Document:

Exhibit
10.2

    

    THIS NOTE
AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

    

    NEOPROBE
CORPORATION

    

    Amended
and Restated 10% Series A Senior Secured Convertible Promissory
Note

    due
December 26, 2011

    

    
      	
              No:
      1A

            	
              $7,000,000.00

            

    

    Dated:
December 26, 2007

    Amended
and Restated: July 24, 2009

    

    For value received, NEOPROBE
CORPORATION, a Delaware corporation (the “Maker”), hereby
promises to pay to the order of Platinum-Montaur Life Sciences, LLC, 152 West
57th
Street, New York, NY 10019 (together with its successors, representatives and
permitted assigns, the “Holder”), in
accordance with the terms hereinafter provided, the principal amount of Seven
Million and 00/100 Dollars ($7,000,000), together with interest thereon. This
Note is being issued pursuant to the Purchase Agreement, and the Exchange
Agreement (as those terms are defined in Section 1.1 hereof).  Upon
satisfaction of conditions set forth in the Purchase Agreement, the Maker issued
to the Holder the Maker’s 10% Series B Senior Secured Convertible Promissory
Note (“Series B
Note”) and shares of the Maker’s 8% Series A Convertible Preferred Stock
(“Preferred
Stock”). This Note and the Series B Note, as amended and restated in
connection with the Exchange Agreement, are collectively referred to herein as
the “Notes.”

    

    All payments under or pursuant to this
Note shall be made in United States Dollars in immediately available funds to
the Holder at the address of the Holder first set forth above or at such other
place as the Holder may designate from time to time in writing to the Maker or
by wire transfer of funds to the Holder’s account, instructions for which are
attached hereto as Exhibit A . The outstanding principal balance of this Note
shall be due and payable on December 26, 2011 (the “Maturity Date”) or at
such earlier time as provided herein.

    

    ARTICLE
I

     

    PAYMENT
TERMS

    

    1.1 
         Purchase
Agreement.  This Note has been executed and delivered pursuant to
the Securities Purchase Agreement, dated as of December 26, 2007 (the “Purchase Agreement
”), and the Securities Amendment and Exchange Agreement, dated as of July 24,
2009 (the “Exchange
Agreement”), each by and among the Maker and the purchasers listed
therein. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Purchase Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.2 
         Interest. Beginning
on the original issuance date of this Note (the “Issuance Date”), the
outstanding principal balance of this Note shall bear interest, in arrears, at a
rate per annum equal to ten percent (10%), payable monthly on the first day of
each calendar month (each, an “Interest Payment
Date”) commencing February 1, 2008, at the option of the Maker in (A)
cash or (B) in registered shares of Common Stock; provided, however, (i)
payment of interest in shares of Common Stock may only occur if during the 20
Trading Days immediately prior to the applicable Interest Payment Date and
through and including the date such shares of Common Stock are issued to the
Holder all of the Equity Conditions, unless waived by the Holder in writing,
have been met and the Maker shall have given the Holder notice in accordance
with the notice requirements set forth below, and (ii) as to such Interest
Payment Date, within two days after the Interest Payment Date the Maker shall
cause the physical delivery to the Holder of a certificate representing the
number of shares of Common Stock to be applied against such interest payment
equal to the quotient of (x) the applicable interest payment divided by (y) 90%
of the average VWAP for the five (5) Trading Days immediately preceding the
Interest Payment Date.  Interest shall be computed on the basis of a
360-day year of twelve (12) 30-day months, shall compound monthly and shall
accrue commencing on the Issuance Date.  Furthermore, upon the occurrence
of an Event of Default (as defined in Section 2.1 hereof), the Maker will pay
interest to the Holder, payable on demand, on the outstanding principal balance
of and unpaid interest on the Note from the date of the Event of Default until
such Event of Default is cured at the rate of the lesser of thirteen percent
(13%) and the maximum applicable legal rate per annum. 
 Notwithstanding the above, the Maker may not issue a number of shares of
Common Stock in excess of the Maximum Monthly Interest Share Amount toward the
payment of Interest, as to all outstanding Series A Notes and Series B Notes, in
the aggregate, during any rolling twenty (20) Trading Day period. For purposes
hereof, “Maximum
Monthly Interest Share Amount” means 20% of the aggregate dollar trading
volume (as reported on Bloomberg) of the Common Stock on the principal Trading
Market over the twenty (20) consecutive Trading Day period immediately prior to
the applicable Interest Payment Date.

     

    1.3 
         Payment of Principal; No
Prepayment.   The Principal Amount hereof shall be paid in full
on the Maturity Date or, if earlier, upon acceleration of this Note in
accordance with the terms hereof. Any amount of principal repaid hereunder may
not be reborrowed.  The Maker may not prepay any portion of the principal
amount of this Note without the prior written consent of the Holder, which may
be withheld in the Holder’s sole and absolute discretion.

     

    1.4          
Security
Agreement.   The obligations of the Maker hereunder are secured
by a continuing security interest in certain assets of the Maker pursuant to the
terms of a Security Agreement dated as of December 26, 2007 by and between the
Maker and the Holder, a Patent, Trademark and Copyright Security Agreement,
dated as of December 26, 2007, by and among the Maker and the Maker’s
subsidiaries, on the one hand, and the Holder, on the other hand, and a Blocked
Account Control Agreement (“Account Control
Agreement”) among the Maker, the Holder and U.S. Bank National
Association (“Bank”), pursuant to
the terms of Section 5.15 of the Purchase Agreement.

    
      
         

      

      
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    1.5 
         Payment on Non-Business
Days.   Whenever any payment to be made shall be due on a
Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment may be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

     

    1.6 
         Transfer. 
 This Note may be transferred or sold, subject to the provisions of Section
5.8 hereof, or pledged, hypothecated or otherwise granted as security by the
Holder.

     

    1.7 
         Replacement. 
 Upon receipt of a duly executed, notarized and unsecured written statement
from the Holder with respect to the loss, theft or destruction of this Note (or
any replacement hereof) and a standard indemnity, or, in the case of a
mutilation of this Note, upon surrender and cancellation of such Note, the Maker
shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen,
destroyed or mutilated Note.

     

    1.8 
         Use of
Proceeds.   The Maker shall use the proceeds of this Note as
set forth in the Purchase Agreement.

     

    1.9 
         Allocation of
Payments.  All payments to each of the Series A Holders under the
Series A Notes shall be made pro rata among the Series A Holders based upon the
aggregate unpaid principal amount of the Series A Notes held by
them.

     

    ARTICLE
II

     

    EVENTS
OF DEFAULT; REMEDIES

    

    2.1 
         Events of Default. The occurrence of any of
the following events shall be an “Event of Default”
under this Note:

     

    (a) 
         any default in the payment of (i) the
principal amount hereunder when due, or (ii) interest on, or liquidated damages
in respect of, this Note, as and when the same shall become due and payable
(whether on the Maturity Date or by acceleration or otherwise); or

     

    (b) 
         the suspension from listing, without
subsequent listing on any one of, or the failure of the Common Stock to be
listed on at least one of the OTC Bulletin Board, the American Stock Exchange,
the Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital
Market or The New York Stock Exchange, Inc. for a period of more than five (5)
consecutive Trading Days; or

     

    (c) 
         the Maker shall fail to (i) timely deliver the
shares of Common Stock upon conversion of the Note or any interest accrued and
unpaid, (ii) file a Registration Statement in accordance with the terms of the
Registration Rights Agreement or (iii) make the payment of any fees or other
payments due under this Note, the Purchase Agreement, the Registration Rights
Agreement or the other Transaction Documents, which failure is not remedied
within five (5) business days after such performance is due; or

    
      
         

      

      
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    (d) 
         while the Registration Statement is required
to be maintained effective pursuant to the terms of the Registration Rights
Agreement, the effectiveness of the Registration Statement (as defined in the
Registration Rights Agreement) lapses for any reason (including, without
limitation, the issuance of a stop order) or is unavailable to the Holder for
sale of the Registrable Securities (as defined in the Registration Rights
Agreement) as provided in the Registration Rights Agreement (other than as a
result of any breach of the Registration Rights Agreement or violation of law by
any holder of the Notes, or their agents or Affiliates), and such lapse or
unavailability continues for a period of ten (10) consecutive Trading
Days,  provided  that the Maker has not exercised its rights pursuant
to Section 3(n) of
the Registration Rights Agreement; or

     

    (e) 
         default shall be made in the performance or
observance of (i) any covenant, condition or agreement contained in this Note
(other than is set forth in (a) through (d) above) and such default is not cured
within ten (10) days after the earlier of (A) the date the Maker receives notice
from the Holder of the occurrence thereof or (B) the date on which the Maker
knew or should have known, if it had exercised reasonable diligence, of such
default, or (ii) any material covenant, condition or agreement contained in the
Purchase Agreement, Registration Rights Agreement, the Series B Note, or any
other Transaction Document that is not covered by any other provisions of this
Section 2.1 and such default is not cured within ten (10) days after the earlier
of (A) the date the Maker receives notice from the Holder of the occurrence
thereof or (B) the date on which the Maker knew or should have known, if it had
exercised reasonable diligence, of such default; or

     

    (f) 
         any material representation or warranty made
by the Maker herein or in the Purchase Agreement, the Series B Note or any other
Transaction Document shall prove to have been false or incorrect or breached in
a material respect on the date as of which made; or

     

    (g)          
the Maker shall (i) default in any payment of any amount or amounts of principal
of or interest on any Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness, in the aggregate, exceeds
$100,000, which default entitles the holder or holders of such Indebtedness to
accelerate the maturity thereof, or (ii) default in the observance or
performance of any other agreement or condition relating to any Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, which default, event
or condition continues beyond any applicable cure period, and the effect of
which default, event or condition is to cause, or to permit the holder or
holders or beneficiary or beneficiaries of such Indebtedness to cause with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity; or

     

    (h) 
         the Maker shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property
or assets, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the United States Bankruptcy Code (as now
or hereafter in effect) or under the comparable laws of any jurisdiction
(foreign or domestic), (iv) file a petition seeking to take advantage of any
bankruptcy, insolvency, moratorium, reorganization or other similar law
affecting the enforcement of creditors’ rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under United
States Bankruptcy Code (as now or hereafter in effect) or under the comparable
laws of any jurisdiction (foreign or domestic), (vi) admit in writing its
inability to pay its debts as they become due, or (vii) take any action under
the laws of any jurisdiction (foreign or domestic) analogous to any of the
foregoing; or

    
      
         

      

      
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    (i) 
         a proceeding or case shall be commenced in
respect of the Maker, without its application or consent, in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium,
dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or
of all or any substantial part of its assets in connection with the liquidation
or dissolution of the Maker, or (iii) similar relief in respect of it under any
law providing for the relief of debtors, and such proceeding or case described
in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in
effect, for a period of sixty (60) days or any order for relief shall be entered
in an involuntary case under United States Bankruptcy Code (as now or hereafter
in effect) or under the comparable laws of any jurisdiction (foreign or
domestic) against the Maker or action under the laws of any jurisdiction
(foreign or domestic) analogous to any of the foregoing shall be taken with
respect to the Maker and shall continue undismissed, or unstayed and in effect
for a period of sixty (60) days; or

     

    (j) 
         at any point after 135 vital blue dye lymph
nodes have been obtained from patients who have completed surgery and injection
of the drug in the Phase 3 clinical trial of Lymphoseek (NEO3-05), the failure
of Maker to achieve the primary objective in such trial of efficacy of
Lymphoseek, which is the concordance of in-vivo detection rate of Lymphoseek and
vital blue dye in tumor-draining sentinel lymph nodes as confirmed by pathology
in at least ninety-three percent (93%) of such patients, determined in good
faith by the Company and the Holder following a review of the unaudited trial
data; or

     

    (k) 
         the Bank shall provide written notice to the
Maker or Holder of the Bank’s termination of the Account Control Agreement, and
the Maker does not within forty-five (45) days following such notice (i)
establish a replacement blocked account pursuant to Section 5.15 of the Purchase
Agreement with another financial institution, on substantially the same terms
contained in the Account Control Agreement, or as otherwise reasonably
acceptable to Maker and Holder (the “Replacement
Account”), (ii) transfer all funds held in the account subject to the
Account Control Agreement to the Replacement Account, and (iii) provide evidence
to the Holder that an instruction letter, substantially in the form of the
Instruction Letter attached as Exhibit M to the Purchase Agreement, has been
executed by each of the Maker and Ethicon, irrevocably instructing Ethicon to
make payments under the Ethicon Agreement to the Replacement Account;
or

     

    (l) 
         the occurrence of any default or event of
default under any other Note or the failure by the Maker to comply with its
material obligations under the Certificate of Designations governing the terms
of the Preferred Stock.

