EXHIBIT 10.2
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS
NEOPROBE CORPORATION
8% SERIES A CONVERTIBLE PROMISSORY NOTE
DUE DECEMBER 12, 2008
$
------------
December 13, 2004
FOR VALUE RECEIVED, the undersigned, NEOPROBE CORPORATION, a Delaware
corporation (the "BORROWER"), hereby promises to pay to the order of
_________________ ("__________"), a ______________, or its registered assigns
(the "HOLDER"), the principal sum of __________________________ DOLLARS
($____________) on December 12, 2008 (the "MATURITY DATE"), with interest
thereon from time to time as provided herein.
1. PURCHASE AGREEMENT. This Convertible Promissory Note (the "NOTE") is
issued by the Borrower, on the date hereof, pursuant to the Securities Purchase
Agreement (the "PURCHASE AGREEMENT"), dated as of December 13, 2004 by and among
the Borrower, Biomedical Value Fund, L.P., Biomedical Offshore Value Fund, Ltd.
and David C. Bupp, and is subject to the terms thereof. This Note, together with
all other promissory notes issued under the Purchase Agreement, and all
promissory notes issued pursuant to paragraph 12 hereof or thereof are
hereinafter referred to as the "NOTES." The obligations of Borrower under this
Note are secured pursuant to a Security Agreement dated December 13, 2004 by and
among the Borrower, Biomedical Value Fund, L.P., Biomedical Offshore Value Fund,
Ltd. and David C. Bupp. The Holder is entitled to the benefits of this Note and
the Purchase Agreement, as it relates to the Note and the Security Agreement,
and may enforce the agreements of the Borrower contained herein and therein and
exercise the remedies provided for hereby and thereby or otherwise available in
respect hereto and thereto. Capitalized terms used herein without definition are
used herein with the meanings ascribed to such terms in the Purchase Agreement.
2. INTEREST.
(a) BASIC INTEREST.
(i) The Borrower promises to pay interest on the principal
amount of this Note at the rate of 8% per annum. The Borrower shall pay
accrued interest quarterly on each March 31, June 30, September 30 and
December 31 of each year or, if any such date shall not be a Business Day,
on the next succeeding Business Day to occur after such date (each date
upon which interest shall be so payable, an "INTEREST PAYMENT DATE"),
beginning on December 31, 2004. Interest on this Note shall be paid by
wire transfer of immediately available funds to an account at a bank
designated in writing by the Holder. In the absence of any such written
designation, any such Interest payment shall be deemed made on the date a
check in the applicable amount payable to the order of Holder is received
by the Holder at its last address as reflected in Borrower's note
register; if no such address appears, then to such Holder in care of the
last address in such note register of any predecessor holder of this Note
(or its predecessor). Interest on this Note shall accrue from and
including the date of issuance through and until repayment of the
principal and payment of all accrued interest in full. Interest shall
accrue and be computed on the basis of a 360-day year of twelve 30-day
months.
(ii) The foregoing to the contrary notwithstanding, interest
payable on any Interest Payment Date may, at Borrower's election, be
accrued and not paid by the Borrower on such Interest Payment Date and the
aggregate of such amount so accrued shall be added to the principal sum
hereof on such Interest Payment Date as additional principal (the
"ADDITIONAL PRINCIPAL") to be paid in accordance with the provisions of
Section 3 hereinbelow. Interest shall accrue and be payable on the
outstanding balance of the Additional Principal as set forth in the first
sentence of this Section 2(a)(i).
(b) DEFAULT RATE OF INTEREST. Except with respect to interest
accruing pursuant to Section 2(a)(ii), but subject to applicable law, any
overdue principal of and overdue interest on this Note shall bear interest,
payable on demand in immediately available funds, for each day from the date
payment thereof was due to the date of actual payment, at a rate equal to the
rate of interest otherwise in effect pursuant to the first sentence of this
Section 2 plus 2% per annum, and, upon and during the occurrence of an Event of
Default (as hereinafter defined), this Note shall bear interest, from the date
of the occurrence of such Event of Default until such Event of Default is cured
or waived, payable on demand in immediately available funds, at a rate equal to
the rate of interest otherwise in effect pursuant to the first sentence of this
Section 2 plus 2% per annum. Subject to applicable law, any interest that shall
accrue on overdue interest on this Note as provided in the preceding sentence
and shall not have been paid in full on or before the next Interest Payment Date
to occur after the Interest Payment Date on which the overdue interest became
due and payable shall itself be deemed to be overdue interest on this Note to
which the preceding sentence shall apply.
