to this Section 9.6(d) shall be made no later than the
      earlier of the Maturity Date or the date on which the Note is
      converted.

    


    (e) Reorganization,
      Reclassification, Merger and Sale of Assets.
      If
      there occurs any capital reorganization or any reclassification of the Common
      Stock of the Company, the consolidation or merger of the Company with or into
      another Person (other than a merger or consolidation of the Company in which
      the
      Company is the continuing corporation and which does not result in any
      reclassification or change of outstanding shares of its Common Stock) or the
      sale or conveyance of all or substantially all of the assets of the Company
      to
      another Person, then the Holder will thereafter be entitled to receive, upon
      the
      conversion of this Note in accordance with the terms hereof, the same kind
      and
      amounts of securities (including shares of stock) or other assets, or both,
      which were issuable or distributable to the holders of outstanding Common Stock
      of the Company upon such reorganization, reclassification, consolidation,
      merger, sale or conveyance, in respect of that number of shares of Common Stock
      then deliverable upon the conversion of this Note if this Note had been
      exercised immediately prior to such reorganization, reclassification,
      consolidation, merger, sale or conveyance; and, in any such case, appropriate
      adjustments (as determined in good faith by the Board of Directors of the
      Company) shall be made to assure that the provisions hereof (including, without
      limitation, provisions with respect to changes in, and other adjustments of,
      the
      Conversion Price) shall thereafter be applicable, as nearly as reasonably may
      be
      practicable, in relation to any securities or other assets thereafter
      deliverable upon conversion of this Note.

    


    (f) Certificate
      as to Adjustments.
      Whenever the Conversion Price shall be adjusted pursuant to the provisions
      hereof, the Company shall promptly give written notice thereof to the Holder,
      in
      accordance with Section 11, in the form of a certificate signed by the Chairman
      of the Board, President or one of the Vice Presidents of the Company, and by
      the
      Chief Financial Officer, Treasurer or one of the Assistant Treasurers of the
      Company, stating the adjusted Conversion Price, and setting forth in reasonable
      detail the method of calculation and the facts requiring such adjustment and
      upon which such calculation is based. Each adjustment shall remain in effect
      until a subsequent adjustment is required.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    


    9.7 Other
      Provisions Relating to Rights of The Holder.
      If all
      or any part of the Note is duly converted, the Holder will for all purposes
      be
      deemed to become the holder of record of the Conversion Shares as to which
      the
      Note is converted, and the certificate for such shares will be dated on the
      date
      the Note (or any successor Note) is surrendered for conversion, except if such
      date is not a Business Day, the Holder will be deemed to become the record
      holder of the Conversion Shares, and the certificate will be dated, on the
      next
      succeeding Business Day. The Holder will not be entitled to any rights as a
      holder of the Conversion Shares, including the right to vote and to receive
      dividends, until the Holder becomes or is deemed to become the holder of such
      shares pursuant to the terms hereof. The issuance of certificates for shares
      of
      Common Stock upon the conversion of the Note shall be made without charge to
      the
      Holder for any issue tax in respect thereof, provided, however, that the Company
      shall not be required to pay any tax which may be payable in respect of any
      transfer involved in the issuance and delivery of any certificate in a name
      other than that of the then Holder of the Note being exercised.

    


    Section
      10. Covenants.

    


    10.1 Reservation
      of Shares.
      The
      Company shall at all times reserve and keep available out of its authorized
      capital stock, solely for the purpose of issuance or delivery upon conversion
      of
      the Notes and exercise of the Warrants, the maximum number of shares of capital
      stock that may be issuable or deliverable upon such conversion or exercise,
      as
      the case may be. Such shares of capital stock shall, when issued or delivered
      in
      accordance with the Notes and the Warrants, as the case may be, be duly and
      validly issued and fully paid and non-assessable. The Company shall issue such
      capital stock in accordance with the provisions of the Notes and the Warrants,
      as the case may be, and shall otherwise comply, in each case, with the terms
      thereof. The Company covenants that it will take all reasonable action as may
      be
      necessary to assure that such Common Stock may be issued as provided herein
      without violation of any applicable law or regulation, or of any requirements
      of
      any domestic securities exchange or automated quotation system upon which the
      Common Stock may be listed, or any agreement to which the Company may be a
      party.

    


    10.2 Limitation
      on Indebtedness.
      Without
      the prior written consent of the Holder, the Company shall not issue, assume
      or
      otherwise incur any indebtedness for borrowed money, other than: 

    


    (a) indebtedness
      created under this Agreement;

    


    (b) indebtedness
      to banks or other financial institutions under working capital facilities not
      to
      exceed $500,000 in the aggregate;

    


    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    (c) the
      Senior Indebtedness; or

    


    (d) indebtedness
      incurred to finance the acquisition of equipment or other personal property
      by
      purchase or lease.