    
      
         

      

      
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    2.2 
         Remedies Upon An Event of
Default.  If an Event of Default shall have occurred and shall be
continuing, the Holder of this Note may at any time at its option declare the
entire unpaid principal balance of this Note, together with all interest accrued
hereon, due and payable, and thereupon, the same shall be accelerated and so due
and payable, without presentment, demand, protest, or notice, all of which are
hereby expressly unconditionally and irrevocably waived by the Maker; provided, however, that upon
the occurrence of an Event of Default described above, the Holder, in its sole
and absolute discretion, may (a) demand that the entire principal amount of this
Note then outstanding and all accrued and unpaid interest thereon shall be
converted into shares of Common Stock at the applicable Conversion Price per
share on the Trading Day immediately preceding the date the Holder demands
conversion pursuant to this clause, or (b) exercise or otherwise enforce any one
or more of the Holder’s rights, powers, privileges, remedies and interests under
this Note (including, if applicable, pursuant to Section 3.7 hereof), the
Purchase Agreement, the Registration Rights Agreement or applicable law. 
No course of delay on the part of the Holder shall operate as a waiver thereof
or otherwise prejudice the right of the Holder. No remedy conferred hereby shall
be exclusive of any other remedy referred to herein or now or hereafter
available at law, in equity, by statute or otherwise. No notice or other action
of Holder shall be required in the case of an Event of Default set forth in
Sections 2.1(h) or (i), and, in such event, the outstanding principal balance
and accrued interest hereunder shall be automatically due and
payable.

     

    ARTICLE
III

     

    CONVERSION;
ANTIDILUTION

    

    3.1          
Conversion
Option.  At any time and from time to time on or after the Issuance
Date:

     

    (a)         
 up to Three Million Five Hundred Thousand and 00/100 Dollars of the
outstanding principal balance of this Note (the “First Conversion
Tranche”) shall be convertible (in whole or in part and from time to
time), at the option of the Holder (the “First Conversion
Option”), into such number of fully paid and non-assessable shares of
Common Stock (the “First Conversion
Rate”) as is determined by dividing (x) that portion of the First
Conversion Tranche as of such date that the Holder elects to convert by (y) the
First Tranche Conversion Price (as defined in Section 3.2 hereof) then in effect
on the date on which the Holder faxes a notice of conversion (the “Conversion Notice”),
duly executed, to the Maker (facsimile number (614) 793-7520, Attn.: Brent L.
Larson, Vice President - Finance) (the “Conversion Date”);
and

     

    (b)         
 up to an additional Three Million Five Hundred Thousand and 00/100 Dollars
of the outstanding principal balance of this Note (the “Second Conversion
Tranche”) shall be convertible (in whole or in part and from time to
time), at the option of the Holder (the “Second Conversion
Option”), into such number of fully paid and non-assessable shares of
Common Stock (the “Second Conversion
Rate”) as is determined by dividing (x) that portion of the Second
Conversion Tranche as of such date that the Holder elects to convert by (y) the
Second Tranche Conversion Price (as defined in Section 3.2 hereof) then in
effect on the Conversion Date,

    

    provided, however, that the
First and Second Tranche Conversion Prices shall be subject to adjustment as
described in Section 3.5 below.  The Holder shall deliver this Note to the
Maker at the address designated in the Purchase Agreement at such time that this
Note is fully converted. With respect to partial conversions of this Note, the
Maker shall keep written records of the amount of this Note converted as of each
Conversion Date.

    
      
         

      

      
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    3.2 
         Conversion Price. The
term “First Tranche
Conversion Price” shall mean $0.26, subject to adjustment under Section
3.5 hereof. The term “Second Tranche Conversion
Price” shall mean $0.9722, subject to adjustment under Section 3.5
hereof. The First and Second Tranche Conversion Prices are hereinafter referred
to collectively as the “Conversion
Prices.”

     

    3.3 
         Mechanics of
Conversion.

     

    (a) 
         Not later than three (3) Trading Days after
any Conversion Date, the Maker or its designated transfer agent, as applicable,
shall issue and deliver to the Depository Trust Company (“DTC”) account on the
Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) as
specified in the Conversion Notice, the number of shares of Common Stock to
which the Holder shall be entitled upon such conversion, registered in the name
of the Holder or its designee.  In the alternative, not later than three
(3) Trading Days after any Conversion Date, the Maker shall deliver to the
applicable Holder by express courier a certificate or certificates which shall
be free of restrictive legends and trading restrictions (other than those
required pursuant to the Purchase Agreement) representing the number of shares
of Common Stock being acquired upon the conversion of this Note (the “Delivery Date”).
Notwithstanding the foregoing to the contrary, the Maker or its transfer agent
shall only be obligated to issue and deliver the shares to the DTC on the
Holder’s behalf via DWAC (or certificates free of restrictive legends) if such
conversion is in connection with a sale by the Holder and the Holder has
complied with the applicable prospectus delivery requirements or an exemption
from such registration requirements (each as evidenced by documentation
furnished to and reasonably satisfactory to the Maker). If in the case of any
Conversion Notice such certificate or certificates are not delivered to or as
directed by the Holder by the Delivery Date, the Holder shall be entitled by
written notice to the Maker at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Maker shall immediately return this Note tendered for conversion,
whereupon the Maker and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice of revocation, except
that any amounts described in Sections 3.3(b) and (c) shall be payable through
the date notice of rescission is given to the Maker.

     

    (b) 
         The Maker understands that a delay in the
delivery of the shares of Common Stock upon conversion of this Note beyond the
Delivery Date could result in economic loss to the Holder. If the Maker fails to
deliver to the Holder such shares via DWAC (or, if applicable, certificates), or
fails to deliver unlegended certificates representing such shares if required
pursuant to Section 3.3(a) hereof, by the Delivery Date, the Maker shall pay to
such Holder, in cash, an amount per Trading Day for each Trading Day until such
shares are delivered via DWAC or certificates are delivered (if applicable),
together with interest on such amount at a rate of 10% per annum, accruing until
such amount and any accrued interest thereon is paid in full, equal to the
greater of (A) (i) 1% of the aggregate principal amount of the Notes requested
to be converted for the first five (5) Trading Days after the Delivery Date and
(ii) 2% of the aggregate principal amount of the Notes requested to be converted
for each Trading Day thereafter and (B) $2,000 per day (which amount shall be
paid as liquidated damages and not as a penalty). Nothing herein shall limit a
Holder’s right to pursue actual damages for the Maker’s failure to deliver
certificates representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right to pursue all
remedies available to it at law or in equity (including, without limitation, a
decree of specific performance and/or injunctive relief). Notwithstanding
anything to the contrary contained herein, the Holder shall be entitled to
withdraw a Conversion Notice, and upon such withdrawal the Maker shall only be
obligated to pay the liquidated damages accrued in accordance with this Section
3.3(b) through the date the Conversion Notice is withdrawn.

    
      
         

      

      
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    3.4 
         Ownership Cap and Certain
Conversion Restrictions.

     

    (a) 
         Notwithstanding anything to the contrary set
forth in Section 3 of this Note, at no time may the Holder convert all or a
portion of this Note if the number of shares of Common Stock to be issued
pursuant to such conversion would exceed, when aggregated with all other shares
of Common Stock owned by the Holder at such time, the number of shares of Common
Stock which would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) more
than 4.99% of all of the Common Stock outstanding at such time; provided, however, that upon
the Holder providing the Maker with sixty-one (61) days notice (pursuant to
Section 4.1 hereof) (the “Waiver Notice”) that
the Holder waives the limitations contained  in this Section 3.4(a) with
regard to any or all shares of Common Stock issuable upon conversion of this
Note, this Section 3.4(a) will be of no force or effect with regard to all or a
portion of the Note referenced in the Waiver Notice.

     

    (b) 
         Notwithstanding anything to the contrary set
forth in Section 3 of this Note, at no time may the Holder convert all or a
portion of this Note if the number of shares of Common Stock to be issued
pursuant to such conversion, when aggregated with all other shares of Common
Stock owned by the Holder at such time, would result in the Holder beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules thereunder) in excess of 9.99% of the then issued and outstanding
shares of Common Stock outstanding at such time;  provided,  however,
that upon the Holder providing the Maker with a Waiver Notice that the Holder
waives the limitations contained in this Section 3.4(b) with regard to any or
all shares of Common Stock issuable upon conversion of this Note, this Section
3.4(b) shall be of no force or effect with regard to all or a portion of the
Note referenced in the Waiver Notice.

     

    (c)         
 Notwithstanding the above, the provisions of Section 3.4(a) and 3.4(b)
shall not be applicable when calculating any adjustment to the Conversion Prices
hereunder or any other adjustments under Section 3.5 hereof.

    

    3.5 
         Adjustment of Conversion
Prices.

     

    (a) 
         Until the Note has been paid in full or
converted in full, each of the Conversion Prices shall be subject to adjustment
from time to time as follows (but shall not be increased, other than pursuant to
Section 3.5(a)(i) hereof):

     

    (i) 
         Adjustments for Stock Splits and
Combinations.  If the Maker shall at any time or from time to time
after the Issuance Date, effect a stock split of the outstanding Common Stock,
the applicable Conversion Prices in effect immediately prior to the stock split
shall be proportionately decreased.  If the Maker shall at any time or from
time to time after the Issuance Date, combine the outstanding shares of Common
Stock, the applicable Conversion Prices in effect immediately prior to the
combination shall be proportionately increased. Any adjustments under this
Section 3.5(a)(i) shall be effective at the close of business on the date the
stock split or combination occurs.

    
      
         

      

      
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    (ii) 
          Adjustments for Certain Dividends
and Distributions.   If the Maker shall at any time or from
time to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in shares of Common Stock, then, and in each event, the
applicable Conversion Prices in effect immediately prior to such event shall be
decreased as of the time of such issuance or, in the event such record date
shall have been fixed, as of the close of business on such record date, by
multiplying each of the applicable Conversion Prices then in effect by a
fraction:

     

    (A) 
         the numerator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date;
and

     

    (B) 
         the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution.

     

    (iii)          
Adjustment for Other Dividends
and Distributions.   If the Maker shall at any time or from
time to time after the Issuance Date, make or issue or set a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in securities of the Maker or any other Person other than
shares of Common Stock, then, and in each event, an appropriate revision to the
applicable Conversion Prices shall be made and provision shall be made (by
adjustments of the Conversion Prices or otherwise) so that the holders of this
Note shall receive upon conversions thereof, in addition to the number of shares
of Common Stock receivable thereon, the number of securities of the Maker or
other issuer (as applicable) which they would have received had this Note been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the Conversion Date,
retained such securities (together with any distributions payable thereon during
such period), giving application to all adjustments called for during such
period under this Section 3.5(a)(iii) with respect to the rights of the holders
of this Note; provided,
however, that if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Conversion Prices shall be adjusted pursuant to this paragraph as
of the time of actual payment of such dividends or
distributions.

    
      
         

      

      
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    (iv)          Adjustments for Reclassification,
Exchange or Substitution.    If the Common Stock issuable upon
conversion of this Note at any time or from time to time after the Issuance Date
shall be changed to the same or different number of shares of any class or
classes of stock, whether by reclassification, exchange, substitution or
otherwise (other than by way of a stock split or combination of shares or stock
dividends provided for in Sections 3.5(a)(i), (ii) and (iii), or a
reorganization, merger, consolidation, or sale of assets provided for in Section
3.5(a)(v)), then, and in each event, an appropriate revision to the Conversion
Prices shall be made and provisions shall be made (by adjustments of the
Conversion Prices or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock and
other securities receivable upon reclassification, exchange, substitution or
other change, by holders of the number of shares of Common Stock into which such
Note might have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further adjustment as
provided herein.

     

    (v) 
         Adjustments for Reorganization,
Merger, Consolidation or Sales of Assets.   If at any time or
from time to time after the Issuance Date there shall be a capital
reorganization of the Maker (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section 3.5(a)(i),
(ii) and (iii), or a reclassification, exchange or substitution of shares
provided for in Section 3.5(a)(iv)), or a merger or consolidation of the Maker
with or into another corporation where the holders of outstanding voting
securities prior to such merger or consolidation do not own over fifty percent
(50%) of the outstanding voting securities of the merged or consolidated entity,
immediately after such merger or consolidation, or the sale of all or
substantially all of the Maker’s properties or assets to any other person (an
“Organic Change”), then as a
part of such Organic Change, (A) if the surviving entity in any such Organic
Change has a class of equity securities registered under the Exchange Act, and
its common stock is listed or quoted on a national exchange or the OTC Bulletin
Board, an appropriate revision to the Conversion Prices shall be made and
provision shall be made (by adjustments of the Conversion Prices or otherwise)
so that the Holder shall have the right thereafter to convert such Note into the
kind and amount of shares of stock and other securities or property of the Maker
or any successor corporation resulting from such Organic Change, and (B) if the
surviving entity in any such Organic Change does not have a class of equity
securities registered under the Exchange Act, or its common stock is not listed
or quoted on a national exchange or the OTC Bulletin Board, the Holder shall
have the right to accelerate the maturity of this Note.  In any case
referenced in clause (A) above, appropriate adjustment shall be made in the
application of the provisions of this Section 3.5(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.5(a)(v) (including any adjustment in the applicable Conversion
Prices then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note) shall be applied after that event in
as nearly an equivalent manner as may be practicable.

