EXHIBIT 99(f)
SECURITY AGREEMENT
April 2, 2003
THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT") is made as of the date first
written above by and between Neoprobe Corporation, a Delaware corporation
qualified to do business in the State of Ohio, with principal offices located at
425 Metro Place North, Dublin, Ohio 43017 ("DEBTOR"), David C. Bupp a resident
of the State of Ohio ("BUPP"), and Donald E. Garlikov, a resident of the State
of Ohio ("GARLIKOV") (each of Bupp and Garlikov a "SECURED PARTY," and
collectively the "SECURED PARTIES").
This Security Agreement is entered into with respect to a Senior
Secured Note in the principal amount of $250,000 (the "SENIOR NOTE") delivered
to Bupp (a) by Debtor pursuant to a 8.5% Senior Secured Note Purchase Agreement,
as the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof (the "SENIOR PURCHASE AGREEMENT") dated the
same date as this Security Agreement, and (b) a 9.5% Secured Convertible Note of
even date herewith in the principal amount of $250,000 (the "CONVERTIBLE NOTE"
and collectively with the Senior Note, the "NOTES", and individually a "NOTE")
delivered to Garlikov by Debtor pursuant to a 9.5% Secured Note Convertible Note
Purchase Agreement, as the same may be amended, modified or supplemented from
time to time in accordance with the terms thereof (the "CONVERTIBLE PURCHASE
AGREEMENT", and collectively with the Senior Purchase Agreement, the "PURCHASE
AGREEMENTS" and individually a "PURCHASE AGREEMENT").
Capitalized terms not otherwise defined herein shall have the
meaning(s) ascribed to them in the Purchase Agreement.
Secured Party and Debtor agree as follows:
SECTION 1. DEFINITIONS.
1.1 "Collateral" means all of Debtor's chattel paper, deposit
accounts, documents, Equipment, General Intangibles, goods,
instruments, Intellectual Property, Inventory, letters of
credit, and all sums on deposit in any account,; together with
(a) all substitutions and replacements for and products of any
of the foregoing; (b) in the case of all goods, all
accessions; (c) all accessories, attachments, parts, equipment
and repairs now or hereafter attached or affixed to or used in
connection with any goods; (d) all warehouse receipts, bills
of lading and other documents of title now or hereafter
covering such goods; (e) all collateral subject to any lien
granted by Debtor to the Secured Party; (f) any money, or
other assets of Debtor that now or hereafter come into the
possession, custody, or control of the Secured Party; (g) all
books, records, ledger cards and other property pertaining to
any of the foregoing, and any equipment on which any such
items are stored or maintained; and (h) proceeds of any and
all of the foregoing; ; provided, however, that the Collateral
shall not include any accounts of Debtor, as such term is
defined in the UCC.
1.2 "Equipment" means all of Debtor's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all present and future machinery,
vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools,
supplies, and including specifically (without limitation) the
goods described in any equipment schedule or list herewith or
hereafter furnished to a Secured Party by Debtor, and whether
located on real estate owned or leased by Debtor or otherwise.
1.3 "General Intangibles" means all of Debtor's general
intangibles, as such term is defined in the UCC, whether now
owned or hereafter acquired, including (without limitation)
all Intellectual Property, trade secrets, customer or supplier
lists and contracts, manuals, operating instructions, permits,
franchises, the right to use Debtor's name, and the goodwill
of Debtor's business.
1.4 "Intellectual Property" means (a) trademarks, trademark
registrations, trade names and trademark applications for any
of the foregoing in the United States Patent and Trademark
Office or in any other office or with any other official
anywhere in the world or which are used in the United States
or any state, territory or possession thereof, or in any other
place, nation or jurisdiction anywhere in the world, and (i)
all renewals thereof, (ii) all income, royalties, damages and
payments now and hereafter due and/or payable with respect
thereto, including, without limitation, payments under all
licenses entered into in connection therewith and damages and
payments for past or future infringements thereof, (iii) the
right to sue for past, present and future infringements
thereof, and (iv) all rights corresponding thereto throughout
the world (all of the foregoing trademarks, and trademark
registrations, trade names, service marks, service mark
registration and applications, together with the items
described in clauses (i) through (iv in this subparagraph (a),
are sometimes hereinafter individually and/or collectively
referred to as the "TRADEMARKS"); (b) license agreements with
any other party in connection with any Trademarks or such
other party's trademarks or trademark applications, whether
Debtor is a licensor or licensee under any such license
agreement, and the right to prepare for sale, sell and
advertise for sale, all of the inventory now or hereafter
owned by Debtor and now or hereafter covered by such license
agreements (all of the foregoing being hereinafter referred to
collectively as the "LICENSES"); (c) the goodwill of Debtor's
business connected with and symbolized by the Trademarks, and
(d) patents and patent applications in the United States
Patent and Trademark Office or in any other office or with any
other official anywhere in the world or which are used in the
United States or any state, territory or possession thereof,
or in any other place, nation or jurisdiction anywhere in the
world, and (i) all renewals thereof, (ii) all income,
royalties, damages and payments now and hereafter due and/or
payable with respect thereto, including, without limitation,
payments under all licenses entered into in connection
therewith and damages and payments for past or future
infringements thereof, (iii) the right to sue for past,
present and future
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infringements thereof, and (iv) all rights corresponding
thereto throughout the world.