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(c) NO USURIOUS INTEREST. In the event that any interest rate
provided for herein shall be determined to be unlawful, such interest rate shall
be computed at the highest rate permitted by applicable law. Any payment by the
Borrower of any interest amount in excess of that permitted by law shall be
considered a mistake, with the excess being applied to the principal of this
Note without prepayment premium or penalty; if no such principal amount is
outstanding, such excess shall be returned to Borrower.
3. PRINCIPAL PAYMENT. The principal amount of this Note, including any
Additional Principal (such total amount, the "TOTAL PRINCIPAL AMOUNT") shall be
due and payable on the Maturity Date.
4. OPTIONAL PREPAYMENT. This Note may not be prepaid in whole or in part.
5. AMENDMENT. Any amendment, supplement or modification of or to any
provision of this Note, any waiver of any provision of this Note, and any
consent to any departure by any party from the terms of any provision of this
Note, may be made only in the manner provided in Section 11.4 of the Purchase
Agreement, and then such amendment, supplement, modification, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
6. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULT. An "Event of Default" shall occur if:
(i) the Borrower shall default in the payment of the principal
of this Note, when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise; or
(ii) the Borrower shall default in the payment of any
installment of interest on this Note according to its terms, when
and as the same shall become due and payable and such default shall
continue for a period of 5 business days; or
(iii) the Borrower shall default in the due observance or
performance of any covenant to be observed or performed pursuant to
Article 9 of the Purchase Agreement; or
(iv) the Borrower or any of its subsidiaries shall default in
the due observance or performance of any other covenant, condition
or agreement on the part of the Borrower or any of its subsidiaries
to be observed or performed pursuant to the terms hereof or pursuant
to the terms of the Purchase Agreement or any of the Transaction
Documents (other than those referred to in clauses (i), (ii) or
(iii) of this Section 6(a)), and such default shall continue for 30
days after the earliest of (A) the date the Borrower is required
pursuant to the Transaction Documents or otherwise to give notice
thereof to the Holder (whether or not such notice is actually given)
or (B) the date of written notice thereof, specifying such default
and, if such default is capable of being remedied, requesting that
the same be remedied, shall have been given to the Borrower by the
Holder; or
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(v) any representation, warranty or certification made by or
on behalf of the Borrower or any of its subsidiaries in the Purchase
Agreement, this Note, the Transaction Documents or in any
certificate or other document delivered pursuant hereto or thereto
shall have been incorrect in any material respect when made; or
(vi) any event or condition shall occur that results in (A)
the acceleration of the maturity of any Indebtedness of the Borrower
or any of its subsidiaries, or (B) a default of any Indebtedness of
the Borrower or any of its subsidiaries, which continues beyond any
applicable period of cure and which would permit the holder to
accelerate (automatically or upon notice and declaration) such
Indebtedness, in either case in a principal amount aggregating
$100,000 or more; or
(vii) any uninsured damage to or loss, theft or destruction of
any assets of the Borrower or any of its subsidiaries shall occur
that is in excess of $150,000; or
(viii) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (a) relief in respect of the Borrower or any of
its subsidiaries, or of a substantial part of its property or
assets, under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (b) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Borrower or any of its subsidiaries, or for a
substantial part of its property or assets, or (c) the winding up or
liquidation of the Borrower or any of its subsidiaries; and such
proceeding or petition shall continue undismissed for 60 days, or an
order or decree approving or ordering any of the foregoing shall be
entered; or
(ix) the Borrower or any of its subsidiaries shall (a)
voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (b) consent to the
institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in
paragraph (viii) of this Section 6(a), (c) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its
subsidiaries, or for a substantial part of their property or assets,
(d) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (e) make a general
assignment for the benefit of creditors, (f) become unable, admit in
writing its inability or fail generally to pay its debts as they
become due or (g) take any action for the purpose of effecting any
of the foregoing; or
(x) one or more judgments for the payment of money in an
aggregate amount in excess of $150,000 (to the extent not covered by
insurance) shall be rendered against the Borrower or any of its
subsidiaries and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor
to levy upon assets or properties of the Borrower or any of its
subsidiaries to enforce any such judgment.