     

    (b)          Record Date. In case
the Maker shall take record of the holders of its Common Stock for the purpose
of entitling them to subscribe for or purchase Common Stock or Convertible
Securities, then the date of the issue or sale of the shares of Common Stock
shall be deemed to be such record date.

     

    (c) 
         [Reserved]

    
      
         

      

      
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    (d) 
         No Impairment. 
 The Maker shall not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Maker, but will at all times in good faith, assist
in the carrying out of all the provisions of this Section 3.5 and in the taking
of all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the Holder against impairment.

     

    (e) 
         Certificates as to
Adjustments.   Upon occurrence of each adjustment or
readjustment of either of the Conversion Prices or number of shares of Common
Stock issuable upon conversion of this Note pursuant to this Section 3.5, the
Maker at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and readjustment, showing in detail the facts upon which
such adjustment or readjustment is based. The Maker shall, upon written request
of the Holder, at any time, furnish or cause to be furnished to the Holder a
like certificate setting forth such adjustments and readjustments, the
applicable Conversion Prices in effect at the time, and the number of shares of
Common Stock and the amount, if any, of other securities or property which at
the time would be received upon the conversion of this Note. Notwithstanding the
foregoing, the Maker shall not be obligated to deliver a certificate unless such
certificate would reflect an increase or decrease of at least one percent (1%)
of such adjusted amount.

     

    (f) 
         Issue Taxes. 
 The Maker shall pay any and all issue and other taxes, excluding federal,
state or local income taxes, that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of this Note pursuant thereto;
provided, however, that the Maker shall not be obligated to pay any transfer
taxes resulting from any transfer requested by the Holder in connection with any
such conversion.

     

    (g) 
         Fractional
Shares.   No fractional shares of Common Stock shall be issued
upon conversion of this Note. In lieu of any fractional shares to which the
Holder would otherwise be entitled, the Maker shall pay cash equal to the
product of such fraction multiplied by the average of the Closing Prices of the
Common Stock for the five (5) consecutive Trading Days immediately preceding the
Conversion Date.

     

    (h) 
         Regulatory
Compliance.   If any shares of Common Stock to be reserved for
the purpose of conversion of this Note or any interest accrued thereon require
registration or listing with or approval of any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise before such shares may be validly issued or delivered upon
conversion, the Maker shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration, listing or
approval, as the case may be.

     

    3.6 
         Inability to Fully
Convert.

     

    (a) 
         Holder’s Option if Maker
Cannot Fully Convert.   If, upon the Maker’s receipt of a
Conversion Notice, the Maker cannot issue shares of Common Stock registered for
resale under the Registration Statement if required pursuant to the Registration
Rights Agreement for any reason, including, without limitation, because the
Maker (i) does not have a sufficient number of shares of Common Stock authorized
and available, (ii) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Maker or any of its
securities from issuing all of the Common Stock which is to be issued to the
Holder pursuant to a Conversion Notice or (iii) fails to have a sufficient
number of shares of Common Stock registered for resale under the Registration
Statement, then the Maker shall issue as many shares of Common Stock as it is
able to issue in accordance with the Holder’s Conversion Notice and, with
respect to the unconverted portion of this Note, the Holder, solely at Holder’s
option (and in addition to all other remedies hereunder), can elect
to:

    
      
         

      

      
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    (A) 
         require the Maker to prepay that portion of
this Note for which the Maker is unable to issue Common Stock in accordance with
the Holder’s Conversion Notice (the “Mandatory
Prepayment”) in an amount equal to one hundred twenty-five percent (125%
of the portion of aggregate principal amount of this Note that Maker was unable
to convert to Common Stock (the “Mandatory Prepayment
Price”);

     

    (B) 
          if the Maker’s inability to fully convert is
pursuant to Section 3.6(a)(iii) above, require the Maker to issue restricted
shares of Common Stock in accordance with such holder’s Conversion Notice;
or

     

    (C) 
         void its Conversion Notice and retain or have
returned, as the case may be, this Note that was to be converted pursuant to the
Conversion Notice (provided that the Holder’s voiding its Conversion Notice
shall not effect the Maker’s obligations to make any payments which have accrued
prior to the date of such notice).

     

    (b) 
         Mechanics of Fulfilling
Holder’s Election.   The Maker shall immediately send via
facsimile to the Holder, upon receipt of a facsimile copy of a Conversion Notice
from the Holder which cannot be fully satisfied as described in Section 3.6(a)
above, a notice of the Maker’s inability to fully satisfy the Conversion Notice
(the “Notice of
Inability to Convert”). Such Inability to Convert Notice shall indicate
(i) the reason why the Maker is unable to fully satisfy such holder’s Conversion
Notice, (ii) the amount of this Note which cannot be converted, and (iii) the
applicable Mandatory Prepayment Price. The Holder shall notify the Maker of its
election pursuant to Section 3.6(a) above by delivering written notice via
facsimile to the Maker (“Election Upon Inability to
Convert”).

     

    (c) 
         Payment of Prepayment
Price.   If the Holder shall elect to have its Notes prepaid
pursuant to Section 3.6(a)(A) above, the Maker shall pay the Mandatory
Prepayment Price to the Holder within thirty (30) days of the Maker’s receipt of
the Holder’s Election Upon Inability to Convert,  provided  that prior
to the Maker’s receipt of the Holder’s Election Upon Inability to Convert the
Maker has not delivered a notice to the Holder stating, to the satisfaction of
the Holder, that the event or condition resulting in the Mandatory Prepayment
has been cured and all Conversion Shares issuable to the Holder can and will be
delivered to the Holder in accordance with the terms of this Note. If the Maker
shall fail to pay the applicable Mandatory Prepayment Price to the Holder within
five (5) business days following the Maker’s receipt of the Holder’s Election
Upon Inability to Convert (other than pursuant to a dispute as to the
determination of the arithmetic calculation of the Mandatory Prepayment Price),
in addition to any remedy the Holder may have under this Note and the Purchase
Agreement, such unpaid amount shall bear interest at the rate of two percent
(2%) per month (prorated for partial months) until paid in full. Until the full
Mandatory Prepayment Price is paid in full to the Holder, the Holder may (i)
void the Mandatory Prepayment with respect to that portion of the Note for which
the full Mandatory Prepayment Price has not been paid, (ii) receive back such
Note, and (iii) require that the Conversion Prices of such returned Note be
adjusted to the lesser of (A) the Conversion Prices as in effect on the date on
which the Holder voided the Mandatory Prepayment and (B) the lowest Closing
Price during the period beginning on the Conversion Date and ending on the date
the Holder voided the Mandatory Prepayment.

    
      
         

      

      
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    (d) 
         Pro-rata Conversion and
Prepayment.   In the event the Maker receives a Conversion
Notice from more than one holder of the Series A Notes on the same day and the
Maker can convert and prepay some, but not all, of the Series A Notes pursuant
to this Section 3.6, the Maker shall convert and prepay from each holder of the
Series A Notes electing to have its Series A Notes converted and prepaid at such
time an amount equal to such holder’s pro-rata amount (based on the principal
amount of the Series A Notes held by such holder relative to the principal
amount of the Series A Notes outstanding) of all the Series A Notes being
converted and prepaid at such time.

     

    3.7 
         Prepayment Upon Triggering
Event.

     

    (a) 
         Prepayment Option Upon
Triggering Event.  In addition to all other rights of the Holder
contained herein, after a Triggering Event (as defined below), the Holder shall
have the right, at the Holder’s option, to require the Maker to prepay all or a
portion of this Note in cash at a price equal to the sum of  (i) one
hundred percent (100%) of the aggregate principal amount of this Note plus all
accrued and unpaid interest, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of this Note and the other Transaction
Documents (the “Prepayment Price”).  If the Holder demands payment of the
Prepayment Price pursuant to this Section 3.7, the Maker shall deliver such
payment to the Holder within 5 business days after the receipt of such
demand

     

    (b) 
         Triggering
Event.  A “Triggering Event”
shall be deemed to have occurred at such time as any of the following
events:

     

    (i) 
           any Event of Default pursuant to
Sections 2.1 (b), (c) or (d) shall have occurred;

     

    (ii) 
           the Maker’s notice to any holder of the
Notes, including by way of public announcement, at any time, of its inability to
comply or its intention not to comply with proper requests for conversion of any
Notes into shares of Common Stock; or

     

    (iii) 
           the Maker deregisters its shares of
Common Stock and as a result such shares of Common Stock are no longer publicly
traded; or

     

    (iv) 
           the Maker consummates a “going private”
transaction and as a result the Common Stock is no longer registered under
Sections 12(b) or 12(g) of the Exchange Act.

    
      
         

      

      
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    3.8 
         No Rights as
Shareholder.   Nothing contained in this Note shall be
construed as conferring upon the Holder, prior to the conversion of this Note,
the right to vote or to receive dividends or to consent or to receive notice as
a shareholder in respect of any meeting of shareholders for the election of
directors of the Maker or of any other matter, or any other rights as a
shareholder of the Maker.

     

    ARTICLE
IV

     

    COVENANTS

    

    For so long as this Note is
outstanding, without the prior written consent of the holders of at least a
majority of the then outstanding principal balance hereof:

    

    4.1 
         No Liens. 
 The Maker shall not, and shall not permit its Subsidiaries to, enter into,
create, incur, assume or suffer to exist any Liens on or with respect to any of
its assets now owned or hereafter acquired or any interest therein or any income
or profits therefrom, other than:

     

    (a) 
         Liens that are Permitted
Encumbrances;

     

    (b) 
         Liens for purchase money obligations, incurred
in the ordinary course of the Maker’s business, to acquire assets that do not
exceed the purchase price of the asset and that encumber only the asset being
purchased; and

     

    (c) 
         any Lien listed on
Schedule 3.12 to the Purchase Agreement.

     

    4.2           No
Indebtedness.   The Maker shall not, and shall not permit
any Subsidiary to, enter into, create, incur, assume or suffer to exist any
Indebtedness, other than

     

    (a)           Indebtedness
existing on the Issuance Date and disclosed in the Commission
Documents;

     

    (b)           Indebtedness
created under the Transaction Documents;

     

    (c)           Non-current
liabilities for post-employment healthcare and other insurance
benefits;

     

    (d)           Trade
payables and insurance premium financing incurred in the ordinary course of
business and consistent with past practices; and

     

    (e)           Indebtedness
secured by Liens permitted under Section 4.1.

     

    4.3           Compliance with Transaction
Documents.   The Maker shall, and shall cause its
Subsidiaries to, comply with its obligations under this Note, the Series B Note
and the other Transaction Documents.

     

    4.4           Compliance with
Law.   The Maker shall, and shall cause each of its
Subsidiaries to, comply with law and duly observe and conform in all material
respects to all valid requirements of Governmental Authorities relating to the
conduct of its business or to its properties or assets.

    
      
         

      

      
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    4.5 
         Transactions with
Affiliates.   The Maker shall not, and shall not permit its
Subsidiaries to, engage in any transactions with any officer, director, employee
or any Affiliate of the Maker, including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Maker, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $50,000, other than (i) for payment of reasonable salary for
services actually rendered, as approved by the Board of Directors of the Maker
as fair in all respects to the Maker, and (ii) reimbursement for expenses
incurred on behalf of the Maker.

     

    4.6 
         No Dividends. 
 The Maker shall not, and shall not permit any Subsidiary to, (a) declare
or pay any dividends or make any distributions to any holder(s) of Common Stock
or other equity security of the Maker or such Subsidiaries (other than dividend
and distributions from a Subsidiary to the Maker and dividends on the Preferred
Stock), (b) purchase or otherwise acquire for value, directly or indirectly, any
shares or other equity security of the Maker, (c) form or create any subsidiary
become a partner in any partnership or joint venture, or make any acquisition of
any interest in any Person or acquire substantially all of the assets of any
Person, or (d) transfer, assign, pledge, issue or otherwise permit any equity or
other ownership interests in the Subsidiaries to be beneficially owned or held
by any person other than the Maker and, in the case of Cira Biosciences, Inc.
the persons owning or holding such securities on the Issuance Date; provided, however, that Maker’s
Cira Biosciences, Inc. subsidiary may issue equity securities in connection with
third-party arms-length capital raising transactions and pay dividends to the
holders of such equity securities in accordance with their terms.