1.5 "Inventory" means all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in the
business of Debtor or used in connection with the
manufacturing, packing, shipping, advertising, selling or
finishing of such goods, merchandise and other personal
property, and all goods, merchandise and other personal
property whenever located, to be furnished by the Debtor under
any contract or contract for service or held for sale or
lease, whether now owned or hereafter acquired, and all
documents of title or other documents representing the
foregoing.
1.6 "Obligations." This Security Agreement secures the following:
(a) Debtor's obligations under the Notes and this
Security Agreement;
(b) the repayment of (i) any amounts that a Secured Party
may advance or spend for the maintenance or preservation of
the Collateral, and (ii) any other expenditures that a Secured
Party may make under the provisions of this Security Agreement
or for the benefit of Debtor;
(c) all amounts owed under any modifications, renewals or
extensions of any of the foregoing obligations; and
(d) any of the foregoing that arises after the filing of
a petition by or against Debtor under the Bankruptcy Code,
even if the obligations do not accrue because of the automatic
stay under Bankruptcy Code Section 362 or otherwise.
1.7 "Permitted Liens" means:
(a) liens on Accounts (as defined in the UCC) securing
obligations of Debtor to Banks;
(b) liens existing on the date hereof and listed on
Schedule 1.5;
(c) liens for taxes, assessments or charges imposed on
Debtor or any of its property by any governmental authority
not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of Debtor, in accordance
with GAAP or liens for such taxes, assessments or charges
which are otherwise permitted under this paragraph;
(d) statutory liens of carriers, warehousemen, mechanics,
materialmen, repairmen, or other like liens arising in the
ordinary course of business, which are
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not overdue for a period of more than 30 days or which are
being contested in good faith and by appropriate proceedings;
(e) pledges or deposits required in connection with
workers' compensation, unemployment insurance and other social
security legislation;
(f) liens incurred on deposits to secure the performance
of tenders, bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and
return-of-money bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) liens in favor of customs and revenue authorities
arising as a matter of law and to secure payment of customs
duties in connection with the importation of goods
(h) liens securing obligations of Debtor (i) in respect
of goods purchased for resale in the ordinary course of
business as long as no UCC financing statements are filed
concerning such goods or (ii) under true consignment
arrangements in which Debtor is the consignee, pursuant to
which UCC financing statements may be filed;
(i) liens of landlords or mortgagees of landlords on
fixtures and movable property located on premises leased in
the ordinary course of business, provided that the rental
payments secured thereby are not yet due; and
(j) purchase money liens for Equipment and Inventory in
an amount not to exceed $100,000 in the aggregate at any one
time.
1.8 "UCC" Any term used in the Uniform Commercial Code as enacted
in the State of Ohio or the State where the Collateral is located and
not defined in this Security Agreement has the meaning (as amended from
time to time) given to the term in the UCC.
SECTION 2. GRANT OF SECURITY INTEREST.
2.1 Security Interest. Debtor grants a security interest in the
Collateral to each Secured Party, to secure the payment or
performance of the Obligations.
2.2 Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (a) Debtor shall remain liable under any
contracts, agreements and other documents included in the
Collateral, to the extent set forth therein, to perform all of
its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed, (b) the
exercise by a Secured Party of any of the rights hereunder
shall not release Debtor from any of its duties or obligations
under such contracts, agreements and other documents included
in the Collateral, and (c) a Secured Party shall not have any
obligation or liability under any contracts,
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agreements and other documents included in the Collateral by
reason of this Security Agreement, nor shall the Secured Party
be obligated to perform any of the obligations or duties of
Debtor thereunder or to take any action to collect or enforce
any such contract, agreement or other document included in the
Collateral hereunder.