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(b) ACCELERATION. If an Event of Default occurs under Section
6(a)(viii) or (ix), then the outstanding principal of and all accrued interest
on this Note shall automatically become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived. If any other Event of Default occurs and is continuing the
Holder, by written notice to the Borrower, may declare the principal of and
accrued interest on this Note to be immediately due and payable. Upon such
declaration, such principal and interest shall become immediately due and
payable. The Holder may rescind an acceleration and its consequences if all
existing Events of Default, except nonpayment of principal or interest that has
become due solely because of the acceleration, have been cured or waived and if
the rescission would not conflict with any judgment or decree. Any notice or
rescission shall be given in the manner specified in Section 15.
7. CONVERSION.
(a) HOLDER'S RIGHT TO CONVERT.
(i) The principal amount of this Note shall be convertible, at
the option of the Holder, at any time, or from time to time, in
whole or in part, into that number of shares of the Common Stock
$.001 par value per share (the "COMMON STOCK"), equal to a fraction,
the numerator of which is the amount of the principal to be
converted and the denominator of which is $0.40 as adjusted as
provided below (as so adjusted, the "CONVERSION PRICE").
(ii) The option to convert into shares of Common Stock shall
be exercised by the Holder (A) giving written notice to the
Borrower, at its principal corporate office, of the election to
convert the same and shall state therein the name or names in which
the certificate or certificates for shares of Common Stock issuable
upon conversion are to be issued and (B) surrendering this Note for
such purpose to the Borrower, at any place where the Corporation
shall maintain a transfer agent for its Common Stock, duly endorsed
in blank or accompanied by proper instruments of transfer. At the
time of the surrender referred to in clause (B) above, the Person in
whose name any certificate for shares of Common Stock shall be
issuable upon such conversion shall be deemed to be the holder of
record of such shares of Common Stock on such date, notwithstanding
that the share register of the Borrower shall then be closed or that
the certificates representing such Common Stock shall not then be
actually delivered to such Person.
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(b) CERTAIN EVENTS.
(i) In case at any time prior to the conversion or payment of
all of the principal of this Note:
(A) the Borrower shall authorize the granting to all the
holders of Common Stock of the Borrower of rights to subscribe
for or purchase any shares of stock of any class or of any
other rights; or
(B) there shall be any reclassification of the Common
Stock of the Borrower(other than a subdivision or combination
of its outstanding Common Stock); or
(C) there shall be any capital reorganization by the
Borrower; or
(D) there shall be an Organic Transaction (as
hereinafter defined); or
(E) there shall be voluntary or involuntary dissolution,
liquidation and winding up by the Borrower or dividend or
distribution to holders of Common Stock;
then in any one or more of said cases, the Borrower shall cause to
be delivered to the Holder, at the earliest practicable time (and,
in any event, not less than 15 days before any record date or the
date set for definitive action), written notice of the date on which
the books of the Borrower shall close or a record shall be taken for
such dividend, distribution or subscription rights or such
reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up or other transaction shall take place, as
the case may be. Such notice shall also set forth such facts as
shall indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Conversion Price
relating to the conversion of the Notes into Common Stock and the
kind and amount of the shares of stock and other securities and
property deliverable upon conversion of the Notes. Such notice shall
also specify the date, if known, as of which the holders of record
of the Common Stock shall participate in said dividend, distribution
or subscription rights or shall be entitled to exchange their shares
of the Common Stock for securities or other property (including
cash) deliverable upon such reorganization, sale, consolidation,
merger, dissolution, liquidation or winding up or other transaction,
as the case may be. Anything herein to the contrary notwithstanding,
the Holder may give a notice of conversion of all or a portion of
the Note as contemplated in Section 7(a)(ii), which may be
conditioned upon the actual occurrence of the event which is the
subject of the notice, it being the intention of Borrower and Holder
that Holder shall be entitled to obtain the benefits of such
conversion if such event actually occurs, but shall be entitled to
retain this Note in full at its option if such event does not occur
for any reason, and the Borrower agrees to take all such action,
including issuing a new Note in order to assure to the Holder the
benefits contemplated by this Section 7(b).