     

    4.7 
         No Merger or Sale of
Assets.   The Maker shall not, and shall not permit any
Subsidiary to, (a) merge or consolidate or sell or dispose of all its assets or
any substantial portion thereof, or (b) in any way or manner alter its
organizational structure or effect a change of entity; provided, however, that the
Maker shall be permitted to sell or dispose of its assets (but not all or
substantially all of its assets) in the ordinary course of its business and
consistent with past practice.

     

    4.8 
         Payment of Taxes,
Etc.   The Maker shall, and shall cause each of its
Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Maker and
the Subsidiaries, except for such failures to pay that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Maker or such Subsidiaries shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Maker and such Subsidiaries will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security
therefor.

    
      
         

      

      
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    4.9 
         Corporate
Existence.   the Maker shall, and shall cause each of its
Subsidiaries to, maintain in full force and effect its corporate existence,
rights and franchises and all licenses and other rights to use property owned or
possessed by it and reasonably deemed to be necessary to the conduct of its
business.

     

    4.10 
       Investment Company
Act.   The Maker shall conduct its businesses in a manner so
that it will not become subject to the Investment Company Act of 1940, as
amended.

     

    4.11 
       Maintenance of
Assets.   The Maker shall, and shall cause its Subsidiaries to,
keep its properties in good repair, working order and condition, reasonable wear
and tear excepted, and from time to time make all necessary and proper repairs,
renewals, replacements, additions and improvements thereto.

     

    4.12 
       Indebtedness to
Affiliates.   The Maker shall not, and shall not permit any
Subsidiary to, make any payment on any indebtedness owed to officers, directors
or Affiliates, except for reimbursements of reasonable and typical business
expenses.

     

    4.13 
       Restriction on
Dividends.   The Maker shall not, and shall not permit any
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to pay dividends or distributions to the Maker, pay any indebtedness
owed to the Maker or transfer any properties or assets to the Maker

     

    4.14 
       No Investments. 
The Maker shall not, and shall not permit any Subsidiary to, make or suffer to
exist any Investments or commitments therefor, other than Investments made in
the ordinary course of business.

     

    4.15 
       Transfers to
Subsidiaries.  The Maker shall not make any transfers of funds or
other assets to any Subsidiary except in the ordinary course of business and
consistent with past practice.

     

    ARTICLE
V

     

    MISCELLANEOUS

    

    5.1 
         Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery,
telecopy or facsimile at the address or number designated in the Purchase
Agreement (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The Maker will give written notice to the Holder at least ten (10) days prior to
the date on which the Maker takes a record (x) with respect to any dividend or
distribution upon the Common Stock, (y) with respect to any pro rata
subscription offer to holders of Common Stock or (z) for determining rights to
vote with respect to any Organic Change, dissolution, liquidation or winding-up
and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Maker will also give written
notice to the Holder at least ten (10) days prior to the date on which any
Organic Change, dissolution, liquidation or winding-up will take place and in no
event shall such notice be provided to the Holder prior to such information
being made known to the public. The Maker shall promptly notify the Holder of
this Note of any notices sent or received, or any actions taken with respect to
the Series A Notes.

    
      
         

      

      
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    5.2 
         Governing Law. 
 This Note shall be governed by and construed in accordance with the
internal laws of the State of New York, without giving effect to any of the
conflicts of law principles which would result in the application of the
substantive law of another jurisdiction. This Note shall not be interpreted or
construed with any presumption against the party causing this Note to be
drafted.

     

    5.3 
         Headings. 
 Article and section headings in this Note are included herein for purposes
of convenience of reference only and shall not constitute a part of this Note
for any other purpose.

     

    5.4 
         Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief.   The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without
limitation, a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder’s
right to pursue actual damages for any failure by the Maker to comply with the
terms of this Note.  Amounts set forth or provided for herein with respect
to payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Maker (or the
performance thereof).  The Maker acknowledges that a breach by it of its
obligations hereunder will cause irreparable and material harm to the Holder and
that the remedy at law for any such breach may be inadequate. Therefore the
Maker agrees that, in the event of any such breach or threatened breach, the
Holder shall be entitled, in addition to all other available rights and
remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.

     

    5.5 
         Enforcement
Expenses.   In the event of any default under this Note, Maker
agrees to pay the reasonable costs and expenses of Holder in enforcing this Note
(including reasonable attorneys’ fees and court costs), subject, in the case of
any suit, action or proceeding to enforce this Note, to Section
5.9.

     

    5.6 
         Binding Effect. 
 The obligations of the Maker and the Holder set forth herein shall be
binding upon the successors and assigns of each such party, whether or not such
successors or assigns are permitted by the terms hereof.

     

    5.7 
         Amendments. 
 This Note may not be modified or amended in any manner except in writing
executed by the Maker and the holders of a majority of the outstanding principal
balance of the Series A Notes.

    
      
         

      

      
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    5.8 
         Compliance with Securities
Laws.   The Holder of this Note acknowledges that this Note is
being acquired solely for the Holder’s own account and not as a nominee for any
other party, and for investment, and that the Holder shall not offer, sell or
otherwise dispose of this Note except in compliance with applicable securities
laws. This Note and any Note issued in substitution or replacement therefor
shall be stamped or imprinted with a legend in substantially the following
form:

     

    “THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN
THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”

    

    5.9 
         Consent to
Jurisdiction. Each of the Maker and the Holder irrevocably agrees that
the any legal action or proceeding arising out of or relating to this Note may
be brought in the Courts of New York County, New York or of the United States of
America for the Southern District of New York and hereby expressly submits to
the personal jurisdiction and venue of such courts for the purposes thereof and
expressly waives any claim of improper venue and any claim that such courts are
an inconvenient forum. Each of the Maker and the Holder hereby irrevocably
consents to the service of process of any of the aforementioned courts in any
such suit, action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at the address in effect for notices to it
under the Purchase Agreement, such service to become effective 10 days after
such mailing. Nothing in this Section 5.9 shall affect or limit any right to
serve process in any other manner permitted by law. Each of the Maker and the
Holder hereby agree that the prevailing party in any suit, action or proceeding
arising out of or relating to this Note shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The Maker and the Holder
hereby waive all rights to trial by jury.

     

    5.10 
       Parties in Interest.
This Note shall be binding upon, inure to the benefit of and be enforceable by
the Maker, the Holder and their respective successors and permitted
assigns.

     

    5.11 
       Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.

    
      
         

      

      
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    5.12 
      Waivers; Dispute
Resolution.

     

    (a) 
      Except as otherwise specifically provided herein, the Maker
and all others that may become liable for all or any part of the obligations
evidenced by this Note, hereby waive presentment, demand, notice of nonpayment,
protest and all other demands and notices in connection with the delivery,
acceptance, performance and enforcement of this Note, and do hereby consent to
any number of renewals of extensions of the time or payment hereof and agree
that any such renewals or extensions may be made without notice to any such
persons and without affecting their liability herein and do further consent to
the release of any person liable hereon, all without affecting the liability of
the other persons, firms or Maker liable for the payment of this Note. No delay
or omission on the part of the Holder in exercising its rights under this Note,
or course of conduct relating hereto, shall operate as a waiver of such rights
or any other right of the Holder, nor shall any waiver by the Holder of any such
right or rights on any one occasion be deemed a waiver of the same right or
rights on any future occasion.

     

    (b) 
      In the case of a dispute as to the determination of the
Closing Price or the VWAP or the arithmetic calculation of the Conversion
Prices, any adjustment to the Conversion Prices, liquidated damages amount,
interest or dividend calculation, or any redemption price, redemption amount,
adjusted Conversion Prices, or similar calculation, or as to whether a
subsequent issuance of securities is prohibited hereunder or would lead to an
adjustment to the Conversion Prices, the Maker shall submit the disputed
determinations or arithmetic calculations via facsimile within two (2) Business
Days of receipt, or deemed receipt, of the Conversion Notice, any redemption
notice, default notice or other event giving rise to such dispute, as the case
may be, to the Holder. If the Holder and the Maker are unable to agree upon such
determination or calculation within two (2) Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Maker shall, within two (2) Business Days submit via facsimile (a) the disputed
determination of the Closing Price or the VWAP to an independent, reputable
investment bank selected by the Maker and approved by the Holder, which approval
shall not be unreasonably withheld, (b) the disputed arithmetic calculation of
the Conversion Prices, adjusted Conversion Prices or any redemption price,
redemption amount or default amount to the Maker’s independent, outside
accountant or (c) the disputed facts regarding whether a subsequent issuance of
securities is prohibited hereunder or would lead to an adjustment to the
Conversion Prices (or any of the other above described facts not expressly
designated to the investment bank or accountant), to an expert attorney from a
nationally recognized outside law firm (having at least 100 attorneys and having
with no prior relationship with the Maker) selected by the Maker and approved by
the Lead Purchaser as defined in the Purchase Agreement). The Maker, at the
Maker’s expense, shall cause the investment bank, the accountant, the law firm,
or other expert, as the case may be, to perform the determinations or
calculations and notify the Maker and the Holder of the results no later than
five (5) Business Days from the time it receives the disputed determinations or
calculations. Such investment bank’s, accountant’s or attorney’s determination
or calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

     

    5.13 
      Additional
Definitions. Terms used herein and not defined shall have the meanings
set forth in the Purchase Agreement.  For the purposes hereof, the
following terms shall have the following meanings:

     

    “Closing Price” shall
mean (i) the last trading price per share of the Common Stock on such date on
the OTC Bulletin Board or a registered national stock exchange on which the
Common Stock is then listed, or if there is no such price on such date, then the
last trading price on such exchange or quotation system on the date nearest
preceding such date, or (ii) if the price of the Common Stock is not then
reported by the OTC Bulletin Board or a registered national securities exchange,
then the average of the “Pink Sheet” quotes for the relevant date, as reported
by the National Quotation Bureau, Inc., or (iii) if the Common Stock is not then
publicly traded the fair market value of a share of Common Stock as determined
by the Holder and reasonably acceptable to the Maker.

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    “Equity Conditions”
shall mean, during the period in question, (i) the Maker shall have duly honored
all conversions and redemptions scheduled to occur or occurring by virtue of one
or more Conversion Notices of the Holder, if any, (ii) all liquidated damages
and other amounts owing to the Holder in respect of this Note shall have been
paid; (iii) there is an effective Registration Statement pursuant to which the
Holder is permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents, whether by conversion or
exercise, forced conversion, in lieu of cash interest or otherwise (and the
Maker believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is trading on
the Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on a Trading Market (and the Maker believes, in
good faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (v) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction Documents,
(vi) there is then existing no Event of Default or event which, with the passage
of time or the giving of notice, would constitute an Event of Default, (vii) the
issuance of the shares in question (including shares of Common Stock as interest
hereunder) to the Holder would not violate the 4.99% or 9.99% beneficial
ownership limitations set forth in Section 3.4 hereof, and (viii) no public
announcement of a pending or proposed Triggering Event has
occurred.

    

    “Investment” means,
with respect to any Person, all investments in any other Person, whether by way
of extension of credit, loan, advance, purchase of stock or other ownership
interest (other than ownership interests in such Person), bonds, notes,
debentures or other securities, or otherwise, and whether existing on the date
of this Agreement or thereafter made, but such term shall not include the cash
surrender value of life insurance policies on the lives of officers or
employees, excluding amounts due from customers for services or products
delivered or sold in the ordinary course of business.

    

    “Trading Day” means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices);  provided ,  however ,
that in the event that the Common Stock is not listed or quoted as set forth in
(a) or (b) hereof, then Trading Day shall mean any day except Saturday, Sunday
and any day which shall be a legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
government action to close.

    

    “Trading Market” means
the Over the Counter Bulletin Board, the New York Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the
American Stock Exchange.

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    

    “VWAP” means, for any
date, (i) the daily volume weighted average price of the Common Stock for such
date on the OTC Bulletin Board (or national securities exchange, if applicable)
as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board (or national securities exchange, if
applicable) and if prices for the Common Stock are then reported in the “Pink
Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (iii) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Maker.

    

    [Signature
on following page]

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the Maker has
caused this Amended and Restated Note to be duly executed by its duly authorized
officer as of July 24, 2009.

     

    
      
        
          	
                  NEOPROBE
      CORPORATION

                
	 
      
	
                  By:
      /s/ Brent L.
Larson

                
	 
      
	
                  Its:
      Vice-President, Finance &
CFO

                

        

      

    

    

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    HOLDER’S
ACCOUNT INSTRUCTIONS

    
      
         

      

      
        23Exhibit
10.3

    

    THIS NOTE
AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
OPINION OF COUNSEL IN THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO
THE MAKER THAT THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF MAY BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.

