Document:

EX-10.11

 

Exhibit 10.11

THIS NOTE HAS 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 “ACT”). THIS NOTE IS SUBJECT TO THE
TERMS OF A NOTE PURCHASE AGREEMENT DATED AS OF JUNE 29, 2007 AND MAY NOT BE TRANSFERRED OR SOLD
EXCEPT AS PROVIDED THEREIN AND AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM.

NEOPROBE CORPORATION

AMENDED 10% CONVERTIBLE NOTE, DUE DECEMBER 31, 2011

			
	 	 	 
	$1,000,000.00
	 	July 3, 2007
	 
	 	As amended December 26, 2007

     FOR VALUE RECEIVED, the undersigned, NEOPROBE CORPORATION (herein called the “Company”), a
corporation organized and existing under the laws of the State of Delaware hereby promises to pay
to David C. Bupp, Cynthia B. Gochoco, and Walter H. Bupp, as joint tenants with right of
survivorship, or their registered assigns, the principal sum of $1,000,000.00 on December 31, 2011,
with interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid
balance thereof at the rate of 10.0% per annum from the date hereof, payable quarterly in arrears,
on the last day of each calendar quarter, commencing with the calendar quarter next succeeding the
date hereof, until the principal hereof shall have become due and payable.

     Payments of principal of, and interest on this Note are to be made in lawful money of the
United States of America at the address of the holder of this Note provided for receipt of notices
under the Note Purchase Agreement referred to below or, at the option of the holder of this Note,
in immediately available funds at any bank or other financial institution capable of receiving
immediately available funds designated by the holder of this Note.

     This Note has been issued pursuant, and is subject, to an 10% Convertible Note Purchase
Agreement, dated as of June 29, 2007, as the same may be amended, modified or supplemented from
time to time in accordance with the terms thereof, between the Company and the Purchaser named
therein (the “Note Purchase Agreement”) and is entitled to the benefits thereof. Each
holder of this Note will be deemed, by its acceptance hereof, (a) to have agreed to all of the
terms of the Note Purchase Agreement and other agreements referenced therein, and (b) to have made
the representations and warranties set forth in Sections 4.2 through 4.8 of the Note Purchase
Agreement.

     This Note is subordinate in right of payment and security to the rights of Platinum-Montaur
Life Sciences, LLC pursuant to the Intercreditor Agreement, dated as of December 26, 2007, among
the holders hereof, the Company and Platinum-Montaur Life Sciences, LLC.

     This Note may be prepaid at any time prior to maturity in whole or in part without premium or
penalty, upon ten (10) days prior written notice to the Holder.

     If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing,
the principal of this Note may be declared or otherwise become due and payable in the manner, at
the price and with the effect provided in the Note Purchase Agreement.

Page 1 of 2 pages

 

 

     This Note is convertible into shares of Common Stock of the Company, on the terms and subject
to the conditions set forth in the Note Purchase Agreement.

     This Note 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. Any controversy, claim or
dispute arising out of or relating to this Note or the breach, termination, enforceability or
validity of this Note, including the determination of the scope or applicability of the agreement
to arbitrate set forth in this paragraph 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 (a) 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 (b) 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 paragraph 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 paragraph) 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 paragraph in the same manner as
provided for the giving of notice under the Note Purchase 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 Note.

	 	 	 	 	 
	 	NEOPROBE CORPORATION

 	 
	 	By  	/s/ Brent L. Larson
 	 
	 	 	Brent L. Larson, Vice President of Finance 	 
	 	 	 	 
	 

Page 2 of 2 pagesEX-10.112

 

Exhibit 10.12

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Security Agreement”) is made as of December 26, 2007 by and between
Neoprobe Corporation, a Delaware corporation qualified to do business in the State of Ohio, with
principal offices located at 425 Metro Place North, Dublin, Ohio 43017 (“Debtor”), 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 “Secured Party,” and
collectively the “Secured Parties”).

     This Security Agreement is entered into with respect to an Amended 10% Convertible Note, Due
December 27, 2011, in the principal amount of $1,000,000 (the “Amended Note”) delivered to Secured
Parties by Debtor pursuant to a 10% Convertible Note Purchase Agreement, dated June 29, 2007, as
amended as of December 26, 2007, and as the same may be further amended, modified or supplemented
from time to time in accordance with the terms thereof (the “Note Purchase Agreement”) dated the
same date as this Security Agreement.

     The obligations of the Debtor and the rights of the Secured Parties hereunder are expressly
subordinate to certain indebtedness of the Debtor and the security interest securing such
indebtedness pursuant to the terms of the Intercreditor Agreement, dated December 26, 2007, among
the Secured Parties and Platinum-Montaur Life Sciences, LLC (the “Intercreditor Agreement”), and in
the event of any conflict between the terms of this Security Agreement and the Intercreditor
Agreement, the terms of the Intercreditor Agreement shall prevail.