SECTION 3. PERFECTION OF SECURITY INTEREST.
3.1 Filing of Financing Statement.
(a) Debtor shall execute and deliver to the Secured Party
concurrently with the execution of this Security Agreement,
and Debtor hereby authorizes the Secured Party to file (with
or without Debtor's signature) at any time and from time to
time thereafter, all financing statements, continuation
financing statements, termination statements, security
agreements, assignments, warehouse receipts, documents of
title, affidavits, reports, notices, schedules of account,
letters of authority and all other documents and instruments,
in form satisfactory to the Secured Party (the "FINANCING
STATEMENTS"), and take all other action, as each Secured Party
may request, to perfect and continue perfected, maintain the
priority of or provide notice of each Secured Party's security
interest in the Collateral and to accomplish the purposes of
this Security Agreement.
(b) Each Secured Party's security interest in the
Collateral is prior to all other security interests, excepting
only the Permitted Liens.
3.2 Possession.
(a) Debtor shall have possession of the Collateral,
except where expressly otherwise provided in this Security
Agreement.
(b) Where Collateral is in the possession of a third
party, Debtor will join with each Secured Party in notifying
the third party of each Secured Party's security interest and
obtaining an acknowledgment from the third party that it is
holding the Collateral for the benefit of each Secured Party.
SECTION 4. POST-CLOSING COVENANTS AND RIGHTS CONCERNING THE COLLATERAL.
4.1 Inspection. A Secured Party may inspect any Collateral, at any
time upon reasonable notice.
4.2 Personal Property. The Collateral shall remain personal
property at all times. Debtor shall not affix any of the
Collateral to any real property in any manner which would
change its nature from that of personal property to real
property or to a fixture.
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4.3 Secured Party's Collection Rights. After the occurrence of,
and during the continuance of, an Event of Default, a Secured
Party shall have the right at any time to enforce Debtor's
rights against Debtor's account debtors and obligors to the
extent that such is included in the definition of Collateral.
4.4 Limitations on Obligations Concerning Maintenance of
Collateral.
(a) Debtor has the risk of loss of the Collateral.
(b) A Secured Party shall have no duty to collect any
income accruing on the Collateral or to preserve any rights
relating to the Collateral.
4.5 No Disposition of Collateral. Each Secured Party does not
authorize, and Debtor agrees not to:
(a) make any sales or leases of any of the Collateral
other than the sale of Inventory or other Collateral in the
normal course of Debtor's business;
(b) license any of the Collateral, except that Debtor may
grant licenses in its Intellectual Property in the ordinary
course of its business; or
(c) grant any other security interest in any of the
Collateral, except for Permitted Liens.
SECTION 5. DEBTOR'S REPRESENTATIONS AND WARRANTIES.
Debtor warrants and represents that:
5.1 Title to and Transfer of Collateral. Debtor has rights in or
power to transfer the Collateral and Debtor is, and will
continue to be, the sole and complete owner of the Collateral
(or, in the case of after-acquired Collateral, at the time
Debtor acquires rights in such Collateral, will be the sole
and complete owner thereof), free from any lien except for
Permitted Liens, or as created by this Security Agreement.
5.2 Location, State of Incorporation, and Name of Debtor.
(a) Debtor's chief executive office is located at 425
Metro Place North, Suite 300, Dublin, Ohio 43017 in the State
of Ohio, county of Franklin, and all Collateral is located at
such address or at the addresses set forth on Schedule 5.2 ;
(b) Debtor's state of incorporation is the State of
Delaware; and
(c) Debtor's exact legal name is as set forth in the
first paragraph of this Security Agreement.
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(d) Debtor has not, at any time in the past two years:
(i) been known as or used any other corporate, trade or
fictitious name; (ii) changed its name; (iii) been the
surviving or resulting corporation in a merger or
consolidation; or (iv) acquired through asset purchase or
otherwise any business of any person with a purchase price in
excess of $1 million, except for the acquisition of Biosonix
Ltd.
5.3 Enforceability of Security Interest.
(a) This Security Agreement creates a security interest
which is enforceable against the Collateral in which Debtor
now has rights and will create a security interest which is
enforceable against the Collateral in which Debtor hereafter
acquires rights at the time Debtor acquires any such rights;
and
(b) Upon the filing of Financing Statements in the
appropriate filing offices in each jurisdiction identified in
Schedule 5.2 where Collateral is located and except for
Permitted Liens, each Secured Party has a perfected and first
priority security interest in the Collateral in which Debtor
now has rights, and will have a perfected and first priority
security interest in the Collateral in which Debtor hereafter
acquires rights at the time Debtor acquires any such rights,
in each case securing the payment and performance of the
Obligations and in each case in which a security interest can
be filed by the filing of a Financing Statement.