    

    NEOPROBE
CORPORATION

    

    Amended
and Restated 10% Series B Senior Secured Convertible Promissory
Note

    due
December 26, 2011

    

    
      
        	
                No.
      1A

              	
                $3,000,000.00

              

      

    

    Dated:
April 16, 2008

    Amended
and Restated: July 24, 2009

    

    For value received, NEOPROBE
CORPORATION, a Delaware corporation (the “Maker”), hereby
promises to pay to the order of Platinum-Montaur Life Sciences, LLC, 152 West
57th Street, New York, NY 10019 (together with its successors, representatives,
and permitted assigns, the “Holder”), in
accordance with the terms hereinafter provided, the principal amount of Three
Million and 00/100 Dollars ($3,000,000.00), together with interest thereon. This
Note is being issued pursuant to the Purchase Agreement, and the Exchange
Agreement (as those terms are defined in Section 1.1 hereof).  The
Maker has also issued to the Holder the Maker’s 10% Series A Senior Secured
Convertible Promissory Note (“Series A Note”) and
shares of the Maker’s 8% Series A Convertible Preferred Stock (“Preferred Stock”).
This Note and the Series A Note, as amended and restated in connection with the
Exchange Agreement, are collectively referred to herein as the
“Notes.”

    

    All payments under or pursuant to this
Note shall be made in United States Dollars in immediately available funds to
the Holder at the address of the Holder first set forth above or at such other
place as the Holder may designate from time to time in writing to the Maker or
by wire transfer of funds to the Holder’s account, instructions for which are
attached hereto as Exhibit A. The outstanding principal balance of this Note
shall be due and payable on December 26, 2011 (the “Maturity Date”) or at
such earlier time as provided herein.

    

    ARTICLE
I

     

    PAYMENT
TERMS

    

    1.1         Purchase
Agreement.  This Note has been executed and delivered pursuant
to the Securities Purchase Agreement, dated as of December 26, 2007 (the
“Purchase Agreement ”), and the Securities Amendment and Exchange Agreement,
dated as of July 24, 2009 (the “Exchange Agreement”), each by and among the
Maker and the purchasers listed therein. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth for such terms in the
Purchase Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.2         Interest. Beginning
on the original issuance date of this Note (the “Issuance Date”), the
outstanding principal balance of this Note shall bear interest, in arrears, at a
rate per annum equal to ten percent (10%), payable monthly on the first day of
each calendar month (each, an “Interest Payment
Date”) commencing February 1, 2008, at the option of the Maker in (A)
cash or (B) in registered shares of Common Stock; provided, however, (i)
payment of interest in shares of Common Stock may only occur if during the 20
Trading Days immediately prior to the applicable Interest Payment Date and
through and including the date such shares of Common Stock are issued to the
Holder all of the Equity Conditions, unless waived by the Holder in writing,
have been met and the Maker shall have given the Holder notice in accordance
with the notice requirements set forth below, and (ii) as to such Interest
Payment Date, within two days after the Interest Payment Date, the Maker shall
cause the physical delivery to the Holder of a
certificate representing the number of shares of Common Stock to be applied
against such interest payment equal to the quotient of (x) the applicable
interest payment divided by (y) 90% of the average VWAP for the five (5) Trading
Days immediately preceding the Interest Payment Date.  Interest shall
be computed on the basis of a 360-day year of twelve (12) 30-day months, shall
compound monthly and shall accrue commencing on the Issuance
Date.  Furthermore, upon the occurrence of an Event of Default (as
defined in Section 2.1 hereof), the Maker will pay interest to the Holder,
payable on demand, on the outstanding principal balance of and unpaid interest
on the Note from the date of the Event of Default until such Event of Default is
cured at the rate of the lesser of thirteen percent (13%) and the maximum
applicable legal rate per annum.   Notwithstanding the above, the
Maker may not issue a number of shares of Common Stock in excess of the Maximum
Monthly Interest Share Amount toward the payment of Interest, as to all
outstanding Series A Notes and Series B Notes, in the aggregate, during any
rolling twenty (20) Trading Day period. For purposes hereof, “Maximum Monthly Interest
Share Amount” means 20% of the aggregate dollar trading volume (as
reported on Bloomberg) of the Common Stock on the principal Trading Market over
the twenty (20) consecutive Trading Day period immediately prior to the
applicable Interest Payment Date.

     

    1.3         Payment of Principal; No
Prepayment.   The Principal Amount hereof shall be paid in
full on the Maturity Date or, if earlier, upon acceleration of this Note in
accordance with the terms hereof. Any amount of principal repaid hereunder may
not be reborrowed.  The Maker may not prepay any portion of the
principal amount of this Note without the prior written consent of the Holder,
which may be withheld in the Holder’s sole and absolute discretion.

     

    1.4        
Security
Agreement.   The obligations of the Maker hereunder are
secured by a continuing security interest in certain assets of the Maker
pursuant to the terms of a Security Agreement dated as of December 26, 2007 by
and between the Maker and the Holder, a Patent, Trademark and Copyright Security
Agreement, dated as of December 26, 2007, by and among the Maker and the Maker’s
subsidiaries, on the one hand, and the Holder, on the other hand, and a Blocked
Account Control Agreement (“Account Control
Agreement”) among the Maker, the Holder and U.S. Bank National
Association (“Bank”), pursuant to
the terms of Section 5.15 of the Purchase Agreement.

     

    1.5         Payment on Non-Business
Days.   Whenever any payment to be made shall be due on a
Saturday, Sunday or a public holiday under the laws of the State of New York,
such payment may be due on the next succeeding business day and such next
succeeding day shall be included in the calculation of the amount of accrued
interest payable on such date.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    1.6         Transfer.   This
Note may be transferred or sold, subject to the provisions of Section 5.8
hereof, or pledged, hypothecated or otherwise granted as security by the
Holder.

     

    1.7         Replacement.   Upon
receipt of a duly executed, notarized and unsecured written statement from the
Holder with respect to the loss, theft or destruction of this Note (or any
replacement hereof) and a standard indemnity, or, in the case of a mutilation of
this Note, upon surrender and cancellation of such Note, the Maker shall issue a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or
mutilated Note.

     

    1.8         Use of
Proceeds.   The Maker shall use the proceeds of this Note
as set forth in the Purchase Agreement.

     

    1.9         Allocation of
Payments.  All payments to each of the Series B Holders under
the Series B Notes shall be made pro rata among the Series B Holders based upon
the aggregate unpaid principal amount of the Series B Notes held by
them.

     

    ARTICLE
II

     

    EVENTS
OF DEFAULT; REMEDIES

    

    2.1         Events
of Default. The occurrence of any of the following events shall be an “Event of Default”
under this Note:

     

    (a)           any
default in the payment of (i) the principal amount hereunder when due, or (ii)
interest on, or liquidated damages in respect of, this Note, as and when the
same shall become due and payable (whether on the Maturity Date or by
acceleration or otherwise); or

     

    (b)           the
suspension from listing, without subsequent listing on any one of, or the
failure of the Common Stock to be listed on at least one of the OTC Bulletin
Board, the American Stock Exchange, the Nasdaq Global Select Market, the Nasdaq
Global Market, the Nasdaq Capital Market or The New York Stock Exchange, Inc.
for a period of more than five (5) consecutive Trading Days; or

     

    (c)           the
Maker shall fail to (i) timely deliver the shares of Common Stock upon
conversion of the Note or any interest accrued and unpaid, (ii) file a
Registration Statement in accordance with the terms of the Registration Rights
Agreement or (iii) make the payment of any fees or other payments due under this
Note, the Purchase Agreement, the Registration Rights Agreement or the other
Transaction Documents, which failure is not remedied within five (5) business
days after such performance is due; or

     

    (d)           while
the Registration Statement is required to be maintained effective pursuant to
the terms of the Registration Rights Agreement, the effectiveness of the
Registration Statement (as defined in the Registration Rights Agreement) lapses
for any reason (including, without limitation, the issuance of a stop order) or
is unavailable to the Holder for sale of the Registrable Securities (as defined
in the Registration Rights Agreement) as provided in the Registration Rights
Agreement (other than as a result of any breach of the Registration Rights
Agreement or violation of law by any holder of the Notes, or their agents or
Affiliates), and such lapse or unavailability continues for a period of ten (10)
consecutive Trading Days,  provided  that the Maker has not
exercised its rights pursuant to Section 3(n) of the Registration
Rights Agreement; or

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (e)           default
shall be made in the performance or observance of (i) any covenant, condition or
agreement contained in this Note (other than is set forth in (a) through (d)
above) and such default is not cured within ten (10) days after the earlier of
(A) the date the Maker receives notice from the Holder of the occurrence thereof
or (B) the date on which the Maker knew or should have known, if it had
exercised reasonable diligence, of such default, or (ii) any material covenant,
condition or agreement contained in the Purchase Agreement, Registration Rights
Agreement, the Series A Note, or any other Transaction Document that is not
covered by any other provisions of this Section 2.1 and such default is not
cured within ten (10) days after the earlier of (A) the date the Maker receives
notice from the Holder of the occurrence thereof or (B) the date on which the
Maker knew or should have known, if it had exercised reasonable diligence, of
such default; or

     

    (f)           any
material representation or warranty made by the Maker herein or in the Purchase
Agreement, the Series A Note or any other Transaction Document shall prove to
have been false or incorrect or breached in a material respect on the date as of
which made; or

     

    (g)           
the Maker shall (i) default in any payment of any amount or amounts of principal
of or interest on any Indebtedness (other than the Indebtedness hereunder) the
aggregate principal amount of which Indebtedness, in the aggregate, exceeds
$100,000, which default entitles the holder or holders of such Indebtedness to
accelerate the maturity thereof, or (ii) default in the observance or
performance of any other agreement or condition relating to any Indebtedness or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, which default, event
or condition continues beyond any applicable cure period, and the effect of
which default, event or condition is to cause, or to permit the holder or
holders or beneficiary or beneficiaries of such Indebtedness to cause with the
giving of notice if required, such Indebtedness to become due prior to its
stated maturity; or

     

    (h)           the
Maker shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or assets, (ii) make a general assignment
for the benefit of its creditors, (iii) commence a voluntary case under the
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition
seeking to take advantage of any bankruptcy, insolvency, moratorium,
reorganization or other similar law affecting the enforcement of creditors’
rights generally, (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic),
(vi) admit in writing its inability to pay its debts as they become due, or
(vii) take any action under the laws of any jurisdiction (foreign or domestic)
analogous to any of the foregoing; or

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (i)           a
proceeding or case shall be commenced in respect of the Maker, without its
application or consent, in any court of competent jurisdiction, seeking (i) the
liquidation, reorganization, moratorium, dissolution, winding up, or composition
or readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of it or of all or any substantial part of its
assets in connection with the liquidation or dissolution of the Maker, or (iii)
similar relief in respect of it under any law providing for the relief of
debtors, and such proceeding or case described in clause (i), (ii) or (iii)
shall continue undismissed, or unstayed and in effect, for a period of sixty
(60) days or any order for relief shall be entered in an involuntary case under
United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker or
action under the laws of any jurisdiction (foreign or domestic) analogous to any
of the foregoing shall be taken with respect to the Maker and shall continue
undismissed, or unstayed and in effect for a period of sixty (60) days;
or

     

    (j)           at
any point after 135 vital blue dye lymph nodes have been obtained from patients
who have completed surgery and injection of the drug in the Phase 3 clinical
trial of Lymphoseek (NEO3-05), the failure of Maker to achieve the primary
objective in such trial of efficacy of Lymphoseek, which is the concordance of
in-vivo detection rate of Lymphoseek and vital blue dye in tumor-draining
sentinel lymph nodes as confirmed by pathology in at least ninety-three percent
(93%) of such patients, determined in good faith by the Company and the Holder
following a review of the unaudited trial data; or

     

    (k)           the
Bank shall provide written notice to the Maker or Holder of the Bank’s
termination of the Account Control Agreement, and the Maker does not within
forty-five (45) days following such notice (i) establish a replacement blocked
account pursuant to Section 5.15 of the Purchase Agreement with another
financial institution, on substantially the same terms contained in the Account
Control Agreement, or as otherwise reasonably acceptable to Maker and Holder
(the “Replacement Account”), (ii) transfer all funds held in the account subject
to the Account Control Agreement to the Replacement Account, and (iii) provide
evidence to the Holder that an instruction letter, substantially in the form of
the Instruction Letter attached as Exhibit M to the Purchase Agreement, has been
executed by each of the Maker and Ethicon, irrevocably instructing Ethicon to
make payments under the Ethicon Agreement to the Replacement Account;
or

     

    (l)           the
occurrence of any default or event of default under any other Note or the
failure by the Maker to comply with its material obligations under the
Certificate of Designations governing the terms of the Preferred
Stock.