     Capitalized terms not otherwise defined herein shall have the meaning(s) ascribed to them in
the Purchase Agreement.

     The Secured Parties and Debtor agree as follows:

Section 1. Definitions.

	 	1.1	 	“Collateral” means all of Debtor’s chattel paper, deposit accounts, documents,
Equipment, General Intangibles, goods, instruments, Intellectual Property, Inventory,
letters of credit, and all sums on deposit in any account,; together with (a) all
substitutions and replacements for and products of any of the foregoing; (b) in the
case of all goods, all accessions; (c) all accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or used in connection with any
goods; (d) all warehouse receipts, bills of lading and other documents of title now or
hereafter covering such goods; (e) all collateral subject to any lien granted by Debtor
to the Secured Parties; (f) any money, or other assets of Debtor that now or hereafter
come into the possession, custody, or control of the Secured Parties; (g) all books,
records, ledger cards and other property pertaining to any of the foregoing, and any
equipment on which any such items are stored or maintained; and (h) proceeds of any and
all of the foregoing; ;

 

 

	 	 	 	provided, however, that the Collateral shall not include any accounts of Debtor, as
such term is defined in the UCC.

	 	1.2	 	“Equipment” means all of Debtor’s equipment, as such term is defined in the
UCC, whether now owned or hereafter acquired, including but not limited to all present
and future machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies, and including
specifically (without limitation) the goods described in any equipment schedule or list
herewith or hereafter furnished to a Secured Parties by Debtor, and whether located on
real estate owned or leased by Debtor or otherwise.
	 
	 	1.3	 	“General Intangibles” means all of Debtor’s general intangibles, as such term
is defined in the UCC, whether now owned or hereafter acquired, including (without
limitation) all Intellectual Property, trade secrets, customer or supplier lists and
contracts, manuals, operating instructions, permits, franchises, the right to use
Debtor’s name, and the goodwill of Debtor’s business.
	 
	 	1.4	 	“Intellectual Property” means (a) trademarks, trademark registrations, trade
names and trademark applications for any of the foregoing in the United States Patent
and Trademark Office or in any other office or with any other official anywhere in the
world or which are used in the United States or any state, territory or possession
thereof, or in any other place, nation or jurisdiction anywhere in the world, and (i)
all renewals thereof, (ii) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including, without limitation,
payments under all licenses entered into in connection therewith and damages and
payments for past or future infringements thereof, (iii) the right to sue for past,
present and future infringements thereof, and (iv) all rights corresponding thereto
throughout the world (all of the foregoing trademarks, and trademark registrations,
trade names, service marks, service mark registration and applications, together with
the items described in clauses (i) through (iv in this subparagraph (a), are sometimes
hereinafter individually and/or collectively referred to as the “Trademarks”); (b)
license agreements with any other party in connection with any Trademarks or such other
party’s trademarks or trademark applications, whether Debtor is a licensor or licensee
under any such license agreement, and the right to prepare for sale, sell and advertise
for sale, all of the inventory now or hereafter owned by Debtor and now or hereafter
covered by such license agreements (all of the foregoing being hereinafter referred to
collectively as the “Licenses”); (c) the goodwill of Debtor’s business connected with
and symbolized by the Trademarks, and (d) patents and patent applications in the United
States Patent and Trademark Office or in any other office or with any other official
anywhere in the world or which are used in the United States or any state, territory or
possession thereof, or in any other place, nation or jurisdiction anywhere in the
world, and (i) all renewals thereof, (ii) all income, royalties, damages and payments
now and hereafter due and/or payable with respect thereto, including, without
limitation, payments under all licenses entered

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	 	 	 	into in connection therewith and damages and payments for past or future
infringements thereof, (iii) the right to sue for past, present and future
infringements thereof, and (iv) all rights corresponding thereto throughout the
world.

	 	1.5	 	“Inventory” means all raw materials, work in process, finished goods and
materials and supplies of any kind, nature or description which are or might be used or
consumed in the business of Debtor or used in connection with the manufacturing,
packing, shipping, advertising, selling or finishing of such goods, merchandise and
other personal property, and all goods, merchandise and other personal property
whenever located, to be furnished by the Debtor under any contract or contract for
service or held for sale or lease, whether now owned or hereafter acquired, and all
documents of title or other documents representing the foregoing.
	 
	 	1.6	 	“Obligations.” This Security Agreement secures the following:
	 
	 	 	 	(a) Debtor’s obligations under the Amended Note and this Security Agreement;

	 	 	 	(b) the repayment of (i) any amounts that a Secured Parties may advance or spend for
the maintenance or preservation of the Collateral, and (ii) any other expenditures
that a Secured Parties may make under the provisions of this Security Agreement or
for the benefit of Debtor;
	 
	 	 	 	(c) all amounts owed under any modifications, renewals or extensions of any of the
foregoing obligations; and
	 
	 	 	 	(d) any of the foregoing that arises after the filing of a petition by or against
Debtor under the Bankruptcy Code, even if the obligations do not accrue because of
the automatic stay under Bankruptcy Code §362 or otherwise.
	 
