10% CONVERTIBLE NOTE PURCHASE AGREEMENT NEOPROBE CORPORATION
Exhibit
10.1
THE
SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
ADMINISTRATOR OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”). THIS AGREEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION IN WHICH
SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE “RESTRICTED
SECURITIES” UNDER RULE 144 PROMULGATED PURSUANT TO THE SECURITIES ACT, AND MAY
NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.
NEOPROBE
CORPORATION
THIS
AGREEMENT is made this 3rd day of July, 2007, between NEOPROBE
CORPORATION (the
“Company”),
incorporated under the laws of the State of Delaware, with its principal office
at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇,
residing at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
residing at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇ ▇. ▇▇▇▇,
residing at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as joint tenants
with right of survivorship (each a “Purchaser,”
and
collectively the “Purchasers”).
In
consideration of the mutual covenants contained in this Agreement, the Company
and the Purchasers agree as follows:
Section
1. Certain
Definitions.
For
purposes of this Agreement:
“Act”
has
the
meaning specified in the legend appearing on the first page.
“Agreement”
means
this 10% Convertible Note Purchase Agreement including all Exhibits and
Attachments hereto, as the same may be amended, modified or supplemented from
time to time in accordance with the terms hereof.
“Average
Closing Price”
has
the
meaning specified in Section 9.6(b).
“Average
Market Price”
means
125% of the average Closing Price of the Common Stock for the five (5)
consecutive Trading Days immediately preceding the Closing Date.
“Business
Day”
means
any day on which banks in the City of Columbus, Ohio are open for
business.
“Closing”
means
the completion of the purchase and sale of the Note and Warrant on the Closing
Date.
“Closing
Date”
means
the date of the Closing.
“Closing
Price”
means
for each Trading Day, the last transaction price as reported on the principal
national securities exchange on which the Common Stock is listed or admitted
for
quotation, or if the Common Stock is not listed or quoted on an exchange, the
closing bid price for the Common Stock on such day in the over-the-counter
market as reported by Bloomberg, the National Quotation Bureau or
NASDAQ.
“Common
Stock”
means
the Common Stock of the Company, $.001 par value.
“Conversion
Amount”
has
the
meaning specified in Section 9.1.
“Conversion
Date”
has
the
meaning specified in Section 9.2.
“Conversion
Notice”
has
the
meaning specified in Section 9.2
“Conversion
Price”
has
the
meaning specified in Section 9.1
“Conversion
Shares”
has
the
meaning specified in Section 9.1.
“Event
of Default”
has
the
meaning specified in Section 7.1.
“Exchange
Act”
has
the
meaning specified in Section 3.5.
“Holder”
means
the Purchasers and any transferee of the Note in a transfer permitted under
Section 8.2.
“Maturity
Date”
has
the
meaning specified in Section 2.1.
“Note”
means
the 10% Convertible Note of the Company, due July 8, 2008, in the Principal
Sum
that is issued pursuant to this Agreement (including any notes issued in
substitution therefor), as the same may be amended, modified or supplemented
from time to time in accordance with the terms thereof.
“Person”
shall
mean any individual, corporation, partnership, limited liability company, trust,
incorporated or unincorporated organization, joint venture, joint stock company,
or a government or any agency or political subdivision thereof or other entity
of any kind.
“Principal
Sum”
has
the
meaning specified in Section 2.1.
“Reports”
has
the
meaning specified in Section 3.6.
2
“Registration
Rights Agreement”
has
the
meaning specified in Section 2.4.
“SEC”
has
the
meaning specified in Section 3.7.
“Securities
Act”
has
the
meaning specified in the legend on the first page of this
Agreement.
“Senior
Indebtedness”
means
all liabilities and obligations of the Company to Biomedical Value Fund, L.P.,
Biomedical Offshore Value Fund, Ltd. and ▇▇▇▇▇ ▇. ▇▇▇▇ under the Series A
Convertible Promissory Notes Due January 7, 2009, in the aggregate original
principal amount of $8,100,000, as amended, modified or supplemented from time
to time.
“Special
Committee”
has
the
meaning specified in Section 4.9.
“Trading
Day”
means
any day on which transactions are effected on the New York Stock Exchange,
the
American Stock Exchange, or the NASDAQ Stock Market.
“Transaction
Documents”
has
the
meaning specified in Section 2.1.
“Warrant”
or
“Warrants”
means
the Warrant purchased from the Company on the Closing Date and any subsequent
Warrant or Warrants issued in exchange or replacement thereof pursuant to the
terms of the original Warrant.
“Warrant
Shares”
means
shares of Common Stock issuable on exercise of the Warrant.
Section
2. Authorization
and Sale of Note.
2.1 Authorization.
Subject
to the terms and conditions of this Agreement, the Company has authorized the
execution and delivery to Purchasers of (a) this Agreement, (b) the Note in
the
principal amount of $1,000,000 (the “Principal
Sum”),
with
a maturity date on July 8, 2008 (the “Maturity
Date”),
(c)
the Warrant, (d) the Registration Rights Agreement, and (e) all other
agreements, documents, instruments and certificates to be delivered by the
Company under the foregoing (the “Transaction
Documents”).