     

    2.2          Remedies Upon An Event of
Default.  If an Event of Default shall have occurred and shall
be continuing, the Holder of this Note may at any time at its option declare the
entire unpaid principal balance of this Note, together with all interest accrued
hereon, due and payable, and thereupon, the same shall be accelerated and so due
and payable, without presentment, demand, protest, or notice, all of which are
hereby expressly unconditionally and irrevocably waived by the Maker; provided, however, that upon
the occurrence of an Event of Default described above, the Holder, in its sole
and absolute discretion, may (a) demand that the entire principal amount of this
Note then outstanding and all accrued and unpaid interest thereon shall be
converted into shares of Common Stock at the Conversion Price per share on the
Trading Day immediately preceding the date the Holder demands conversion
pursuant to this clause, or (b) exercise or otherwise enforce any one or more of
the Holder’s rights, powers, privileges, remedies and interests under this Note
(including, if applicable, pursuant to Section 3.7 hereof), the Purchase
Agreement, the Registration Rights Agreement or applicable law.  No
course of delay on the part of the Holder shall operate as a waiver thereof or
otherwise prejudice the right of the Holder. No remedy conferred hereby shall be
exclusive of any other remedy referred to herein or now or hereafter available
at law, in equity, by statute or otherwise. No notice or other action of Holder
shall be required in the case of an Event of Default set forth in Sections
2.1(h) or (i), and, in such event, the outstanding principal balance and accrued
interest hereunder shall be automatically due and payable.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    ARTICLE
III

     

    CONVERSION;
ANTIDILUTION

    

    3.1        
Conversion
Option.  At any time and from time to time on or after the
Issuance Date, the entire outstanding principal balance of this Note (the “Conversion Amount”)
shall be convertible (in whole or in part), at the option of the Holder (the
“Conversion
Option”), into such number of fully paid and non-assessable shares of
Common Stock (the “Conversion Rate”) as
is determined by dividing (x) that portion of the Conversion Amount as of such
date that the Holder elects to convert by (y) the Conversion Price (as defined
in Section 3.2 hereof) then in effect on the date on which the Holder faxes a
notice of conversion (the “Conversion Notice”),
duly executed, to the Maker (facsimile number (614) 793-7520, Attn.: Brent L.
Larson, Vice President - Finance) (the “Conversion
Date”);  provided, however, that the
Conversion Price shall be subject to adjustment as described in Section 3.5
below.  The Holder shall deliver this Note to the Maker at the address
designated in the Purchase Agreement at such time that this Note is fully
converted. With respect to partial conversions of this Note, the Maker shall
keep written records of the amount of this Note converted as of each Conversion
Date.

     

    3.2         Conversion Price. The
term “Conversion Price” shall mean $0.36, subject to adjustment under Section
3.5 hereof.

     

    3.3         Mechanics of
Conversion.

     

    (a)           Not
later than three (3) Trading Days after any Conversion Date, the Maker or its
designated transfer agent, as applicable, shall issue and deliver to the
Depository Trust Company (“DTC”) account on the Holder’s behalf via the Deposit
Withdrawal Agent Commission System (“DWAC”) as specified in the Conversion
Notice, the number of shares of Common Stock to which the Holder shall be
entitled upon such conversion, registered in the name of the Holder or its
designee.  In the alternative, not later than three (3) Trading Days
after any Conversion Date, the Maker shall deliver to the applicable Holder by
express courier a certificate or certificates which shall be free of restrictive
legends and trading restrictions (other than those required pursuant to the
Purchase Agreement) representing the number of shares of Common Stock being
acquired upon the conversion of this Note (the “Delivery Date”).
Notwithstanding the foregoing to the contrary, the Maker or its transfer agent
shall only be obligated to issue and deliver the shares to the DTC on the
Holder’s behalf via DWAC (or certificates free of restrictive legends) if such
conversion is in connection with a sale by the Holder and the Holder has
complied with the applicable prospectus delivery requirements or an exemption
from such registration requirements (each as evidenced by documentation
furnished to and reasonably satisfactory to the Maker). If in the case of any
Conversion Notice such certificate or certificates are not delivered to or as
directed by the Holder by the Delivery Date, the Holder shall be entitled by
written notice to the Maker at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Maker shall immediately return this Note tendered for conversion,
whereupon the Maker and the Holder shall each be restored to their respective
positions immediately prior to the delivery of such notice of revocation, except
that any amounts described in Sections 3.3(b) and (c) shall be payable through
the date notice of rescission is given to the Maker.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (b)           The
Maker understands that a delay in the delivery of the shares of Common Stock
upon conversion of this Note beyond the Delivery Date could result in economic
loss to the Holder. If the Maker fails to deliver to the Holder such shares via
DWAC (or, if applicable, certificates), or fails to deliver unlegended
certificates representing such shares if required pursuant to Section 3.3(a)
hereof,  by the Delivery Date, the Maker shall pay to such Holder, in
cash, an amount per Trading Day for each Trading Day until such shares are
delivered via DWAC or certificates are delivered (if applicable), together with
interest on such amount at a rate of 10% per annum, accruing until such amount
and any accrued interest thereon is paid in full, equal to the greater of (A)
(i) 1% of the aggregate principal amount of the Notes requested to be converted
for the first five (5) Trading Days after the Delivery Date and (ii) 2% of the
aggregate principal amount of the Notes requested to be converted for each
Trading Day thereafter and (B) $2,000 per day (which amount shall be paid as
liquidated damages and not as a penalty). Nothing herein shall limit a Holder’s
right to pursue actual damages for the Maker’s failure to deliver certificates
representing shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies available to
it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Notwithstanding anything to the contrary
contained herein, the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal the Maker shall only be obligated to pay the liquidated
damages accrued in accordance with this Section 3.3(b) through the date the
Conversion Notice is withdrawn.

     

    3.4         Ownership Cap and Certain
Conversion Restrictions.

     

    (a)           Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may the
Holder convert all or a portion of this Note if the number of shares of Common
Stock to be issued pursuant to such conversion would exceed, when aggregated
with all other shares of Common Stock owned by the Holder at such time, the
number of shares of Common Stock which would result in the Holder beneficially
owning (as determined in accordance with Section 13(d) of the Exchange Act and
the rules thereunder) more than 4.99% of all of the Common Stock outstanding at
such time; provided,
however, that upon the Holder providing the Maker with sixty-one (61)
days notice (pursuant to Section 4.1 hereof) (the “Waiver Notice”) that
the Holder waives the limitations contained  in this Section 3.4(a)
with regard to any or all shares of Common Stock issuable upon conversion of
this Note, this Section 3.4(a) will be of no force or effect with regard to all
or a portion of the Note referenced in the Waiver Notice.

     

    (b)           Notwithstanding
anything to the contrary set forth in Section 3 of this Note, at no time may the
Holder convert all or a portion of this Note if the number of shares of Common
Stock to be issued pursuant to such conversion, when aggregated with all other
shares of Common Stock owned by the Holder at such time, would result in the
Holder beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules thereunder) in excess of 9.99% of the then issued
and outstanding shares of Common Stock outstanding at such
time;  provided,  however, that upon the Holder providing
the Maker with a Waiver Notice that the Holder waives the limitations contained
in this Section 3.4(b) with regard to any or all shares of Common Stock issuable
upon conversion of this Note, this Section 3.4(b) shall be of no force or effect
with regard to all or a portion of the Note referenced in the Waiver
Notice.

    
      
         

      

      
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    (c)           Notwithstanding
the above, the provisions of Section 3.4(a) and 3.4(b) shall not be applicable
when calculating any adjustment to the Conversion Price hereunder or any other
adjustments under Section 3.5 hereof.

     

    3.5         Adjustment of Conversion
Price.

     

    (a)           Until
the Note has been paid in full or converted in full, the Conversion Price shall
be subject to adjustment from time to time as follows (but shall not be
increased, other than pursuant to Section 3.5(a)(i) hereof):

     

    (i)           Adjustments for Stock Splits and
Combinations.  If the Maker shall at any time or from time to
time after the Issuance Date, effect a stock split of the outstanding Common
Stock, the applicable Conversion Price in effect immediately prior to the stock
split shall be proportionately decreased.  If the Maker shall at any
time or from time to time after the Issuance Date, combine the outstanding
shares of Common Stock, the applicable Conversion Price in effect immediately
prior to the combination shall be proportionately increased. Any adjustments
under this Section 3.5(a)(i) shall be effective at the close of business on the
date the stock split or combination occurs.

     

    (ii)            Adjustments for Certain Dividends
and Distributions.   If the Maker shall at any time or
from time to time after the Issuance Date, make or issue or set a record date
for the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in shares of Common Stock, then, and in each
event, the applicable Conversion Price in effect immediately prior to such event
shall be decreased as of the time of such issuance or, in the event such record
date shall have been fixed, as of the close of business on such record date, by
multiplying, the applicable Conversion Price then in effect by a
fraction:

     

    (A)           the
numerator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date; and

     

    (B)           the
denominator of which shall be the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution.

    
      
         

      

      
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    (iii)           
Adjustment for Other Dividends
and Distributions.   If the Maker shall at any time or
from time to time after the Issuance Date, make or issue or set a record date
for the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in securities of the Maker or any other Person
other than shares of Common Stock, then, and in each event, an appropriate
revision to the applicable Conversion Price shall be made and provision shall be
made (by adjustments of the Conversion Price or otherwise) so that the holders
of this Note shall receive upon conversions thereof, in addition to the number
of shares of Common Stock receivable thereon, the number of securities of the
Maker or other issuer (as applicable) which they would have received had this
Note been converted into Common Stock on the date of such event and had
thereafter, during the period from the date of such event to and including the
Conversion Date, retained such securities (together with any distributions
payable thereon during such period), giving application to all adjustments
called for during such period under this Section 3.5(a)(iii) with respect to the
rights of the holders of this Note; provided, however, that if
such record date shall have been fixed and such dividend is not fully paid or if
such distribution is not fully made on the date fixed therefor, the Conversion
Price shall be adjusted pursuant to this paragraph as of the time of actual
payment of such dividends or distributions.

     

    (iv)           Adjustments for Reclassification,
Exchange or Substitution.    If the Common Stock
issuable upon conversion of this Note at any time or from time to time after the
Issuance Date shall be changed to the same or different number of shares of any
class or classes of stock, whether by reclassification, exchange, substitution
or otherwise (other than by way of a stock split or combination of shares or
stock dividends provided for in Sections 3.5(a)(i), (ii) and (iii), or a
reorganization, merger, consolidation, or sale of assets provided for in Section
3.5(a)(v)), then, and in each event, an appropriate revision to the Conversion
Price shall be made and provisions shall be made (by adjustments of the
Conversion Price or otherwise) so that the Holder shall have the right
thereafter to convert this Note into the kind and amount of shares of stock and
other securities receivable upon reclassification, exchange, substitution or
other change, by holders of the number of shares of Common Stock into which such
Note might have been converted immediately prior to such reclassification,
exchange, substitution or other change, all subject to further adjustment as
provided herein.

     

    (v)           Adjustments for Reorganization,
Merger, Consolidation or Sales of Assets.   If at any time
or from time to time after the Issuance Date there shall be a capital
reorganization of the Maker (other than by way of a stock split or combination
of shares or stock dividends or distributions provided for in Section 3.5(a)(i),
(ii) and (iii), or a reclassification, exchange or substitution of shares
provided for in Section 3.5(a)(iv)), or a merger or consolidation of the Maker
with or into another corporation where the holders of outstanding voting
securities prior to such merger or consolidation do not own over fifty percent
(50%) of the outstanding voting securities of the merged or consolidated entity,
immediately after such merger or consolidation, or the sale of all or
substantially all of the Maker’s properties or assets to any other person (an
“Organic Change”), then as a
part of such Organic Change, (A) if the surviving entity in any such Organic
Change has a class of equity securities registered under the Exchange Act, and
its common stock is listed or quoted on a national exchange or the OTC Bulletin
Board, an appropriate revision to the Conversion Price shall be made and
provision shall be made (by adjustments of the Conversion Price or otherwise) so
that the Holder shall have the right thereafter to convert such Note into the
kind and amount of shares of stock and other securities or property of the Maker
or any successor corporation resulting from such Organic Change, and (B) if the
surviving entity in any such Organic Change does not have a class of equity
securities registered under the Exchange Act, or its common stock is not listed
or quoted on a national exchange or the OTC Bulletin Board, the Holder shall
have the right to accelerate the maturity of this Note.  In any case
referenced in clause (A) above, appropriate adjustment shall be made in the
application of the provisions of this Section 3.5(a)(v) with respect to the
rights of the Holder after the Organic Change to the end that the provisions of
this Section 3.5(a)(v) (including any adjustment in the applicable Conversion
Price then in effect and the number of shares of stock or other securities
deliverable upon conversion of this Note) shall be applied after that event in
as nearly an equivalent manner as may be practicable.

    
      
         

      

      
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    (b)           Record Date. In case
the Maker shall take record of the holders of its Common Stock for the purpose
of entitling them to subscribe for or purchase Common Stock or Convertible
Securities, then the date of the issue or sale of the shares of Common Stock
shall be deemed to be such record date.

     

    (c)           [Reserved]

     

    (d)           No
Impairment.   The Maker shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Maker, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 3.5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Holder against
impairment.