    


    Section
      11. Notices.
      All
      notices and communications provided for hereunder shall be in writing and sent
      (a) by fax if the sender on the same day sends a confirming copy of such notice
      by a recognized overnight delivery service (charges prepaid), or (b) by
      registered or certified mail with return receipt requested (postage prepaid),
      or
      (c) by a recognized overnight delivery service (with charges prepaid). Any
      such
      notice must be sent:

    


    
      	
            	(a)	
              if
                to the Company, to 

               

              Neoprobe
                Corporation 

              425
                Metro Place North, Suite 300

              Dublin,
                Ohio 43017 

              Attn:
                Chief Financial Officer

              (fax)
                (614) 793-9376

              


              copy
                to:

              


              William
                J. Kelly, Jr.

              Porter,
                Wright, Morris & Arthur

              41
                South High Street, Suite 2800

              Columbus,
                Ohio 43215

            


    

     

    or
      to
      such other Person at such other place as the Company shall designate to
      Purchaser in writing;

    
      


      
        	
              	(b)	
                if
                  to the Purchasers, to 

                 

                
                  David
                    C. Bupp

                  9095
                    Moors Place North

                  Dublin,
                    Ohio 43017

                  


                  copy
                    to:

                  


                  Kenneth
                    J. Warren, Esq.

                  5134
                    Blazer Parkway

                  Dublin,
                    Ohio 43017

                

              


      

    

    


    or
      at
      such other address as a majority in interest of Purchasers shall designate
      to
      the Company in writing; or

    


    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    (c) if
      to any
      transferee or transferees of Purchasers, at such address or addresses as shall
      have been furnished to the Company at the time of the transfer or transfers,
      or
      at such other address or addresses as may have been furnished by such transferee
      or transferees to the Company in writing.

    


    Section
      12. Miscellaneous.

    


    12.1 Entire
      Agreement.
      This
      Agreement, including all Exhibits and Attachments embody the entire agreement
      and understanding between the parties hereto with respect to the subject matter
      hereof and supersedes all prior oral or written agreements and understandings
      relating to the subject matter hereof. No statement, representation, warranty,
      covenant or agreement of any kind not expressly set forth in this Agreement
      shall affect, or be used to interpret, change or restrict, the express terms
      and
      provisions of this Agreement.

    


    12.2 Amendments.
      This
      Agreement may not be modified or amended except pursuant to an instrument in
      writing signed by the Company and by Purchaser.

    


    12.3 Headings.
      The
      headings of the various sections of this Agreement have been inserted for
      convenience of reference only and shall not be deemed to be part of this
      Agreement.

    


    12.4 Severability.
      In case
      any provision contained in this Agreement should be invalid, illegal or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions contained herein shall not in any way be affected or
      impaired thereby.

    


    12.5 Governing
      Law/Jurisdiction.
      This
      Agreement will be construed and enforced in accordance with and governed by
      the
      laws of the State of Ohio, without reference to principles of conflicts of
      law,
      except to the extent that the Delaware General Corporation Law shall govern.
      Each party hereby agrees that if the other party to this Agreement obtains
      a
      judgment against it in such a proceeding, the party which obtained such judgment
      may enforce same by summary judgment in the courts of any country having
      jurisdiction over the party against whom such judgment was obtained, and each
      party hereby waives any defenses available to it under local law and agrees
      to
      the enforcement of such a judgment. Each party to this Agreement irrevocably
      consents to the service of process in any such proceeding by the mailing of
      copies thereof by registered or certified mail, postage prepaid, to such party
      at its address set provided for notices under Section 11. Nothing herein shall
      affect the right of any party to serve process in any other manner permitted
      by
      law.

    


    12.6 Disputes.
      Any
      controversy, claim or dispute arising out of or relating to this Agreement
      or
      the breach, termination, enforceability or validity of this Agreement, including
      the determination of the scope or applicability of the agreement to arbitrate
      set forth in this Section 10.6 shall be determined exclusively by binding
      arbitration in the City of Columbus, Ohio. The arbitration shall be governed
      by
      the rules and procedures of the American Arbitration Association (the “AAA”)
      under its Commercial Arbitration Rules and its Supplementary Procedures for
      Large, Complex Disputes; provided that Persons eligible to be selected as
      arbitrators shall be limited to attorneys-at-law each of whom (i) is on the
      AAA’s Large, Complex Case Panel or a Center for Public Resources (“CPR”) Panel
      of Distinguished Neutrals, or has professional credentials comparable to those
      of the attorneys listed on such AAA and CPR Panels and (ii) has actively
      practiced law (in private or corporate practice or as a member of the judiciary)
      for at least 15 years in the State of Ohio concentrating in either general
      commercial litigation or general corporate and commercial matters. Any
      arbitration proceeding shall be before one arbitrator mutually agreed to by
      the
      parties to such proceeding (who shall have the credentials set forth above)
      or,
      if the parties are unable to agree to the arbitrator within 15 business days
      of
      the initiation of the arbitration proceedings, then by the AAA. No provision
      of,
      nor the exercise of any rights under, this Section 12.6 shall limit the right
      of
      any party to request and obtain from a court of competent jurisdiction in the
      State of Ohio, County of Franklin (which shall have exclusive jurisdiction
      for
      purposes of this Section 12.6) before, during or after the pendency of any
      arbitration, provisional or ancillary remedies and relief including injunctive
      or mandatory relief or the appointment of a receiver. The institution and
      maintenance of an action or judicial proceeding for, or pursuit of, provisional
      or ancillary remedies shall not constitute a waiver of the right of any party,
      even if it is the plaintiff, to submit the dispute to arbitration if such party
      would otherwise have such right. Each of the parties hereby submits
      unconditionally to the exclusive jurisdiction of the state and federal courts
      located in the County of Franklin, State of Ohio for purposes of this provision,
      waives objection to the venue of any proceeding in any such court or that any
      such court provides an inconvenient forum and consents to the service of process
      upon it in connection with any proceeding instituted under this Section 10.6
      in
      the same manner as provided for the giving of notice under this Agreement.
      Judgment upon the award rendered may be entered in any court having
      jurisdiction. The parties hereby expressly consent to the nonexclusive
      jurisdiction of the state and federal courts situated in the County of Franklin,
      State of Ohio for this purpose and waive objection to the venue of any
      proceeding in such court or that such court provides an inconvenient forum.
      The
      arbitrator shall have the power to award recovery of all costs (including
      attorneys’ fees, administrative fees, arbitrators' fees and court costs) to the
      prevailing party. The arbitrator shall not have power, by award or otherwise,
      to
      vary any of the provisions of this Agreement.