	 	1.7	 	“Permitted Liens” means:
	 
	 	 	 	(a) liens on Accounts (as defined in the UCC) securing obligations of Debtor to
Banks;
	 
	 	 	 	(b) liens existing on the date hereof and listed on Schedule 1.5;
	 
	 	 	 	(c) liens for taxes, assessments or charges imposed on Debtor or any of its property
by any governmental authority not yet due or which are being contested in good faith
and by appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of Debtor, in accordance with GAAP or liens for such taxes,
assessments or charges which are otherwise permitted under this paragraph;

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	 	 	 	(d) statutory liens of carriers, warehousemen, mechanics, materialmen, repairmen, or
other like liens arising in the ordinary course of business, which are not overdue
for a period of more than 30 days or which are being contested in good faith and by
appropriate proceedings;
	 
	 	 	 	(e) pledges or deposits required in connection with workers’ compensation,
unemployment insurance and other social security legislation;
	 
	 	 	 	(f) liens incurred on deposits to secure the performance of tenders, bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance bonds
and return-of-money bonds and other obligations of a like nature incurred in the
ordinary course of business;
	 
	 	 	 	(g) liens in favor of customs and revenue authorities arising as a matter of law and
to secure payment of customs duties in connection with the importation of goods
	 
	 	 	 	(h) liens securing obligations of Debtor (i) in respect of goods purchased for
resale in the ordinary course of business as long as no UCC financing statements are
filed concerning such goods or (ii) under true consignment arrangements in which
Debtor is the consignee, pursuant to which UCC financing statements may be filed;
	 
	 	 	 	(i) liens of landlords or mortgagees of landlords on fixtures and movable property
located on premises leased in the ordinary course of business, provided that the
rental payments secured thereby are not yet due;
	 
	 	 	 	(j) purchase money liens for Equipment and Inventory in an amount not to exceed
$100,000 in the aggregate at any one time; and
	 
	 	 	 	(k) liens to which the security interest granted hereby are made expressly
subordinate pursuant to the Intercreditor Agreement.

1.8 “UCC” Any term used in the Uniform Commercial Code as enacted in the State of Ohio or
the State where the Collateral is located and not defined in this Security Agreement has the
meaning (as amended from time to time) given to the term in the UCC.

Section 2. Grant of Security Interest.

	 	2.1	 	Security Interest. Debtor grants a security interest in the Collateral to each
Secured Parties, to secure the payment or performance of the Obligations.
	 
	 	2.2	 	Debtor Remains Liable. Anything herein to the contrary notwithstanding, (a)
Debtor shall remain liable under any contracts, agreements and other documents included
in the Collateral, to the extent set forth therein, to perform all of its

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	 	 	 	duties and obligations thereunder to the same extent as if this Security Agreement
had not been executed, (b) the exercise by a Secured Parties of any of the rights
hereunder shall not release Debtor from any of its duties or obligations under such
contracts, agreements and other documents included in the Collateral, and (c) a
Secured Parties shall not have any obligation or liability under any contracts,
agreements and other documents included in the Collateral by reason of this Security
Agreement, nor shall the Secured Parties be obligated to perform any of the
obligations or duties of Debtor thereunder or to take any action to collect or
enforce any such contract, agreement or other document included in the Collateral
hereunder.

Section 3. Perfection of Security Interest.

	 	3.1	 	Filing of Financing Statement.
	 
	 	 	 	(a) Debtor shall execute and deliver to the Secured Parties concurrently with the
execution of this Security Agreement, and Debtor hereby authorizes the Secured
Parties to file (with or without Debtor’s signature) at any time and from time to
time thereafter, all financing statements, continuation financing statements,
termination statements, security agreements, assignments, warehouse receipts,
documents of title, affidavits, reports, notices, schedules of account, letters of
authority and all other documents and instruments, in form satisfactory to the
Secured Parties (the “Financing Statements”), and take all other action, as each
Secured Parties may request, to perfect and continue perfected, maintain the
priority of or provide notice of each Secured Parties’ security interest in the
Collateral and to accomplish the purposes of this Security Agreement.
	 
	 	 	 	(b) The Secured Parties’ security interest in the Collateral is prior to all other
security interests, excepting only the Permitted Liens.
	 
	 	3.2	 	Possession.
	 
	 	 	 	(a) Debtor shall have possession of the Collateral, except where expressly otherwise
provided in this Security Agreement.
	 
	 	 	 	(b) Where Collateral is in the possession of a third party, Debtor will join with
each Secured Parties in notifying the third party of each Secured Parties’ security
interest and obtaining an acknowledgment from the third party that it is holding the
Collateral for the benefit of each Secured Parties.

Section 4. Post-Closing Covenants and Rights Concerning the Collateral.