     

    (e)           Certificates as to
Adjustments.   Upon occurrence of each adjustment or
readjustment of the Conversion Price or number of shares of Common Stock
issuable upon conversion of this Note pursuant to this Section 3.5, the Maker at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to the Holder a certificate setting forth such
adjustment and readjustment, showing in detail the facts upon which such
adjustment or readjustment is based. The Maker shall, upon written request of
the Holder, at any time, furnish or cause to be furnished to the Holder a like
certificate setting forth such adjustments and readjustments, the applicable
Conversion Price in effect at the time, and the number of shares of Common Stock
and the amount, if any, of other securities or property which at the time would
be received upon the conversion of this Note. Notwithstanding the foregoing, the
Maker shall not be obligated to deliver a certificate unless such certificate
would reflect an increase or decrease of at least one percent (1%) of such
adjusted amount.

     

    (f)           Issue
Taxes.   The Maker shall pay any and all issue and other
taxes, excluding federal, state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of this
Note pursuant thereto; provided, however, that the Maker shall not be obligated
to pay any transfer taxes resulting from any transfer requested by the Holder in
connection with any such conversion.

     

    (g)           Fractional
Shares.   No fractional shares of Common Stock shall be
issued upon conversion of this Note. In lieu of any fractional shares to which
the Holder would otherwise be entitled, the Maker shall pay cash equal to the
product of such fraction multiplied by the average of the Closing Prices of the
Common Stock for the five (5) consecutive Trading Days immediately preceding the
Conversion Date.

    
      
         

      

      
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     (h)           Regulatory
Compliance.   If any shares of Common Stock to be reserved
for the purpose of conversion of this Note or any interest accrued thereon
require registration or listing with or approval of any governmental authority,
stock exchange or other regulatory body under any federal or state law or
regulation or otherwise before such shares may be validly issued or delivered
upon conversion, the Maker shall, at its sole cost and expense, in good faith
and as expeditiously as possible, endeavor to secure such registration, listing
or approval, as the case may be.

     

    3.6           Inability to Fully
Convert.

     

    (a)            Holder’s Option if Maker
Cannot Fully Convert.   If, upon the Maker’s receipt of a
Conversion Notice, the Maker cannot issue shares of Common Stock registered for
resale under the Registration Statement if required pursuant to the Registration
Rights Agreement for any reason, including, without limitation, because the
Maker (i) does not have a sufficient number of shares of Common Stock authorized
and available, (ii) is otherwise prohibited by applicable law or by the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Maker or any of its
securities from issuing all of the Common Stock which is to be issued to the
Holder pursuant to a Conversion Notice or (iii) fails to have a sufficient
number of shares of Common Stock registered for resale under the Registration
Statement, then the Maker shall issue as many shares of Common Stock as it is
able to issue in accordance with the Holder’s Conversion Notice and, with
respect to the unconverted portion of this Note, the Holder, solely at Holder’s
option (and in addition to all other remedies hereunder), can elect
to:

     

    (A)        require
the Maker to prepay that portion of this Note for which the Maker is unable to
issue Common Stock in accordance with the Holder’s Conversion Notice (the “Mandatory
Prepayment”) in an amount equal to one hundred twenty-five percent (125%
of the portion of aggregate principal amount of this Note that Maker was unable
to convert to Common Stock (the “Mandatory Prepayment
Price”);

     

    (B)         if
the Maker’s inability to fully convert is pursuant to Section 3.6(a)(iii) above,
require the Maker to issue restricted shares of Common Stock in accordance with
such holder’s Conversion Notice; or

     

    (C)         void
its Conversion Notice and retain or have returned, as the case may be, this Note
that was to be converted pursuant to the Conversion Notice (provided that the
Holder’s voiding its Conversion Notice shall not effect the Maker’s obligations
to make any payments which have accrued prior to the date of such
notice).

    
      
         

      

      
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    (b)           Mechanics of Fulfilling
Holder’s Election.   The Maker shall immediately send via
facsimile to the Holder, upon receipt of a facsimile copy of a Conversion Notice
from the Holder which cannot be fully satisfied as described in Section 3.6(a)
above, a notice of the Maker’s inability to fully satisfy the Conversion Notice
(the “Notice of
Inability to Convert”). Such Inability to Convert Notice shall indicate
(i) the reason why the Maker is unable to fully satisfy such holder’s Conversion
Notice, (ii) the amount of this Note which cannot be converted, and (iii) the
applicable Mandatory Prepayment Price. The Holder shall notify the Maker of its
election pursuant to Section 3.6(a) above by delivering written notice via
facsimile to the Maker (“Election Upon Inability to
Convert”).

     

    (c)           Payment of Prepayment
Price.   If the Holder shall elect to have its Notes
prepaid pursuant to Section 3.6(a)(A) above, the Maker shall pay the Mandatory
Prepayment Price to the Holder within thirty (30) days of the Maker’s receipt of
the Holder’s Election Upon Inability to
Convert,  provided  that prior to the Maker’s receipt of the
Holder’s Election Upon Inability to Convert the Maker has not delivered a notice
to the Holder stating, to the satisfaction of the Holder, that the event or
condition resulting in the Mandatory Prepayment has been cured and all
Conversion Shares issuable to the Holder can and will be delivered to the Holder
in accordance with the terms of this Note. If the Maker shall fail to pay the
applicable Mandatory Prepayment Price to the Holder within five (5) business
days following the Maker’s receipt of the Holder’s Election Upon Inability to
Convert (other than pursuant to a dispute as to the determination of the
arithmetic calculation of the Mandatory Prepayment Price), in addition to any
remedy the Holder may have under this Note and the Purchase Agreement, such
unpaid amount shall bear interest at the rate of two percent (2%) per month
(prorated for partial months) until paid in full. Until the full Mandatory
Prepayment Price is paid in full to the Holder, the Holder may (i) void the
Mandatory Prepayment with respect to that portion of the Note for which the full
Mandatory Prepayment Price has not been paid, (ii) receive back such Note, and
(iii) require that the Conversion Price of such returned Note be adjusted to the
lesser of (A) the Conversion Price as in effect on the date on which the Holder
voided the Mandatory Prepayment and (B) the lowest Closing Price during the
period beginning on the Conversion Date and ending on the date the Holder voided
the Mandatory Prepayment.

     

    (d)           Pro-rata Conversion and
Prepayment.   In the event the Maker receives a Conversion
Notice from more than one holder of the Series B Notes on the same day and the
Maker can convert and prepay some, but not all, of the Series B Notes pursuant
to this Section 3.6, the Maker shall convert and prepay from each holder of the
Series B Notes electing to have its Series B Notes converted and prepaid at such
time an amount equal to such holder’s pro-rata amount (based on the principal
amount of the Series B Notes held by such holder relative to the principal
amount of the Series B Notes outstanding) of all the Series B Notes being
converted and prepaid at such time.

     

    3.7         
Prepayment Upon
Triggering Event.

     

    (a)           Prepayment Option Upon
Triggering Event.  In addition to all other rights of the
Holder contained herein, after a Triggering Event (as defined below), the Holder
shall have the right, at the Holder’s option, to require the Maker to prepay all
or a portion of this Note in cash at a price equal to the sum of  (i)
one hundred percent (100%) of the aggregate principal amount of this Note plus
all accrued and unpaid interest, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of this Note and the other Transaction
Documents (the “Prepayment Price”).  If the Holder demands payment of
the Prepayment Price pursuant to this Section 3.7, the Maker shall deliver such
payment to the Holder within 5 business days after the receipt of such
demand.

    
      
         

      

      
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    (b)           Triggering
Event.  A “Triggering Event”
shall be deemed to have occurred at such time as any of the following
events:

     

    (i)             any
Event of Default pursuant to Sections 2.1 (b), (c) or (d) shall have
occurred;

     

    (ii)            the
Maker’s notice to any holder of the Notes, including by way of public
announcement, at any time, of its inability to comply or its intention not to
comply with proper requests for conversion of any Notes into shares of Common
Stock; or

     

    (iii)           the
Maker deregisters its shares of Common Stock and as a result such shares of
Common Stock are no longer publicly traded; or

     

    (iv)           the
Maker consummates a “going private” transaction and as a result the Common Stock
is no longer registered under Sections 12(b) or 12(g) of the Exchange
Act.

     

    3.8         No Rights as
Shareholder.   Nothing contained in this Note shall be
construed as conferring upon the Holder, prior to the conversion of this Note,
the right to vote or to receive dividends or to consent or to receive notice as
a shareholder in respect of any meeting of shareholders for the election of
directors of the Maker or of any other matter, or any other rights as a
shareholder of the Maker.

     

    ARTICLE
IV

     

    COVENANTS

    

    For so long as this Note is
outstanding, without the prior written consent of the holders of at least a
majority of the then outstanding principal balance hereof:

    

    4.1         No
Liens.   The Maker shall not, and shall not permit its
Subsidiaries to, enter into, create, incur, assume or suffer to exist any Liens
on or with respect to any of its assets now owned or hereafter acquired or any
interest therein or any income or profits therefrom, other than:

     

    (a)           Liens
that are Permitted Encumbrances;

     

    (b)           Liens
for purchase money obligations, incurred in the ordinary course of the Maker’s
business, to acquire assets that do not exceed the purchase price of the asset
and that encumber only the asset being purchased; and

     

    (c)           any
Lien listed on Schedule 3.12 to the Purchase Agreement.

     

    4.2         No
Indebtedness.   The Maker shall not, and shall not permit
any Subsidiary to, enter into, create, incur, assume or suffer to exist any
Indebtedness, other than

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    (a)           Indebtedness
existing on the Issuance Date and disclosed in the Commission
Documents;

     

    (b)           Indebtedness
created under the Transaction Documents;

     

    (c)           Non-current
liabilities for post-employment healthcare and other insurance
benefits;

     

    (d)           Trade
payables and insurance premium financing incurred in the ordinary course of
business and consistent with past practices; and

     

    (e)           Indebtedness
secured by Liens permitted under Section 4.1.

     

    4.3         Compliance with Transaction
Documents.   The Maker shall, and shall cause its
Subsidiaries to, comply with its obligations under this Note, the Series A Note
and the other Transaction Documents.

     

    4.4         Compliance with
Law.   The Maker shall, and shall cause each of its
Subsidiaries to, comply with law and duly observe and conform in all material
respects to all valid requirements of Governmental Authorities relating to the
conduct of its business or to its properties or assets.

     

    4.5         Transactions with
Affiliates.   The Maker shall not, and shall not permit
its Subsidiaries to, engage in any transactions with any officer, director,
employee or any Affiliate of the Maker, including any contract, agreement or
other arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Maker, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner, in
each case in excess of $50,000, other than (i) for payment of reasonable salary
for services actually rendered, as approved by the Board of Directors of the
Maker as fair in all respects to the Maker, and (ii) reimbursement for expenses
incurred on behalf of the Maker.

     

    4.6         No
Dividends.   The Maker shall not, and shall not permit any
Subsidiary to, (a) declare or pay any dividends or make any distributions to any
holder(s) of Common Stock or other equity security of the Maker or such
Subsidiaries (other than dividend and distributions from a Subsidiary to the
Maker and dividends on the Preferred Stock), (b) purchase or otherwise acquire
for value, directly or indirectly, any shares or other equity security of the
Maker, (c) form or create any subsidiary become a partner in any partnership or
joint venture, or make any acquisition of any interest in any Person or acquire
substantially all of the assets of any Person, or (d) transfer, assign, pledge,
issue or otherwise permit any equity or other ownership interests in the
Subsidiaries to be beneficially owned or held by any person other than the Maker
and, in the case of Cira Biosciences, Inc. the persons owning or holding such
securities on the Issuance Date; provided, however, that Maker’s
Cira Biosciences, Inc. subsidiary may issue equity securities in connection with
third-party arms-length capital raising transactions and pay dividends to the
holders of such equity securities in accordance with their
terms.

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    4.7         No Merger or Sale of
Assets.   The Maker shall not, and shall not permit any
Subsidiary to, (a) merge or consolidate or sell or dispose of all its assets or
any substantial portion thereof, or (b) in any way or manner alter its
organizational structure or effect a change of entity; provided, however, that the
Maker shall be permitted to sell or dispose of its assets (but not all or
substantially all of its assets) in the ordinary course of its business and
consistent with past practice.

     

    4.8         Payment of Taxes,
Etc.   The Maker shall, and shall cause each of its
Subsidiaries to, promptly pay and discharge, or cause to be paid and discharged,
when due and payable, all lawful taxes, assessments and governmental charges or
levies imposed upon the income, profits, property or business of the Maker and
the Subsidiaries, except for such failures to pay that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Maker or such Subsidiaries shall
have set aside on its books adequate reserves with respect thereto, and
provided, further, that the Maker and such Subsidiaries will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.