5.4 Other Financing Statements. Other than (a) Financing
Statements disclosed to each Secured Party prior to the date
hereof and (b) Financing Statements in favor of each Secured
Party on behalf of itself, no effective Financing Statement
naming Debtor as debtor, assignor, grantor, mortgagor, pledgor
or the like and covering all or any part of the Collateral is
on file in any filing or recording office in any jurisdiction.
SECTION 6. DEBTOR'S COVENANTS.
Until the Obligations are paid in full, Debtor agrees that it will
preserve its corporate existence, and without the prior written consent
of each Secured Party (which shall not be unreasonably withheld):
6.1 Change State of Incorporation. Will not change the state of
its incorporation;
6.2 Change Corporate Name. Will not change its corporate name; and
6.3 Change Chief Executive Office. Will not change the location of
its chief executive office or the place where any material
portion of the Collateral is located.
6.4 Defense of Collateral. Will appear in and defend any action,
suit or proceeding which may affect to a material extent its
title to, or right or interest in, or the
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Secured Party's right or interest in, the Collateral
consistent with customary and prudent business practices.
6.5 Preservation of Collateral. Will do and perform all reasonable
acts that may be necessary and appropriate to maintain,
preserve and protect the value of the Collateral.
6.6 Compliance with Laws, Etc. Will comply with all laws,
regulations and ordinances, and all policies of insurance,
relating in a material way to the possession, operation,
maintenance and control of the Collateral if the noncompliance
therewith could reasonably result in a material adverse effect
on Debtor.
6.7 Maintenance of Records. Will keep separate, accurate and
complete books with respect to the Collateral.
6.8 Disposition of Collateral. Will not surrender or lose
possession of (other than to the Secured Party), sell, lease,
rent, or otherwise dispose of or transfer any of the
Collateral or any right or interest therein, except in the
ordinary course of business.
6.9 Liens. Will keep the Collateral free of all liens except
Permitted Liens and liens created pursuant to this Security
Agreement.
6.10 Expenses. Will pay all validly assessed or incurred expenses
of protecting, storing, warehousing, insuring, handling and
shipping the Collateral.
6.11 Inventory. Following the occurrence and during the continuance
of any Event of Default, will: (a) if requested by a Secured
Party, prepare and deliver to each Secured Party a report of
all Inventory, in form and substance satisfactory to each
Secured Party; (b) (i) other than with respect to any
Inventory in the possession of a subcontractor of Debtor, not
store any material portion of Inventory with a bailee,
warehouseman or similar person or on premises leased to Debtor
without prior notice to each Secured Party and (ii), except
with respect to demonstration models, Inventory transferred as
upgrades to existing customers and Inventory shipped to
customers awaiting customer acceptance, in each instance in
the ordinary course of Debtor's business, not dispose of any
material portion of Inventory on a bill-and-hold, guaranteed
sale, sale and return, sale on approval, consignment or
similar basis, nor acquire any material portion of Inventory
from any person on any such basis without in each case giving
the Secured Party prior written notice thereof.
6.12 Notices, Reports and Information. Following the occurrence and
during the continuance of any Event of Default, will (a)
notify each Secured Party of any
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material claim made or asserted against the Collateral by any
person and of any change in the basic nature of the Collateral
or other event which could materially adversely affect the
value of the Collateral or a Secured Party's lien thereon
(other than commodity fluctuations affecting Debtor's industry
generally); (b) furnish to each Secured Party such statements
and schedules further identifying and describing the
Collateral and such other reports and other information in
connection with the Collateral as a Secured Party may
reasonably request, all in reasonable detail; and (c) upon
request of a Secured Party make such demands and requests for
information and reports as Debtor is entitled to make in
respect of the Collateral.
6.13 Insurance.
(a) Shall carry and maintain in full force and effect, at
the expense of Debtor and with financially sound and reputable
insurance companies, insurance with respect to the Inventory
in such amounts, with such deductibles and covering such risks
as is customarily carried by persons engaged in the same or
similar business. Following the occurrence and during the
continuance of any Event of Default, and upon the request of a
Secured Party, Debtor shall furnish each Secured Party with
full information as to such insurance carried by it and, if so
requested, copies of all such insurance policies.