	 	4.1	 	Inspection. A Secured Parties may inspect any Collateral, at any time upon
reasonable notice.

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	 	4.2	 	Personal Property. The Collateral shall remain personal property at all times.
Debtor shall not affix any of the Collateral to any real property in any manner which
would change its nature from that of personal property to real property or to a
fixture.
	 
	 	4.3	 	Secured Parties’s Collection Rights. After the occurrence of, and during the
continuance of, an Event of Default, a Secured Parties shall have the right at any time
to enforce Debtor’s rights against Debtor’s account debtors and obligors to the extent
that such is included in the definition of Collateral.
	 
	 	4.4	 	Limitations on Obligations Concerning Maintenance of Collateral.
	 
	 	 	 	(a) Debtor has the risk of loss of the Collateral.
	 
	 	 	 	(b) A Secured Parties shall have no duty to collect any income accruing on the
Collateral or to preserve any rights relating to the Collateral.
	 
	 	4.5	 	No Disposition of Collateral. Each Secured Parties does not authorize, and
Debtor agrees not to:
	 
	 	 	 	(a) make any sales or leases of any of the Collateral other than the sale of
Inventory or other Collateral in the normal course of Debtor’s business;
	 
	 	 	 	(b) license any of the Collateral, except that Debtor may grant licenses in its
Intellectual Property in the ordinary course of its business; or
	 
	 	 	 	(c) grant any other security interest in any of the Collateral, except for Permitted
Liens.

Section 5. Debtor’s Representations and Warranties.

     Debtor warrants and represents that:

	 	5.1	 	Title to and Transfer of Collateral. Debtor has rights in or power to transfer
the Collateral and Debtor is, and will continue to be, the sole and complete owner of
the Collateral (or, in the case of after-acquired Collateral, at the time Debtor
acquires rights in such Collateral, will be the sole and complete owner thereof), free
from any lien except for Permitted Liens, or as created by this Security Agreement.
	 
	 	5.2	 	Location, State of Incorporation, and Name of Debtor.
	 
	 	 	 	(a) Debtor’s chief executive office is located at 425 Metro Place North, Suite 300,
Dublin, Ohio 43017 in the State of Ohio, county of Franklin, and all Collateral is
located at such address or at the addresses set forth on Schedule 5.2 ;

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	 	 	 	(b) Debtor’s state of incorporation is the State of Delaware; and
	 
	 	 	 	(c) Debtor’s exact legal name is as set forth in the first paragraph of this
Security Agreement.
	 
	 	 	 	(d) Debtor has not, at any time in the past two years: (i) been known as or used any
other corporate, trade or fictitious name; (ii) changed its name; (iii) been the
surviving or resulting corporation in a merger or consolidation; or (iv) acquired
through asset purchase or otherwise any business of any person with a purchase price
in excess of $1 million, except for the acquisition of Biosonix Ltd.
	 
	 	5.3	 	Enforceability of Security Interest.
	 
	 	 	 	(a) This Security Agreement creates a security interest which is enforceable against
the Collateral in which Debtor now has rights and will create a security interest
which is enforceable against the Collateral in which Debtor hereafter acquires
rights at the time Debtor acquires any such rights; and
	 
	 	 	 	(b) Upon the filing of Financing Statements in the appropriate filing offices in
each jurisdiction identified in Schedule 5.2 where Collateral is located and except
for Permitted Liens, each Secured Parties has a perfected and first priority
security interest in the Collateral in which Debtor now has rights, and will have a
perfected and first priority security interest in the Collateral in which Debtor
hereafter acquires rights at the time Debtor acquires any such rights, in each case
securing the payment and performance of the Obligations and in each case in which a
security interest can be filed by the filing of a Financing Statement.
	 
	 	5.4	 	Other Financing Statements. Other than (a) Financing Statements disclosed to
each Secured Parties prior to the date hereof and (b) Financing Statements in favor of
each Secured Parties on behalf of itself, no effective Financing Statement naming
Debtor as debtor, assignor, grantor, mortgagor, pledgor or the like and covering all or
any part of the Collateral is on file in any filing or recording office in any
jurisdiction.

Section 6. Debtor’s Covenants.

Until the Obligations are paid in full, Debtor agrees that it will preserve its corporate
existence, and without the prior written consent of each Secured Parties (which shall not be
unreasonably withheld):

	 	6.1	 	Change State of Incorporation. Will not change the state of its incorporation;
	 
	 	6.2	 	Change Corporate Name. Will not change its corporate name; and

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	 	6.3	 	Change Chief Executive Office. Will not change the location of its chief
executive office or the place where any material portion of the Collateral is located.
	 
	 	6.4	 	Defense of Collateral. Will appear in and defend any action, suit or
proceeding which may affect to a material extent its title to, or right or interest in,
or the Secured Parties’s right or interest in, the Collateral consistent with customary
and prudent business practices.
	 