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(ii) For purposes hereof, the term "ORGANIC TRANSACTION" means
(A) the sale, lease, exchange, transfer or other disposition
(including, without limitation, by merger, consolidation or
otherwise) of assets constituting all or substantially all of the
assets of the Borrower and its subsidiaries, taken as a whole, to a
Person or group of Persons, (B) any merger, consolidation or other
business combination or refinancing or recapitalization that results
in the holders of the issued and outstanding voting securities of
the Borrower immediately prior to such transaction beneficially
owning or controlling less than a majority of the voting securities
of the continuing or surviving entity immediately following such
transaction or (C) any Person or Persons acting together or which
would constitute a "group" for the purposes of Section 13(d) of the
Exchange Act, together or with any Affiliates thereof, other than
any of the holders of the Common Stock, the holders of the Series A
Preferred Stock, as of the date of this Note as originally issued,
and their respective Affiliates, beneficially owning (as defined in
Rule 13d-3 of the Exchange Act) or controlling, directly or
indirectly, at least 50% of the total voting power of all classes of
capital stock entitled to vote generally in the election of
directors of the Borrower.
(c) COMPANY RIGHT TO CONVERT.
(i) The principal amount of this Note and all other Notes
shall be convertible, at the option of the Company, by delivery of
written notice (a "FORCED CONVERSION NOTICE") to the persons then
registered as the Holder of this Note and Holders of all other Notes
stating that the Borrower is exercising its right to convert all,
and not less than all, of the Notes into shares of Common Stock, the
number of shares of Common Stock issuable upon such conversion, and
instructions for tendering this Note and receiving stock
certificates representing the shares of Common Stock issuable upon
such conversion, provided that the Forced Conversion Notice may only
be given if and at such time as each of the following conditions
shall have been satisfied:
(A) The arithmetic weighted average trading prices for
the ten consecutive trading days ending on the day immediately
prior to the date the Forced Conversion Notice, as reported by
Bloomberg, L.P. using the VAP function, is given is greater
than $1.00 per share.
(B) The average daily trading volume reported by
Bloomberg, L.P. for the 30 consecutive trading days ending on
the day immediately prior to the date the Forced Conversion
Notice is given is greater than 500,000 shares.
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(C) The shares of Common Stock of the Company shall have
been admitted for trading on either the American Stock
Exchange or Nasdaq Stock Market.
(D) Either (A) a corporate partnership satisfactory to
the holders of the Notes shall have been reached with RIGScan
CR or (B) Lymphoseek shall have been approved by the U.S. Food
and Drug Administration.
(ii) Upon the giving of the Forced Conversion Notice in
accordance herewith, the registered Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon
conversion of this Note the thereafter the Holder shall have no
rights under this Note (including rights to receive payments of
principal and interest hereunder) except the right to receive a
certificate representing such shares upon surrender of this Note in
accordance with the instructions set forth in the Forced Conversion
Notice.
(d) ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be
adjusted from time to time in the following manner upon the occurrence of the
following events:
(i) Dividend, Subdivision, Combination or Reclassification of
Common Stock. If the Company shall, at any time or from time to
time, (A) declare a dividend on the Common Stock payable in shares
of its capital stock (including Common Stock), (B) subdivide the
outstanding Common Stock into a larger number of shares of Common
Stock, (C) combine the outstanding Common Stock into a smaller
number of shares of its Common Stock, or (D) issue any shares of its
capital stock in a reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then in
each such case, the Conversion Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification shall be adjusted so
that the Holder of this Note upon conversion after such date shall
be entitled to receive the aggregate number and kind of shares of
capital stock which, if this Note had been converted immediately
prior to such date, such holder would have owned upon such
conversion and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. Any such adjustment
shall become effective immediately after the record date of such
dividend or the effective date of such subdivision, combination or
reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If a dividend is
declared and such dividend is not paid, the Conversion Price shall
again be adjusted to be the Conversion Price, in effect immediately
prior to such record date (giving effect to all adjustments that
otherwise would be required to be made pursuant to this Section 7(d)
from and after such record date).