(b) Following the occurrence and during the continuance
of any Event of Default, if any material amount of Inventory
shall be materially damaged or destroyed, in whole or in part,
by fire or other casualty, Debtor shall give prompt notice
thereof to each Secured Party. No settlement on account of any
loss on any such Inventory covered by insurance shall be made
for less than net book value without the consent of each
Secured Party, which shall not be unreasonably withheld. Any
payment exceeding $25,000 at any time made to Debtor by any
insurer with respect to a casualty relating to all or any part
of the Collateral shall be, at the Debtor's option, (i) paid
equally to the Secured Parties for application to the
Obligations, or (ii) reinvested in the production of Inventory
constituting Collateral hereunder, in each case, within 90
days of Debtor's receipt of such insurance payment (it being
understood that Debtor may elect to make payment to each
Secured Party under the preceding clause (i), reinvest the
applicable insurance proceeds under the preceding clause (ii),
or a combination of both).
SECTION 7. COSTS AND EXPENSES. Debtor agrees to pay or reimburse on
demand:
7.1 Out of Pocket Expenses. Following the occurrence and during
the continuance of any Event of Default, the reasonable
out-of-pocket costs and expenses of each Secured Party
(including reasonable attorney fees and expenses and search,
recording and filing fees and expenses, provided, that the
Secured Party shall deliver reasonably detailed statements for
such fees and expenses); and in addition, Debtor will pay any
such costs and expenses incurred by each Secured
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Party in connection with any amendments, modifications or
waivers of the terms of this Security Agreement requested by
Debtor;
7.2 Title Appraisal, etc. Following the occurrence and during the
continuance of any Event of Default, all title, appraisal
(including the allocated costs of internal appraisal services,
provided, that the Secured Party requesting same shall deliver
reasonably detailed statements for such fees and expenses),
survey, audit, consulting and similar fees, costs and expenses
incurred or sustained by a Secured Party in connection with
this Security Agreement or the Collateral; and
7.3 Search Fees, etc. Following the occurrence and during the
continuance of any Event of Default, all costs and expenses of
each Secured Party, (including reasonable attorney fees and
expenses and search, recording and filing fees and expenses,
provided, that the Secured Party shall deliver reasonably
detailed statements for such fees and expenses), in connection
with the enforcement or attempted enforcement of, and
preservation of any rights or interests under, this Security
Agreement, any out-of-court workout or other refinancing or
restructuring or in any bankruptcy case, and the protection,
sale or collection of, or other realization upon, any of the
Collateral, including all expenses of taking, collecting,
holding, sorting, handling, preparing for sale, selling, or
the like, and other such expenses of sales and collections of
Collateral, and any and all losses, costs and expenses
sustained by a Secured Party as a result of any failure by
Debtor to perform or observe its obligations contained herein.
SECTION 8. INTERCREDITOR AGREEMENT. Irrespective of any statement
contained in the Note or the Purchase Agreement to the
contrary and irrespective of the time, order or method of
attachment or perfection of any liens granted thereby or the
time or order of filing or recording of financing statements
or any other lien, and irrespective of anything contained in
any filing or agreement to which any of the Secured Parties
may now or hereafter be a party, the Secured Parties hereby
agree among themselves that the priorities to be accorded to
their respective liens in the Collateral shall be equal. So
long as any of the Obligations are outstanding, the Secured
Parties shall act jointly in regard to making all
determinations, taking all actions and otherwise carrying out
any provision of this Agreement. For so long as any of the
Obligations now or hereafter owed to the Secured Parties
remain outstanding, neither Secured Party shall have the right
or the option, without providing notice to and receiving the
consent of the other Secured Party, to amend, waive or modify
any of the terms or provisions of the Note or Purchase
Agreement including without limitation (a) any term or
provision regarding the time or method of repayment, (b) the
terms upon which such repayment may occur, (c) the amount of
periodic payments or (d) the allocation of principal and
interest among such payments. Each Secured Party hereby agrees
to indemnify the other Secured Party, its successors and
assigns harmless from and against any and all claims,
liabilities, damages, losses, costs and expenses, including
without limitation, reasonable counsel fees, resulting from
one Secured Party's exercise of any rights or privileges as a
secured party with respect to any of the Collateral or
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any proceeds thereof provided that such Secured Party acted
with the approval of the other Secured Party and did not act
or omit to act in a grossly negligent or reckless manner, or
with an intent to cause damage.