    


    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    12.7 Recovery
      of Attorneys’ Fees.
      In any
      action arising under this Agreement, the Note, the Warrant, or the Registration
      Rights Agreement then the prevailing party shall be entitled to recovery of
      its
      legal fees and expenses incurred in connection therewith, to the extent such
      legal fees and expenses have not been awarded by an arbitrator.

    


    12.8 Counterparts/Facsimile.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      constitute an original, but all of which, when taken together, shall constitute
      but one instrument, and shall become effective when one or more counterparts
      have been signed by each party hereto and delivered to the other party. In
      lieu
      of the original, a facsimile transmission or copy of the original shall be
      as
      effective and enforceable as the original.

    


    12.9 Publicity.
      Neither
      Purchaser nor the Company shall issue any press releases or otherwise make
      any
      public statement with respect to the transactions contemplated by this Agreement
      without the prior written consent of the other, except as may be required by
      applicable law or regulation.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    


    12.10 Survival.
      The
      representations and warranties in this Agreement shall survive
      Closing.

    


    12.11 Expenses.
      Each of
      the parties shall bear its own legal and other expenses in connection with
      the
      negotiation and closing of the transactions contemplated hereby, except that
      the
      Company will reimburse Purchasers for $25,000.00 in legal and investment
      advisory fees and expenses incurred by Purchasers hereunder.

    


    12.12 No
      Strict Construction.
      The
      parties hereto have participated jointly in the negotiation and drafting of
      this
      Agreement and the other Transaction Documents. In the event an ambiguity or
      question of intent or interpretation arises under any provision of this
      Agreement or any Transaction Document, this Agreement or such other Transaction
      Document shall be construed as if drafted jointly by the parties thereto, and
      no
      presumption or burden of proof shall arise favoring or disfavoring any party
      by
      virtue of the authorship of any of the provisions of this Agreement or any
      other
      Transaction Document. 

    


    12.13
      Power
      of Attorney.
      With
      respect to any Purchaser executing and delivering this Agreement pursuant to
      a
      power of attorney, the attorney in fact so appointed by such Purchaser
      represents and warrants that as of the date hereof and on the Closing Date:
      (a)
      he is the attorney in fact designated by such power of attorney; (b) the
      principal is not deceased, and has not revoked or partially or fully terminated
      or suspended the power of attorney; (c) there is currently no petition to
      determine incapacity or appoint a guardian for the principal; and (d) the power
      of attorney is in full force and effect.

    


    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
      by
      their duly authorized representatives the day and year first above
      written.

     

    [Signatures
      on following pages] 

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

       

    

    
      	 	 	 
	 	
              NEOPROBE
                CORPORATION

            
	 
 	 
 	 
 
	
            	By   
              	/s/
              Brent L. Larson
	 	
              

              Brent
                L. Larson, Vice President of
                Finance

            


    

     

    Signature
      page to Note Purchase Agreement


    
      
         

      

      
        24

        
          

        

      

       

    

    
       

      
        	 	 	 
	 
 	 
 	
                PURCHASERS

              
	
              	
              	/s/
                David C. Bupp
	 	
                

                
                  David
                    C. Bupp

                

              


      

      
        
           

          
            	 	 	 
	
                  	
                  	
                    /s/
                      Cynthia B. Gochoco    

                  
	 	
                    

                    
                      
                        Cynthia
                          B.
                          Gochoco

                      

                    

                  


          

          
            
               

              
                	 	 	 
	
                      	
                      	
                        
                          /s/
                            Walter H. Bupp     

                        

                      
	 	
                        

                        
                          
                            
                              Walter
                                H. Bupp, by David C. Bupp, his attorney in fact,
                                under power of attorney
                                dated April 22,
                                2005

                            

                          

                        

                      


              

               

            

          

        

      

    

    Signature
      page to Note Purchase Agreement

     

    
      
         

      

      
        25