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(ii) Certain Distributions. If the Company shall, at any time
or from time to time, fix a record date for the distribution to all
holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is
the continuing corporation) of evidences of indebtedness, assets or
other property (other than regularly scheduled cash dividends or
cash distributions payable out of consolidated earnings or earned
surplus or dividends payable in capital stock for which adjustment
is made under Subsection 7(d)(i)) or subscription rights, options or
warrants, then the Conversion Price shall be reduced to the price
determined by multiplying the Conversion Price in effect immediately
prior to such record date by a fraction (which shall in no event be
less than zero), the numerator of which shall be the Current Market
Price per share of Common Stock on such record date (or, if an ex
dividend date has been established for such record date, on the next
day preceding such ex dividend date), less the fair market value (as
determined in good faith by the Board of Directors of the Company)
of the portion of the assets, evidences of indebtedness, other
property, subscription rights or warrants so to be distributed
applicable to one share of Common Stock and the denominator of which
shall be such Current Market Price per share of Common Stock. Any
such adjustment shall become effective immediately after the record
date for such distribution. Such adjustments shall be made
successively whenever such a record date is fixed. In the event that
such distribution is not so made, the Conversion Price shall be
adjusted to the Conversion Price in effect immediately prior to such
record date (giving effect to all adjustments that otherwise would
be required to be made pursuant to this Section 3 from and after
such record date).
(iii) Issuance of Common Stock Below Current Market Price or
Conversion Price.
(A) If the Company shall, at any time and from time to
time, after the date hereof, directly or indirectly, sell or
issue shares of Common Stock (regardless of whether originally
issued or from the Company's treasury), or rights, options,
warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock)
at a price per share of Common Stock (determined, in the case
of rights, options, warrants or convertible or exchangeable
securities (collectively, "SECURITIES"), by dividing (x) the
total consideration received or receivable by the Company in
consideration of the sale or issuance of such Securities, plus
the total consideration payable to the Company upon exercise
or conversion or exchange thereof, by (y) the total number of
shares of Common Stock covered by such Securities) which is
lower than the Conversion Price in effect immediately
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prior to such sale or issuance, then, subject to clause
7(d)(iii)(B), (A) if such sale or issuance occurs on or prior
to December 13, 2006, the Conversion Price shall be reduced to
the consideration received (in the case of Securities,
determined as provided below) per share of Common Stock with
respect to such sale or issuance, and (B) if such sale or
issuance occurs after December 13, 2006, the Conversion Price
shall be reduced to a price determined by multiplying the
Conversion Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the
number of shares of Common Stock outstanding immediately prior
to such sale or issuance plus the number of shares of Common
Stock which the aggregate consideration received (in the case
of Securities, determined as provided below) for such sale or
issuance would purchase at the Purchase Price in effect
immediately prior to such sale or issuance and the denominator
of which shall be the total number of shares of Common Stock
outstanding immediately after such sale or issuance. Such
adjustment shall be made successively whenever such sale or
issuance is made. For the purposes of such adjustments, the
shares of Common Stock which the holder of any such Securities
shall be entitled to subscribe for or purchase shall be deemed
to be issued and outstanding as of the date of such sale or
issuance of such Securities and the consideration "received"
by the Company therefor shall be deemed to be the
consideration actually received or receivable by the Company
(plus any underwriting discounts or commissions in connection
therewith) for such Securities, plus the consideration stated
in such Securities to be payable to the Company for the shares
of Common Stock covered thereby. If the Company shall sell or
issue shares of Common Stock for a consideration consisting,
in whole or in part, of property other than cash or its
equivalent, then in determining the "price per share of Common
Stock" and the "consideration" received or receivable by or
payable to the Company for purposes of the first sentence and
the immediately preceding sentence of this Subsection
7(d)(iii)(A), the fair value of such property shall be
determined in good faith by the Board of Directors of the
Company. Except as provided below, the determination of
whether any adjustment is required under this Subsection
7(d)(iii)(A) by reason of the sale or issuance of Securities
and the amount of such adjustment, if any, shall be made only
at the time of such issuance or sale and not at the subsequent
time of issuance of shares of Common Stock upon the exercise,
conversion or exchange of such Securities.