SECTION 9. REMEDIES UPON DEFAULT.
9.1 General. Upon any Event of Default, the Secured Parties may
jointly pursue any remedy available at law (including those
available under the provisions of the UCC), or in equity to
collect, enforce or satisfy any Obligations then owing,
whether by acceleration or otherwise.
9.2 Specific Remedies. Following the occurrence and during the
continuance of any Event of Default, the Secured Parties shall
have, in addition to all other rights and remedies granted to
it in this Security Agreement, all rights and remedies of a
secured party under the UCC and other applicable laws. Without
limiting the generality of the foregoing, Debtor agrees that a
Secured Party may: (a) peaceably and without notice enter any
premises of Debtor, take possession of any Collateral, remove
or dispose of all or part of the Collateral on any premises of
Debtor or elsewhere, and otherwise collect, receive,
appropriate and realize upon all or any part of the
Collateral, and demand, give receipt for, settle, renew,
extend, exchange, compromise, adjust, or sue for all or any
part of the Collateral, as such Secured Party may determine;
(b) require Debtor to assemble all or any part of the
Collateral and make it available to such Secured Party, at any
place and time designated by such Secured Party; (c) secure
the appointment of a receiver of the Collateral or any part
thereof (to the extent and in the manner provided by
applicable law); (d) sell, resell, lease, use, assign,
transfer or otherwise dispose of any or all of the Collateral
in its then condition or following any commercially reasonable
preparation or processing (utilizing in connection therewith
any of Debtor's assets, without charge or liability to such
Secured Party therefor) at public or private sale, by one or
more contracts, in one or more parcels, at the same or
different times, for cash or credit or for future delivery
without assumption of any credit risk, all as such Secured
Party deems advisable; provided, however, that Debtor shall be
credited with the net proceeds of sale after application of
Section 9.5 only when such proceeds are finally collected by
the Secured Party. A Secured Party shall have the right upon
any such public sale, and, to the extent permitted by law,
upon any such private sale, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of
redemption, which right or equity of redemption Debtor hereby
releases, to the extent permitted by law. Debtor hereby agrees
that the sending of notice by ordinary mail, postage prepaid,
to the address of Debtor set forth in Section 10.3 of the
place and time of any public sale or of the time after which
any private sale or other intended disposition is to be made,
shall be deemed reasonable notice thereof if such notice is
sent 10 days prior to the date of such sale or other
disposition or the date on or after which such sale or other
disposition may occur, provided that the Secured Party may
provide Debtor shorter notice or no notice, to
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the extent permitted by the UCC or other applicable law. A
Secured Party shall have no obligation to clean up or
otherwise prepare the Collateral for sale. A Secured Party has
no obligation to attempt to satisfy these Obligations by
collecting them from any other person liable for them and a
Secured Party may release, modify or waive any Collateral
provided by any other person to secure any of the Obligations,
all without affecting such Secured Party's right against
Debtor. Debtor waives any right it may have to require a
Secured Party to pursue any third person or any of the
Obligations. A Secured Party may comply with any applicable
state or federal law requirements in connection with a
disposition of the Collateral and compliance will not be
considered adversely to affect the commercial reasonableness
of any sale of the Collateral. A Secured Party may sell the
Collateral without giving any warranty as to the Collateral. A
Secured Party may specifically disclaim any warranties of
title or the like. This procedure will not be considered
adversely to affect the commercial reasonableness of any sale
of the Collateral. If a Secured Party sells any of the
Collateral upon credit, Debtor will be credited only with
payments actually made by the purchaser, received by such
Secured Party, and applied to the indebtedness of the
purchaser. In the event the purchaser fails to pay for the
Collateral, such Secured Party may resell the Collateral and
Debtor shall be credited with the net proceeds of the sales
after application of Section 9.5.
9.3 License Upon Default. For the purpose of enabling a Secured
Party to exercise its rights and remedies under this Section
9, Debtor grants to each Secured Party, following the
occurrence and during the continuance of any Event of Default,
an irrevocable, non-exclusive and assignable license
(exercisable without payment or royalty or other compensation
to Debtor) to use, license or sublicense any Intellectual
Property, to enable each Secured Party (among other things) to
transfer any of the Intellectual Property or tangible property
of Debtor that are included in the Collateral.