	 	6.5	 	Preservation of Collateral. Will do and perform all reasonable acts that may
be necessary and appropriate to maintain, preserve and protect the value of the
Collateral.
	 
	 	6.6	 	Compliance with Laws, Etc. Will comply with all laws, regulations and
ordinances, and all policies of insurance, relating in a material way to the
possession, operation, maintenance and control of the Collateral if the noncompliance
therewith could reasonably result in a material adverse effect on Debtor.
	 
	 	6.7	 	Maintenance of Records. Will keep separate, accurate and complete books with
respect to the Collateral.
	 
	 	6.8	 	Disposition of Collateral. Will not surrender or lose possession of (other
than to the Secured Parties), sell, lease, rent, or otherwise dispose of or transfer
any of the Collateral or any right or interest therein, except in the ordinary course
of business.
	 
	 	6.9	 	Liens. Will keep the Collateral free of all liens except Permitted Liens and
liens created pursuant to this Security Agreement.
	 
	 	6.10	 	Expenses. Will pay all validly assessed or incurred expenses of protecting,
storing, warehousing, insuring, handling and shipping the Collateral.
	 
	 	6.11	 	Inventory. Following the occurrence and during the continuance of any Event of
Default, will: (a) if requested by a Secured Parties, prepare and deliver to each
Secured Parties a report of all Inventory, in form and substance satisfactory to each
Secured Parties; (b) (i) other than with respect to any Inventory in the possession of
a subcontractor of Debtor, not store any material portion of Inventory with a bailee,
warehouseman or similar person or on premises leased to Debtor without prior notice to
each Secured Parties and (ii), except with respect to demonstration models, Inventory
transferred as upgrades to existing customers and Inventory shipped to customers
awaiting customer acceptance, in each instance in the ordinary course of Debtor’s
business, not dispose of any material portion of Inventory on a bill-and-hold,
guaranteed sale, sale and return, sale on

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	 	 	 	approval, consignment or similar basis, nor acquire any material portion of
Inventory from any person on any such basis without in each case giving the Secured
Parties prior written notice thereof.

	 	6.12	 	Notices, Reports and Information. Following the occurrence and during the
continuance of any Event of Default, will (a) notify each Secured Parties of any
material claim made or asserted against the Collateral by any person and of any change
in the basic nature of the Collateral or other event which could materially adversely
affect the value of the Collateral or a Secured Parties’s lien thereon (other than
commodity fluctuations affecting Debtor’s industry generally); (b) furnish to each
Secured Parties such statements and schedules further identifying and describing the
Collateral and such other reports and other information in connection with the
Collateral as a Secured Parties may reasonably request, all in reasonable detail; and
(c) upon request of a Secured Parties make such demands and requests for information
and reports as Debtor is entitled to make in respect of the Collateral.
	 
	 	6.13	 	Insurance.
	 
	 	 	 	(a) Shall carry and maintain in full force and effect, at the expense of Debtor and
with financially sound and reputable insurance companies, insurance with respect to
the Inventory in such amounts, with such deductibles and covering such risks as is
customarily carried by persons engaged in the same or similar business. Following
the occurrence and during the continuance of any Event of Default, and upon the
request of a Secured Parties, Debtor shall furnish each Secured Parties with full
information as to such insurance carried by it and, if so requested, copies of all
such insurance policies.
	 
	 	 	 	(b) Following the occurrence and during the continuance of any Event of Default, if
any material amount of Inventory shall be materially damaged or destroyed, in whole
or in part, by fire or other casualty, Debtor shall give prompt notice thereof to
each Secured Parties. No settlement on account of any loss on any such Inventory
covered by insurance shall be made for less than net book value without the consent
of each Secured Parties, which shall not be unreasonably withheld. Any payment
exceeding $25,000 at any time made to Debtor by any insurer with respect to a
casualty relating to all or any part of the Collateral shall be, at the Debtor’s
option, (i) paid equally to the Secured Parties for application to the Obligations,
or (ii) reinvested in the production of Inventory constituting Collateral hereunder,
in each case, within 90 days of Debtor’s receipt of such insurance payment (it being
understood that Debtor may elect to make payment to each Secured Parties under the
preceding clause (i), reinvest the applicable insurance proceeds under the preceding
clause (ii), or a combination of both).