(B) No adjustment shall be made to the Conversion Price
pursuant to clause 7(d)(iii)(A) in connection with the (I)
issuance of shares in any of the transactions described in
Subsections 7(d)(i) and 7(d)(ii) hereof; (II) issuance of
shares upon exercise of the Warrants; (III) issuance of shares
upon conversion of the Notes; (IV) issuance of shares of
Common Stock upon the exercise of Management Options (as
defined in the Purchase Agreement) or the grant of Management
Options provided that the aggregate number of shares of Common
Stock issued and issuable pursuant to all Management Options
does not exceed 5,242,106; (E) issuance of shares of Common
Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock as part of a unit in
connection with an arm's length institutional debt financing,
(F) issuance of shares of Common Stock upon the exercise or
conversion or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock outstanding on December 13,
2004;
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(G) issuance of shares of Common Stock or rights, options,
warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock
in connection with licenses, assignments or other transfers of
Intellectual Property of the Company or Subsidiaries, or
rights therein, in connection with cooperative research and
development agreements, strategic alliances, or agreements
providing for the manufacturing, distribution or sale of
products or services of the Company or Subsidiaries; and (H)
contributions of Common Stock to the Company's 401(k) Plan.
(C) In the event of any change in the number of shares
of Common Stock deliverable or any change in the consideration
payable to the Company upon exercise, conversion or exchange
of any Securities (including, without limitation, by operation
of the anti-dilution provisions of such Securities other than
those anti-dilution provisions contained within the Securities
that are substantially similar to the provisions of Section
7(d)(i) hereof), any adjustment to the Conversion Price which
was made upon the issuance of such Securities, and any
subsequent adjustments based thereon, shall be recomputed to
reflect such change, except as provided below, no further
adjustment shall be made for the actual issuance of Common
Stock or any payment of such consideration upon the exercise,
conversion or exchange of any such Securities. The Company
shall make all necessary adjustments (including successive
adjustments if required) to the Conversion Price in accordance
with Section 7(d). Upon the expiration or termination of the
right to exercise, convert or exchange any Securities, any
adjustment to the Conversion Price which was made upon the
issuance of such Securities, and any subsequent adjustments
based thereon, shall be recomputed to reflect the issuance of
only the number of shares of Common Stock actually issued upon
the exercise, conversion or exchange of such Securities and
the actual consideration received therefor (as determined in
this Section 7(d)).
(iv) Determination of Current Market Price. For the purpose of
any computation under Subsections 7(d)(ii) or 7(d)(iii) or any other
provision of this Note, (A) the Current Market Price per share of
Common Stock on any date shall be deemed to be the average of the
daily Closing Prices (as defined below) per share of Common Stock
for the 10 consecutive trading days commencing 15 trading days
before such date, and --- (B) "Closing Price" shall mean, with
respect to each share of Common Stock for any day, (I) the last
reported sale price regular way or, in case no such sale takes place
on such day, the average of the closing bid and asked prices regular
way, in either case as reported on the principal national securities
exchange on which the Common Stock is listed or admitted for trading
or (II) if the Common Stock is not listed or admitted for trading on
any national securities exchange, the last reported sale price or,
in case no such sale takes place on such day, the average of the
highest reported bid and the lowest reported asked quotation for the
Common Stock, in either case as reported on the Nasdaq Stock Market
or OTCBB or a similar service if Nasdaq or OTCBB is no longer
reporting such information. If on any such date the shares of Common
Stock are not listed or
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admitted for trading on any national securities exchange or quoted
by the Nasdaq Stock Market, OTCBB or a similar service, then the
Company, on the one hand, and [Great Point Partners, LLC] [David C.
Bupp], on the other hand, shall each promptly appoint as an
appraiser an individual who shall be a member of a nationally
recognized investment banking firm. Each appraiser shall be
instructed to, within 30 days of appointment, determine the Current
Market Price per share of Common Stock which shall be deemed to be
equal to the fair market value per share of Common Stock as of such
date. If the two appraisers are unable to agree on the Current
Market Price per share of Common Stock within such 30 day period,
then the two appraisers, within 10 days after the end of such 30 day
period shall jointly select a third appraiser. The third appraiser
shall, within 30 days of its appointment, determine, in good faith,
the Current Market Price per share of Common Stock and such
determination shall be controlling. If any party fails to appoint an
appraiser or if one of the two initial appraisers fails after
appointment to submit its appraisal within the required period, the
appraisal submitted by the remaining appraiser shall be controlling.