     

    4.9         Corporate
Existence.   the Maker shall, and shall cause each of its
Subsidiaries to, maintain in full force and effect its corporate existence,
rights and franchises and all licenses and other rights to use property owned or
possessed by it and reasonably deemed to be necessary to the conduct of its
business.

     

    4.10       Investment Company
Act.   The Maker shall conduct its businesses in a manner
so that it will not become subject to the Investment Company Act of 1940, as
amended.

     

    4.11       Maintenance of
Assets.   The Maker shall, and shall cause its
Subsidiaries to, keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto.

     

    4.12       Indebtedness to
Affiliates.   The Maker shall not, and shall not permit
any Subsidiary to, make any payment on any indebtedness owed to officers,
directors or Affiliates, except for reimbursements of reasonable and typical
business expenses.

     

    4.13       Restriction on
Dividends.   The Maker shall not, and shall not permit any
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to pay dividends or distributions to the Maker, pay any indebtedness
owed to the Maker or transfer any properties or assets to the Maker

     

    4.14       No
Investments.  The Maker shall not, and shall not permit any
Subsidiary to, make or suffer to exist any Investments or commitments therefor,
other than Investments made in the ordinary course of business.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    4.15       Transfers to
Subsidiaries.  The Maker shall not make any transfers of funds
or other assets to any Subsidiary except in the ordinary course of business and
consistent with past practice.

     

    ARTICLE
V

     

    MISCELLANEOUS

    

    5.1         Notices. Any notice,
demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery,
telecopy or facsimile at the address or number designated in the Purchase
Agreement (if delivered on a business day during normal business hours where
such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such
address, or upon actual receipt of such mailing, whichever shall first occur.
The Maker will give written notice to the Holder at least ten (10) days prior to
the date on which the Maker takes a record (x) with respect to any dividend or
distribution upon the Common Stock, (y) with respect to any pro rata
subscription offer to holders of Common Stock or (z) for determining rights to
vote with respect to any Organic Change, dissolution, liquidation or winding-up
and in no event shall such notice be provided to such holder prior to such
information being made known to the public. The Maker will also give written
notice to the Holder at least ten (10) days prior to the date on which any
Organic Change, dissolution, liquidation or winding-up will take place and in no
event shall such notice be provided to the Holder prior to such information
being made known to the public. The Maker shall promptly notify the Holder of
this Note of any notices sent or received, or any actions taken with respect to
the Series B Notes.

     

    5.2         Governing
Law.   This Note shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to any of the conflicts of law principles which would result in the
application of the substantive law of another jurisdiction. This Note shall not
be interpreted or construed with any presumption against the party causing this
Note to be drafted.

     

    5.3         Headings.   Article
and section headings in this Note are included herein for purposes of
convenience of reference only and shall not constitute a part of this Note for
any other purpose.

     

    5.4         Remedies, Characterizations,
Other Obligations, Breaches and Injunctive Relief.   The
remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without
limitation, a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder’s
right to pursue actual damages for any failure by the Maker to comply with the
terms of this Note.  Amounts set forth or provided for herein with
respect to payments, conversion and the like (and the computation thereof) shall
be the amounts to be received by the holder thereof and shall not, except as
expressly provided herein, be subject to any other obligation of the Maker (or
the performance thereof).  The Maker acknowledges that a breach by it
of its obligations hereunder will cause irreparable and material harm to the
Holder and that the remedy at law for any such breach may be inadequate.
Therefore the Maker agrees that, in the event of any such breach or threatened
breach, the Holder shall be entitled, in addition to all other available rights
and remedies, at law or in equity, to seek and obtain such equitable relief,
including but not limited to an injunction restraining any such breach or
threatened breach, without the necessity of showing economic loss and without
any bond or other security being required.

    
      
         

      

      
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    5.5         Enforcement
Expenses.   In the event of any default under this Note,
Maker agrees to pay the reasonable costs and expenses of Holder in enforcing
this Note (including reasonable attorneys’ fees and court costs), subject, in
the case of any suit, action or proceeding to enforce this Note, to Section
5.9.

     

    5.6         Binding
Effect.   The obligations of the Maker and the Holder set
forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.

     

    5.7         Amendments.   This
Note may not be modified or amended in any manner except in writing executed by
the Maker and the holders of a majority of the outstanding principal balance of
the Series B Notes.

     

    5.8         Compliance with Securities
Laws.   The Holder of this Note acknowledges that this
Note is being acquired solely for the Holder’s own account and not as a nominee
for any other party, and for investment, and that the Holder shall not offer,
sell or otherwise dispose of this Note except in compliance with applicable
securities laws. This Note and any Note issued in substitution or replacement
therefor shall be stamped or imprinted with a legend in substantially the
following form:

     

    “THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN
THE FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS
NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE MAY BE
SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”

    

    5.9         Consent to
Jurisdiction. Each of the Maker and the Holder irrevocably agrees that
the any legal action or proceeding arising out of or relating to this Note may
be brought in the Courts of New York County, New York or of the United States of
America for the Southern District of New York and hereby expressly submits to
the personal jurisdiction and venue of such courts for the purposes thereof and
expressly waives any claim of improper venue and any claim that such courts are
an inconvenient forum. Each of the Maker and the Holder hereby irrevocably
consents to the service of process of any of the aforementioned courts in any
such suit, action or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at the address in effect for notices to it
under the Purchase Agreement, such service to become effective 10 days after
such mailing. Nothing in this Section 5.9 shall affect or limit any right to
serve process in any other manner permitted by law. Each of the Maker and the
Holder hereby agree that the prevailing party in any suit, action or proceeding
arising out of or relating to this Note shall be entitled to reimbursement for
reasonable legal fees from the non-prevailing party. The Maker and the Holder
hereby waive all rights to trial by jury.

    
      
         

      

      
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    5.10       Parties in Interest.
This Note shall be binding upon, inure to the benefit of and be enforceable by
the Maker, the Holder and their respective successors and permitted
assigns.

     

    5.11       Failure or Indulgence Not
Waiver. No failure or delay on the part of the Holder in the exercise of
any power, right or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege.

     

    5.12       Waivers; Dispute
Resolution.

     

    (a)           Except
as otherwise specifically provided herein, the Maker and all others that may
become liable for all or any part of the obligations evidenced by this Note,
hereby waive presentment, demand, notice of nonpayment, protest and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, and do hereby consent to any number of renewals of
extensions of the time or payment hereof and agree that any such renewals or
extensions may be made without notice to any such persons and without affecting
their liability herein and do further consent to the release of any person
liable hereon, all without affecting the liability of the other persons, firms
or Maker liable for the payment of this Note. No delay or omission on the part
of the Holder in exercising its rights under this Note, or course of conduct
relating hereto, shall operate as a waiver of such rights or any other right of
the Holder, nor shall any waiver by the Holder of any such right or rights on
any one occasion be deemed a waiver of the same right or rights on any future
occasion.

     

    (b)           In
the case of a dispute as to the determination of the Closing Price or the VWAP
or the arithmetic calculation of the Conversion Price, any adjustment to the
Conversion Price, liquidated damages amount, interest or dividend calculation,
or any redemption price, redemption amount, adjusted Conversion Price, or
similar calculation, or as to whether a subsequent issuance of securities is
prohibited hereunder or would lead to an adjustment to the Conversion Price, the
Maker shall submit the disputed determinations or arithmetic calculations via
facsimile within two (2) Business Days of receipt, or deemed receipt, of the
Conversion Notice, any redemption notice, default notice or other event giving
rise to such dispute, as the case may be, to the Holder. If the Holder and the
Maker are unable to agree upon such determination or calculation within two (2)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Maker shall, within two (2) Business Days
submit via facsimile (a) the disputed determination of the Closing Price or the
VWAP to an independent, reputable investment bank selected by the Maker and
approved by the Holder, which approval shall not be unreasonably withheld, (b)
the disputed arithmetic calculation of the Conversion Price, adjusted Conversion
Price or any redemption price, redemption amount or default amount to the
Maker’s independent, outside accountant or (c) the disputed facts regarding
whether a subsequent issuance of securities is prohibited hereunder or would
lead to an adjustment to the Conversion Price (or any of the other above
described facts not expressly designated to the investment bank or accountant),
to an expert attorney from a nationally recognized outside law firm (having at
least 100 attorneys and having with no prior relationship with the Maker)
selected by the Maker and approved by the Lead Purchaser as defined in the
Purchase Agreement). The Maker, at the Maker’s expense, shall cause the
investment bank, the accountant, the law firm, or other expert, as the case may
be, to perform the determinations or calculations and notify the Maker and the
Holder of the results no later than five (5) Business Days from the time it
receives the disputed determinations or calculations. Such investment bank’s,
accountant’s or attorney’s determination or calculation, as the case may be,
shall be binding upon all parties absent demonstrable error.

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

     

    5.13       Additional
Definitions. Terms used herein and not defined shall have the meanings
set forth in the Purchase Agreement.  For the purposes hereof, the
following terms shall have the following meanings:

     

    “Closing Price” shall
mean (i) the last trading price per share of the Common Stock on such date on
the OTC Bulletin Board or a registered national stock exchange on which the
Common Stock is then listed, or if there is no such price on such date, then the
last trading price on such exchange or quotation system on the date nearest
preceding such date, or (ii) if the price of the Common Stock is not then
reported by the OTC Bulletin Board or a registered national securities exchange,
then the average of the “Pink Sheet” quotes for the relevant date, as reported
by the National Quotation Bureau, Inc., or (iii) if the Common Stock is not then
publicly traded the fair market value of a share of Common Stock as determined
by the Holder and reasonably acceptable to the Maker.

    

    “Equity Conditions”
shall mean, during the period in question, (i) the Maker shall have duly honored
all conversions and redemptions scheduled to occur or occurring by virtue of one
or more Conversion Notices of the Holder, if any, (ii) all liquidated damages
and other amounts owing to the Holder in respect of this Note shall have been
paid; (iii) there is an effective Registration Statement pursuant to which the
Holder is permitted to utilize the prospectus thereunder to resell all of the
shares issuable pursuant to the Transaction Documents, whether by conversion or
exercise, forced conversion, in lieu of cash interest or otherwise (and the
Maker believes, in good faith, that such effectiveness will continue
uninterrupted for the foreseeable future), (iv) the Common Stock is trading on
the Trading Market and all of the shares issuable pursuant to the Transaction
Documents are listed for trading on a Trading Market (and the Maker believes, in
good faith, that trading of the Common Stock on a Trading Market will continue
uninterrupted for the foreseeable future), (v) there is a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock for the
issuance of all of the shares issuable pursuant to the Transaction Documents,
(vi) there is then existing no Event of Default or event which, with the passage
of time or the giving of notice, would constitute an Event of Default, (vii) the
issuance of the shares in question (including shares of Common Stock as interest
hereunder) to the Holder would not violate the 4.99% or 9.99% beneficial
ownership limitations set forth in Section 3.4 hereof, and (viii) no public
announcement of a pending or proposed Triggering Event has
occurred.

    

    “Investment” means,
with respect to any Person, all investments in any other Person, whether by way
of extension of credit, loan, advance, purchase of stock or other ownership
interest (other than ownership interests in such Person), bonds, notes,
debentures or other securities, or otherwise, and whether existing on the date
of this Agreement or thereafter made, but such term shall not include the cash
surrender value of life insurance policies on the lives of officers or
employees, excluding amounts due from customers for services or products
delivered or sold in the ordinary course of business.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    “Trading Day” means
(a) a day on which the Common Stock is traded on the OTC Bulletin Board, or (b)
if the Common Stock is not traded on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices);  provided
,  however , that in the event that the Common Stock is not listed or
quoted as set forth in (a) or (b) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other government action to close.

     

    “Trading Market” means
the Over the Counter Bulletin Board, the New York Stock Exchange, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the
American Stock Exchange.

    

    “VWAP” means, for any
date, (i) the daily volume weighted average price of the Common Stock for such
date on the OTC Bulletin Board (or national securities exchange, if applicable)
as reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30 a.m.
Eastern Time to 4:02 p.m. Eastern Time); (ii) if the Common Stock is not then
listed or quoted on the OTC Bulletin Board (or national securities exchange, if
applicable) and if prices for the Common Stock are then reported in the “Pink
Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (iii) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Holder and reasonably acceptable to the
Maker.

     

    IN
WITNESS WHEREOF, the Maker has caused this Amended and Restated Note to be duly
executed by its duly authorized officer as of July 24, 2009.

    

    
      
        
          
            
              	
                      NEOPROBE
      CORPORATION

                    
	 
      	 
      
	
                      By:

                    	
                      /s/ Brent L. Larson

                    
	 
      	 
      
	
                      Its:
      Vice President, Finance &
CFO

                    

            

          

        

      

    

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    EXHIBIT
A

    

    HOLDER’S
ACCOUNT INFORMATION

    
      
         

      

      
        21

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