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Section 7. Costs and Expenses. Debtor agrees to pay or reimburse on demand:

	 	7.1	 	Out of Pocket Expenses. Following the occurrence and during the continuance of
any Event of Default, the reasonable out-of-pocket costs and expenses of each Secured
Parties (including reasonable attorney fees and expenses and search, recording and
filing fees and expenses, provided, that the Secured Parties shall deliver reasonably
detailed statements for such fees and expenses); and in addition, Debtor will pay any
such costs and expenses incurred by each Secured Parties in connection with any
amendments, modifications or waivers of the terms of this Security Agreement requested
by Debtor;
	 
	 	7.2	 	Title Appraisal, etc. Following the occurrence and during the continuance of
any Event of Default, all title, appraisal (including the allocated costs of internal
appraisal services, provided, that the Secured Parties requesting same shall deliver
reasonably detailed statements for such fees and expenses), survey, audit, consulting
and similar fees, costs and expenses incurred or sustained by a Secured Parties in
connection with this Security Agreement or the Collateral; and
	 
	 	7.3	 	Search Fees, etc. Following the occurrence and during the continuance of any
Event of Default, all costs and expenses of each Secured Parties, (including reasonable
attorney fees and expenses and search, recording and filing fees and expenses,
provided, that the Secured Parties shall deliver reasonably detailed statements for
such fees and expenses), in connection with the enforcement or attempted enforcement
of, and preservation of any rights or interests under, this Security Agreement, any
out-of-court workout or other refinancing or restructuring or in any bankruptcy case,
and the protection, sale or collection of, or other realization upon, any of the
Collateral, including all expenses of taking, collecting, holding, sorting, handling,
preparing for sale, selling, or the like, and other such expenses of sales and
collections of Collateral, and any and all losses, costs and expenses sustained by a
Secured Parties as a result of any failure by Debtor to perform or observe its
obligations contained herein.

	Section 8.	 	 Collateral Agent. Each Secured Party hereby appoints David C. Bupp as the Collateral
Agent under this Security Agreement, the Amended Note, and the Intercreditor Agreement
(together, the “Security Documents”) and each Secured Party authorizes the Collateral Agent to
take such action as agent on its behalf and to exercise such powers under the Security
Documents as are granted to the Secured Parties under such agreements and to exercise such
powers as are reasonably incidental thereto. Without limiting the foregoing, each Secured
Party hereby authorizes the Collateral Agent to execute and deliver, and to perform its
obligations under, each of the Security Documents, to exercise all rights, powers and remedies
that the Secured Parties may have under the Security Documents and to act as agent for the
Secured Parties thereunder. The Collateral Agent shall not be liable to any Secured Party for
any action taken or omitted to be taken by the Collateral Agent under or in connection with
the Security Documents, except

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	 	 	 	for the Collateral Agent’s own gross negligence
or willful misconduct. Each Secured Party
agrees to indemnify the Collateral Agent and
each of the Collateral Agent’s affiliates, and
each of their respective directors, officers,
employees, agents and advisors, from any and
all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs,
expenses and disbursements (including fees,
expenses and disbursements of financial and
legal advisors) of any kind or nature
whatsoever that may be imposed on, incurred by,
or asserted against, the Collateral Agent or
any of the Collateral Agent’s affiliates,
directors, officers, employees, agents and
advisors in any way relating to or arising out
of the Security Documents or any action taken
or omitted by the Collateral Agent under the
Security Documents; provided, however, that
no Purchaser shall be liable for any portion of
such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the
Collateral Agent’s gross negligence or willful
misconduct.

Section 9. Remedies Upon Default.

	 	9.1	 	General. Upon any Event of Default, the Secured Parties may jointly pursue any
remedy available at law (including those available under the provisions of the UCC), or
in equity to collect, enforce or satisfy any Obligations then owing, whether by
acceleration or otherwise.
	 
	 	9.2	 	Specific Remedies. Following the occurrence and during the continuance of any
Event of Default, the Secured Parties shall have, in addition to all other rights and
remedies granted to it in this Security Agreement, all rights and remedies of a secured
party under the UCC and other applicable laws. Without limiting the generality of the
foregoing, Debtor agrees that a Secured Parties may: (a) peaceably and without notice
enter any premises of Debtor, take possession of any Collateral, remove or dispose of
all or part of the Collateral on any premises of Debtor or elsewhere, and otherwise
collect, receive, appropriate and realize upon all or any part of the Collateral, and
demand, give receipt for, settle, renew, extend, exchange, compromise, adjust, or sue
for all or any part of the Collateral, as such Secured Parties may determine; (b)
require Debtor to assemble all or any part of the Collateral and make it available to
such Secured Parties, at any place and time designated by such Secured Parties; (c)
secure the appointment of a receiver of the Collateral or any part thereof (to the
extent and in the manner provided by applicable law); (d) sell, resell, lease, use,
assign, transfer or otherwise dispose of any or all of the Collateral in its then
condition or following any commercially reasonable preparation or processing (utilizing
in connection therewith any of Debtor’s assets, without charge or liability to such
Secured Parties therefor) at public or private sale, by one or more contracts, in one
or more parcels, at the same or different times, for cash or credit or for future
delivery without assumption of any credit risk, all as such Secured Parties deems
advisable; provided, however, that Debtor shall be credited with the net proceeds of
sale after application of Section 9.5 only when such proceeds are finally