The cost of the foregoing appraisals shall be shared one-half by the
Company and one-half by [Great Point Partners, LLC] [David C. Bupp],
provided, however, in the event a third appraiser is utilized and
one of the two initial appraisals (but not the other initial
appraisal) is greater than or less than the appraisal by such third
appraiser by 10% or more, then the cost of all of the foregoing
appraisals shall be borne by the party who appointed the appraiser
who made such initial appraisal.
(v) De Minimis Adjustments. No adjustment shall be made under
this Section 7(d) if the amount of such adjustment would result in a
change in the Conversion Price of less than one percent (1%), but in
such case any adjustment that would otherwise be required to be made
shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment, which together with
any adjustment so carried forward, would result in a change of at
least one percent (1%). Notwithstanding the provisions of the first
sentence of this Subsection7(d)(v), any adjustment postponed
pursuant to this Subsection 7(d)(v) shall be made no later than the
earlier of the Maturity Date or the date on which the Note is
converted.
(vi) Reorganization, Reclassification, Merger and Sale of
Assets. If there occurs any capital reorganization or any
reclassification of the Common Stock of the Company, the
consolidation or merger of the Company with or into another Person
(other than a merger or consolidation of the Company in which the
Company is the continuing corporation and which does not result in
any reclassification or change of outstanding shares of its Common
Stock) or the sale or conveyance of all or substantially all of the
assets of the Company to another Person, then the Holder will
thereafter be entitled to receive, upon the conversion of this Note
in accordance with the terms hereof, the same kind and amounts of
securities (including shares of stock) or other assets, or both,
which were issuable or distributable to the holders of outstanding
Common Stock of the Company upon such
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reorganization, reclassification, consolidation, merger, sale or
conveyance, in respect of that number of shares of Common Stock then
deliverable upon the conversion of this Note if this Note had been
exercised immediately prior to such reorganization,
reclassification, consolidation, merger, sale or conveyance; and, in
any such case, appropriate adjustments (as determined in good faith
by the Board of Directors of the Company) shall be made to assure
that the provisions hereof (including, without limitation,
provisions with respect to changes in, and other adjustments of, the
Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be practicable, in relation to any securities or
other assets thereafter deliverable upon conversion of this Note.
(vii) Certificate as to Adjustments. Whenever the Conversion
Price shall be adjusted pursuant to the provisions hereof, the
Company shall promptly give written notice thereof to the Holder, in
accordance with Section 15, in the form of a certificate signed by
the Chairman of the Board, President or one of the Vice Presidents
of the Company, and by the Chief Financial Officer, Treasurer or one
of the Assistant Treasurers of the Company, stating the adjusted
Conversion Price, and setting forth in reasonable detail the method
of calculation and the facts requiring such adjustment and upon
which such calculation is based. Each adjustment shall remain in
effect until a subsequent adjustment is required.
(viii) Fractional Shares. Notwithstanding an adjustment
pursuant to Section 7(d) in the Conversion Price, the Company shall
not be required to issue fractions of shares upon conversion of this
Note or to distribute certificates which evidence fractional shares.
In lieu of fractional shares, the Company may make payment to the
Holder, at the time of conversion of this Note as herein provided,
of an amount in cash equal to such fraction multiplied by the
greater of the Current Market Price of a share of Common Stock on
the Conversion Date and the Conversion Price.
(e) NOTICE OF PROPOSED ACTIONS. In case the Company shall propose at
any time or from time to time (i) to declare or pay any dividend payable in
stock of any class to the holders of Common Stock or to make any other
distribution to the holders of Common Stock (other than a regularly scheduled
cash dividend), (ii) to offer to the holders of Common Stock rights or Notes to
subscribe for or to purchase any additional shares of Common Stock or shares of
stock of any class or any other securities, rights, Notes or options, (iii) to
effect any reclassification of its Common Stock, (iv) to effect any
consolidation, merger or sale, transfer or other disposition of all or
substantially all of the property, assets or business of the Company which
would, if consummated, adjust the Conversion Price or the securities issuable
upon conversion of this Note, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to take any other action that would require a
vote of the Company's stockholders, then, in each such case, the Company shall
give to the Holder, in accordance with Section 15, a written notice of such
proposed action, which shall specify (A) the record date for the purposes of
such stock dividend, distribution of rights or Notes or vote of the stockholders
of the Company, or if a record is not to be taken, the date as of which the
holders of shares of Common Stock of record to be entitled to such dividend,
distribution of rights or Notes, or vote is to be determined, or (B) the date on
which such reclassification, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding up is expected to become effective, and such
notice shall be so given as promptly as possible but in any event at least ten
(10) Business Days prior to the applicable record, determination or effective
date specified in such notice.