9.4 Proceeds Account. To the extent that any of the Obligations
may be contingent, unmatured or unliquidated (including with
respect to undrawn amounts under any letters of credit
outstanding) at such time as there may exist an Event of
Default, a Secured Party may, at his election, (a) retain the
proceeds of any sale, collection, disposition or other
realization upon the Collateral (or any portion thereof) in a
special purpose non-interest-bearing restricted deposit
account (the "Proceeds Account") created and maintained by
such Secured Party for such purpose (which shall constitute a
deposit account included within the Collateral hereunder)
until such time as such Secured Party may elect to apply such
proceeds to the Obligations, and Debtor agrees that such
retention of such proceeds by such Secured Party shall not be
deemed strict foreclosure with respect thereto; (b) in any
manner elected by a Secured Party, estimate the liquidated
amount of any such contingent, unmatured or unliquidated
claims and apply the proceeds of the Collateral against such
amount; or (c) otherwise proceed in any manner permitted by
applicable law. Debtor agrees that the Proceeds Account shall
be a blocked account and that upon the irrevocable deposit of
funds into the Proceeds Account,
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Debtor shall not have any right of withdrawal with respect to
such funds. Accordingly, Debtor irrevocably waives until the
termination of this Security Agreement in accordance with its
terms the right to make any withdrawal from the Proceeds
Account and the right to instruct a Secured Party to honor
drafts against the Proceeds Account.
9.5 Application of Proceeds. Subject to Section 9.4, cash proceeds
actually received from the sale or other disposition or
collection of Collateral, and any other amounts received in
respect of the Collateral the application of which is not
otherwise provided for herein, shall be payable to each
Secured Party on a pro-rata basis against all or any part of
the Obligations in the following order: (a) first, to any fees
due in respect of the Obligations; (b) next, to any interest
due in respect of the Obligations; (c) next, to any principal
due in respect of the Obligations; and (d) last, to any other
Obligations. Any surplus thereof which exists after payment
and performance in full of the Obligations shall be promptly
paid over to Debtor or otherwise disposed of in accordance
with the UCC or other applicable law. Debtor shall remain
liable to each Secured Party for any deficiency which exists
after any sale or other disposition or collection of
Collateral.
9.6 Certain Waivers. Debtor waives, to the fullest extent
permitted by law, (a) any right of redemption with respect to
the Collateral, whether before or after sale hereunder, and
all rights, if any, of marshalling of the Collateral or other
collateral or security for the Obligations; (b) any right to
require a Secured Party (i) to proceed against any person,
(ii) to exhaust any other collateral or security for any of
the Obligations, (iii) to pursue any remedy in a Secured
Party's power, or (iv) to make or give any presentments,
demands for performance, notices of nonperformance, protests,
notices of protests or notices of dishonor in connection with
any of the Collateral.
SECTION 10. MISCELLANEOUS.
10.1 Assignment.
(a) This Security Agreement shall bind and shall inure to
the benefit of the permitted heirs and assigns of the Secured
Party and shall bind all persons who become bound as a debtor
to this Security Agreement.
(b) No Secured Party consents to any assignment by Debtor
except as expressly provided in this Security Agreement.
(c) Each Secured Party may assign and transfer its rights
and interests under this Security Agreement only pursuant to a
permitted assignment or transfer of the Note secured hereby.
If an assignment is made, Debtor shall render performance
under this Security Agreement to the assignee.
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10.2 Severability. Should any provision of this Security Agreement
be found to be void, invalid or unenforceable by a court or
panel of arbitrators of competent jurisdiction, that finding
shall only affect the provisions found to be void, invalid or
unenforceable and shall not affect the remaining provisions of
this Security Agreement.
10.3 Notices. Any notice or other communication required or
permitted to be given or made under this Security Agreement
(a) shall be in writing, and (b) may be delivered by hand
delivery, First Class U.S. Mail (regular, certified,
registered or expedited delivery), FedEx, UPS Overnight,
Airborne or other nationally recognized delivery service, or
fax. The addresses for notice for each party and their counsel
are set forth in the Purchase Agreement. All notices shall be
served upon the parties at said addresses or such other
addresses as they may hereafter direct in writing.
10.4 Headings. Section headings used in this Security Agreement are
for convenience only. They are not a part of this Security
Agreement and shall not be used in construing it.
10.5 Governing Law; Jurisdiction. This Security Agreement is being
executed and delivered and is intended to be performed in the
State of Ohio and shall be construed and enforced in
accordance with the laws of the State of Ohio, without giving
effect to any choice of law or conflict of law provision or
rule (whether of the State of Ohio or any other jurisdictions)
that would cause the application of the laws of any
jurisdiction other than the State of Ohio, except to the
extent that the UCC provides for the application of the law of
Delaware. Each party hereby irrevocably waives personal
service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to
such party at the address for such notices to it under the
Purchase Agreement and agrees that such service shall
constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by
law.