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	 	 	 	collected by the Secured Parties. A Secured Parties shall have the right upon any
such public sale, and, to the extent permitted by law, upon any such private sale,
to purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption, which right or equity of redemption Debtor hereby releases, to
the extent permitted by law. Debtor hereby agrees that the sending of notice by
ordinary mail, postage prepaid, to the address of Debtor set forth in Section 10.3
of the place and time of any public sale or of the time after which any private sale
or other intended disposition is to be made, shall be deemed reasonable notice
thereof if such notice is sent 10 days prior to the date of such sale or other
disposition or the date on or after which such sale or other disposition may occur,
provided that the Secured Parties may provide Debtor shorter notice or no notice, to
the extent permitted by the UCC or other applicable law. A Secured Parties shall
have no obligation to clean up or otherwise prepare the Collateral for sale. A
Secured Parties has no obligation to attempt to satisfy these Obligations by
collecting them from any other person liable for them and a Secured Parties may
release, modify or waive any Collateral provided by any other person to secure any
of the Obligations, all without affecting such Secured Parties’s right against
Debtor. Debtor waives any right it may have to require a Secured Parties to pursue
any third person or any of the Obligations. A Secured Parties may comply with any
applicable state or federal law requirements in connection with a disposition of the
Collateral and compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. A Secured Parties may sell the
Collateral without giving any warranty as to the Collateral. A Secured Parties may
specifically disclaim any warranties of title or the like. This procedure will not
be considered adversely to affect the commercial reasonableness of any sale of the
Collateral. If a Secured Parties sells any of the Collateral upon credit, Debtor
will be credited only with payments actually made by the purchaser, received by such
Secured Parties, and applied to the indebtedness of the purchaser. In the event the
purchaser fails to pay for the Collateral, such Secured Parties may resell the
Collateral and Debtor shall be credited with the net proceeds of the sales after
application of Section 9.5.

	 	9.3	 	License Upon Default. For the purpose of enabling a Secured Parties to exercise
its rights and remedies under this Section 9, Debtor grants to each Secured Parties,
following the occurrence and during the continuance of any Event of Default, an
irrevocable, non-exclusive and assignable license (exercisable without payment or
royalty or other compensation to Debtor) to use, license or sublicense any Intellectual
Property, to enable each Secured Parties (among other things) to transfer any of the
Intellectual Property or tangible property of Debtor that are included in the
Collateral.
	 
	 	9.4	 	Proceeds Account. To the extent that any of the Obligations may be contingent,
unmatured or unliquidated (including with respect to undrawn amounts under any letters
of credit outstanding) at such time as there may exist an Event of Default, a Secured
Parties may, at his election, (a) retain the proceeds of any sale, collection,
disposition or other realization upon the Collateral (or any portion thereof) in a

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	 	 	 	special purpose non-interest-bearing restricted deposit account (the “Proceeds
Account”) created and maintained by such Secured Parties for such purpose (which
shall constitute a deposit account included within the Collateral hereunder) until
such time as such Secured Parties may elect to apply such proceeds to the
Obligations, and Debtor agrees that such retention of such proceeds by such Secured
Parties shall not be deemed strict foreclosure with respect thereto; (b) in any
manner elected by a Secured Parties, estimate the liquidated amount of any such
contingent, unmatured or unliquidated claims and apply the proceeds of the
Collateral against such amount; or (c) otherwise proceed in any manner permitted by
applicable law. Debtor agrees that the Proceeds Account shall be a blocked account
and that upon the irrevocable deposit of funds into the Proceeds Account, Debtor
shall not have any right of withdrawal with respect to such funds. Accordingly,
Debtor irrevocably waives until the termination of this Security Agreement in
accordance with its terms the right to make any withdrawal from the Proceeds Account
and the right to instruct a Secured Parties to honor drafts against the Proceeds
Account.

	 	9.5	 	Application of Proceeds. Subject to Section 9.4, cash proceeds actually
received from the sale or other disposition or collection of Collateral, and any other
amounts received in respect of the Collateral the application of which is not otherwise
provided for herein, shall be payable to each Secured Parties on a pro-rata basis
against all or any part of the Obligations in the following order: (a) first, to any
fees due in respect of the Obligations; (b) next, to any interest due in respect of the
Obligations; (c) next, to any principal due in respect of the Obligations; and (d)
last, to any other Obligations. Any surplus thereof which exists after payment and
performance in full of the Obligations shall be promptly paid over to Debtor or
otherwise disposed of in accordance with the UCC or other applicable law. Debtor shall
remain liable to each Secured Parties for any deficiency which exists after any sale or
other disposition or collection of Collateral.
	 
	 	9.6	 	Certain Waivers. Debtor waives, to the fullest extent permitted by law, (a)
any right of redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling of the Collateral or other collateral
or security for the Obligations; (b) any right to require a Secured Parties (i) to
proceed against any person, (ii) to exhaust any other collateral or security for any of
the Obligations, (iii) to pursue any remedy in a Secured Parties’s power, or (iv) to
make or give any presentments, demands for performance, notices of nonperformance,
protests, notices of protests or notices of dishonor in connection with any of the
Collateral.