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8. USE OF PROCEEDS. The Borrower shall use the principal amount of this
Note in accordance with the permitted uses described in the Purchase Agreement.
9. SUITS FOR ENFORCEMENT.
(a) Upon the occurrence of any one or more Events of Default, the
Holder of this Note may proceed to protect and enforce its rights hereunder by
suit in equity, action at law or by other appropriate proceeding, whether for
the specific performance of any covenant or agreement contained in the Purchase
Agreement or this Note or in aid of the exercise of any power granted in the
Purchase Agreement or this Note, or may proceed to enforce the payment of this
Note, or to enforce any other legal or equitable right of the Holders of this
Note.
(b) In case of any default under this Note, the Borrower will pay to
the Holder such amounts as shall be sufficient to cover the costs and expenses
of such Holder due to such default, as provided in Article 7 of the Purchase
Agreement.
10. REMEDIES CUMULATIVE. No remedy herein conferred upon the Holder is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
11. REMEDIES NOT WAIVED. No course of dealing between the Borrower and the
Holder or any delay on the part of the Holder in exercising any rights hereunder
shall operate as a waiver of any right.
12. TRANSFER.
(a) The term "HOLDER" as used herein shall also include any
transferee of this Note whose name has been recorded by the Borrower in the Note
Register. Each transferee of this Note acknowledges that this Note has not been
registered under the Securities Act, and may be transferred only pursuant to an
effective registration under the Securities Act or pursuant to an applicable
exemption from the registration requirements of the Securities Act.
(b) The Borrower shall maintain a register (the "NOTE REGISTER") in
its principal offices for the purpose of registering the Note and any transfer
or partial transfer thereof, which register shall reflect and identify, at all
times, the ownership of record of any interest in the Note. Upon the issuance of
this Note, the Borrower shall record the name and address of the initial
purchaser of this Note in the Note Register as the first Holder. Upon surrender
for registration of transfer or exchange of this Note at the principal offices
of the Borrower, the Borrower shall, at its expense, execute and deliver one or
more new Notes of like tenor registered in the name of the Holder or a
transferee or transferees. Every Note surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by written instrument of
transfer duly executed by the Holder of such Note or such holder's attorney duly
authorized in writing.
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(c) This Note may be transferred or assigned, in whole or in part,
by the Holder at any time.
13. REPLACEMENT OF NOTE. On receipt by the Borrower of an affidavit of an
authorized representative of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Note (and in the case of any such
mutilation, on surrender and cancellation of such Note), the Borrower, at its
expense, will promptly execute and deliver, in lieu thereof, a new Note of like
tenor. If required by the Borrower, such Holder must provide indemnity
sufficient in the reasonable judgment of the Borrower to protect the Borrower
from any loss which they may suffer if a lost, stolen or destroyed Note is
replaced.
14. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Borrower shall bind its successors and assigns, whether so expressed or not.
15. NOTICES. All notices, demands and other communications provided for or
permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier (with receipt
confirmed), courier service or personal delivery at the addresses specified in
Section 11.2 of the Purchase Agreement. All such notices and communications
shall be deemed to have been duly given when: delivered by hand, if personally
delivered; when delivered by courier, if delivered by commercial overnight
courier service; if mailed, five Business Days after being deposited in the
mail, postage prepaid; or if telecopied, when receipt is acknowledged.
16. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE
WITH, AND ENFORCED UNDER, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE.
EXCEPT TO THE EXTENT THE GENERAL CORPORATIONS LAW OF THE STATE OF DELAWARE SHALL
APPLY.
17. SEVERABILITY. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
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18. HEADINGS. The headings in this Note are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof
NEOPROBE CORPORATION
By:
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Name:
Title:
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