10.6 Disputes. Any controversy, claim or dispute arising out of or
relating to this Security Agreement or the breach,
termination, enforceability or validity of this Security
Agreement, including the determination of the scope or
applicability of the agreement to arbitrate set forth in this
Section 10.6 shall be determined exclusively by binding
arbitration in the City of Columbus, Ohio. The arbitration
shall be governed by the rules and procedures of the American
Arbitration Association (the "AAA") under its Commercial
Arbitration Rules and its Supplementary Procedures for Large,
Complex Disputes; provided that persons eligible to be
selected as arbitrators shall be limited to attorneys-at-law
each of whom (a) is on the AAA's Large, Complex Case Panel or
a Center for Public Resources ("CPR") Panel of Distinguished
Neutrals, or has professional credentials comparable to those
of the attorneys listed on such AAA and CPR
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Panels, and (b) has actively practiced law (in private or
corporate practice or as a member of the judiciary) for at
least 15 years in the State of Ohio concentrating in either
general commercial litigation or general corporate and
commercial matters. Any arbitration proceeding shall be before
one arbitrator mutually agreed to by the parties to such
proceeding (who shall have the credentials set forth above)
or, if the parties are unable to agree to the arbitrator
within 15 business days of the initiation of the arbitration
proceedings, then by the AAA. No provision of, nor the
exercise of any rights under, this Section 10.6 shall limit
the right of any party to request and obtain from a court of
competent jurisdiction in the State of Ohio, County of
Franklin (which shall have exclusive jurisdiction for purposes
of this Section 10.6) before, during or after the pendency of
any arbitration, provisional or ancillary remedies and relief
including injunctive or mandatory relief or the appointment of
a receiver. The institution and maintenance of an action or
judicial proceeding for, or pursuit of, provisional or
ancillary remedies shall not constitute a waiver of the right
of any party, even if it is the plaintiff, to submit the
dispute to arbitration if such party would otherwise have such
right. Each of the parties hereby submits unconditionally to
the exclusive jurisdiction of the state and federal courts
located in the County of Franklin, State of Ohio for purposes
of this provision, waives objection to the venue of any
proceeding in any such court or that any such court provides
an inconvenient forum and consents to the service of process
upon it in connection with any proceeding instituted under
this Section 9.6 in the same manner as provided for the giving
of notice under this Security Agreement. Judgment upon the
award rendered may be entered in any court having
jurisdiction. The parties hereby expressly consent to the
nonexclusive jurisdiction of the state and federal courts
situated in the County of Franklin, State of Ohio for this
purpose and waive objection to the venue of any proceeding in
such court or that such court provides an inconvenient forum.
The arbitrator shall have the power to award recovery of all
costs (including attorneys' fees, administrative fees,
arbitrators' fees and court costs) to the prevailing party.
The arbitrator shall not have power, by award or otherwise, to
vary any of the provisions of this Security Agreement.
10.7 Rules of Construction.
(a) No reference to "proceeds" in this Security Agreement
authorizes any sale, transfer, or other disposition of the
Collateral by Debtor.
(b) "Includes" and "including" are not limiting.
(c) "Or" is not exclusive.
(d) "All" includes "any" and "any" includes "all."
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10.8 Integration and Modifications.
(a) This Security Agreement, together with each Note and
each Purchase Agreement, constitute the entire agreement of
Debtor and each Secured Party concerning the subject matter
hereof.
(b) Any modifications to this Security Agreement must be
made in writing and signed by the party adversely affected.
10.9 Waiver. Any party to this Security Agreement may waive
the enforcement of any provision to the extent the provision
is for its benefit.
10.10 Further Assurances. Debtor agrees to execute any further
documents, and to take any further actions, reasonably
requested by a Secured Party to evidence or perfect the
security interest granted herein, to maintain the first
priority of the security interest or to effectuate the rights
granted to a Secured Party herein.
The parties have signed this Security Agreement as of the day and year
first above written at Franklin County, Ohio.
"DEBTOR"
NEOPROBE CORPORATION
By: Brent L. Larson
----------------------------
Name: Brent L. Larson
Its: Vice President-Finance
"SECURED PARTIES"
/s/ David C. Bupp
-------------------------------
David C. Bupp
/s/ Donald E. Garlikov
-------------------------------
Donald E. Garlikov
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