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Section 10. Miscellaneous.

	 	10.1	 	Assignment.
	 
	 	 	 	(a) This Security Agreement shall bind and shall inure to the benefit of the
permitted heirs and assigns of the Secured Parties and shall bind all persons who
become bound as a debtor to this Security Agreement.
	 
	 	 	 	(b) No Secured Parties consents to any assignment by Debtor except as expressly
provided in this Security Agreement.
	 
	 	 	 	(c) Each Secured Parties may assign and transfer its rights and interests under this
Security Agreement only pursuant to a permitted assignment or transfer of the Note
secured hereby. If an assignment is made, Debtor shall render performance under
this Security Agreement to the assignee.
	 
	 	10.2	 	Severability. Should any provision of this Security Agreement be found to be
void, invalid or unenforceable by a court or panel of arbitrators of competent
jurisdiction, that finding shall only affect the provisions found to be void, invalid
or unenforceable and shall not affect the remaining provisions of this Security
Agreement.
	 
	 	10.3	 	Notices. Any notice or other communication required or permitted to be given
or made under this Security Agreement (a) shall be in writing, and (b) may be delivered
by hand delivery, First Class U.S. Mail (regular, certified, registered or expedited
delivery), FedEx, UPS Overnight, Airborne or other nationally recognized delivery
service, or fax. The addresses for notice for each party and their counsel are set
forth in the Purchase Agreement. All notices shall be served upon the parties at said
addresses or such other addresses as they may hereafter direct in writing.
	 
	 	10.4	 	Headings. Section headings used in this Security Agreement are for convenience
only. They are not a part of this Security Agreement and shall not be used in
construing it.
	 
	 	10.5	 	Governing Law; Jurisdiction. This Security Agreement is being executed and
delivered and is intended to be performed in the State of Ohio and shall be construed
and enforced in accordance with the laws of the State of Ohio, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of Ohio or
any other jurisdictions) that would cause the application of the laws of any
jurisdiction other than the State of Ohio, except to the extent that the UCC provides
for the application of the law of Delaware. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for such
notices to it under the Purchase Agreement and

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	 	 	 	agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.

	 	10.6	 	Disputes. Any controversy, claim or dispute arising out of or relating to this
Security Agreement or the breach, termination, enforceability or validity of this
Security 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 (a) 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 (b) 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 10.6 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 10.6) 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 9.6 in the same manner as provided for the giving of
notice under this Security 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

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	 	 	 	arbitrator shall not have power, by award or otherwise, to vary any of the
provisions of this Security Agreement.

	 	10.7	 	Rules of Construction.
	 
	 	 	 	(a) No reference to “proceeds” in this Security Agreement authorizes any sale,
transfer, or other disposition of the Collateral by Debtor.
	 
	 	 	 	(b) “Includes” and “including” are not limiting.
	 
	 	 	 	(c) “Or” is not exclusive.
	 
	 	 	 	(d) “All” includes “any” and “any” includes “all.”
	 
	 	10.8	 	Integration and Modifications.
	 
	 	 	 	(a) This Security Agreement, together with each Note and each Purchase Agreement,
constitute the entire agreement of Debtor and each Secured Parties concerning the
subject matter hereof.
	 
	 	 	 	(b) Any modifications to this Security Agreement must be made in writing and signed
by the party adversely affected.
	 
	 	10.9	 	Waiver. Any party to this Security Agreement may waive the enforcement of any
provision to the extent the provision is for its benefit.
	 
	 	10.10	 	Further Assurances. Debtor agrees to execute any further documents, and to
take any further actions, reasonably requested by a Secured Parties to evidence or
perfect the security interest granted herein, to maintain the first priority of the
security interest or to effectuate the rights granted to a Secured Parties herein.

     The parties have signed this Security Agreement as of the day and year first above written at
Franklin County, Ohio.

[Signature pages follow]

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	 	DEBTOR

NEOPROBE CORPORATION

 	 
	 	By:  	/s/ Brent L. Larson
 	 
	 	 	Name:  	Brent L. Larson 	 
	 	 	Its:       Vice President-Finance 	 
	 

Signature Page to Security Agreement

 

 

	 	 	 	 	 
	 	SECURED PARTIES

 	 
	 	/s/ David C. Bupp
 	 
	 	               David C. Bupp 	 
	 	 	 
	 
	 	 	 
	 	      /s/ Cynthia B. Gochoco
 	 
	 	               Cynthia B. Gochoco 	 
	 	 	 
	 
	 	 	 
	 	 David C. Bupp POA
 	 
	 	Walter H. Bupp, by David C. Bupp, his attorney in fact, under power of attorney dated April 22, 2005 	 
	 	 	 
	 

Signature Page to Security Agreement

18

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