The
Company promises to pay to the Holder the Principal Sum plus any accrued and
unpaid interest in cash on the Maturity Date. Simple interest shall accrue
on
the unpaid Principal Sum at the rate of 10% per annum from the Closing Date,
and
shall be payable in arrears on the last day of each calendar quarter in cash,
provided that from and after an Event of Default the rate of interest shall
increase to 12% per annum until the Event of Default is cured. The form of
the
Note is annexed hereto as Exhibit
A.
The
Company, if not then in default hereunder, shall have the right to prepay at
any
time and from time to time before the Maturity Date any amount or amounts due
under the Note, subject to the terms of Section 9.3 of this Agreement. Any
partial prepayment shall be in the minimum amount of $100,000 or any integral
multiple thereof.
2.2 Agreement
to Sell and Purchase the Note.
Subject
to the terms and conditions of this Agreement, the Company will issue and sell
the Note to Purchasers and Purchasers will purchase the Note from the Company,
at the Closing provided for in Section 2.5, at the purchase price of 100% of
the
Principal Sum.
3
2.3 Warrant
Issuable Upon Closing.
As
additional consideration for the purchase of the Note, at the Closing the
Company will issue to Purchasers a warrant to purchase a total of 500,000 shares
of the Company’s Common Stock, pursuant to the terms of a separate Warrant, the
form of which is attached hereto as Exhibit
B
(the
“Warrant”).
The
Warrant shall have an exercise price equal to the Average Market
Price.
2.4 Registration
Rights.
At the
Closing, the Company will enter into a Registration Rights Agreement with
Purchasers in the form attached hereto as Exhibit
C,
providing for the filing of a registration statement under the Act with respect
to resales of the Warrant Shares and Conversion Shares.
2.5 Time
and Place of Closing.
The
Closing shall be held at the offices of Porter, Wright, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ on or before July 6, 2007.
2.6 Payment
and Delivery.
At the
Closing, the following shall occur:
(a) The
Company shall deliver or cause to be delivered to Purchaser
(i)
an
original Note and Warrant, substantially in the form set forth in Exhibits
A and
B hereto, each bearing the original signatures of a duly authorized officer
of
the Company;
(ii)
a
Registration Rights Agreement in the form set forth in Exhibit C each bearing
the original signatures of a duly authorized officer of the
Company;
(iii)
a
certificate, dated the Closing of the Secretary of the Company certifying (x)
that complete and accurate copies of the resolutions of the board of directors
of the Company approving the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby are
attached thereto, (y) that such resolutions are in full force and effect and
have not been amended or repealed and (z) the names and titles of the officers
of the Company who have executed the documents, certificates and instruments
delivered at the Closing and their signatures; and
(iv)
a
copy of the Certificate of Incorporation of the Company (certified by the
Secretary of State of the State of Delaware).
(b) Purchasers
shall cause payment to be made to the Company in immediately available U.S.
funds of the Principal Sum.
4
2.7 Usury.
All
agreements which either now are or which shall become agreements between
the
Company and Purchasers are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed
by
any applicable usury laws. If any payments in the nature of interest, additional
interest and other charges made under this Agreement or the Note are held
to be
in excess of the limits imposed by any applicable usury laws, it is agreed
that
any such amount held to be in excess shall be considered payment of principal
hereunder, and the indebtedness evidenced hereby shall be reduced by such
amount
so that the total liability for payments in the nature of interest, additional
interest and other charges shall not exceed the applicable limits imposed
by any
applicable usury laws, in compliance with the desires of the Company and
Purchasers. This provision shall never be superseded or waived and shall
control
every other provision of the Transaction Documents and all agreements between
the Company and Purchasers, or their successors and assigns.
Section
3. General
Representations and Warranties of the Company.
The
Company hereby represents and warrants to Purchasers that the following are
true
and correct as of the date hereof and as of the Closing Date.
3.1 Organization;
Qualification.
The
Company is a corporation duly organized and validly existing under the laws
of
the State of Delaware and is in good standing under such laws. The Company
has
all requisite corporate power and authority to own, lease and operate its
properties and assets, and to carry on its business as presently conducted.
The
Company is qualified to do business as a foreign corporation in each
jurisdiction in which the ownership of its property or the nature of its
business requires such qualification, except where failure to so qualify
would
not have a material adverse effect on the condition (financial or otherwise)
or
on the earnings, business affairs, properties or assets of the
Company.
3.2 Capitalization.
The
Company has authorized 150,000,000 shares of Common Stock, of which 62,869,731
are currently issued and outstanding, and 22,858,182 are currently reserved
for
issuance under outstanding warrants and options. The Company also has authorized
5,000,000 shares of preferred stock, $.001 par value, of which no shares
are
issued or outstanding. All issued and outstanding shares of Common Stock
have
been duly authorized and validly issued and are fully paid and nonassessable
and
no outstanding shares of Common Stock are subject to, or have been issued
in
violation of, preemptive or similar rights. As of the Closing Date, the Company
covenants that it will from its authorized but unissued shares of Common
Stock
reserve a sufficient number of shares of Common Stock for issuance upon
conversion of the Note and exercise of the Warrant. The Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its Common Stock or any warrants, options or other
rights to acquire its Common Stock. Except as disclosed in the Reports and
excluding outstanding options to employees and directors, and except for
the
securities issuable under this Agreement, the Note and the Warrant, there
are no
contracts relating to the issuance, sale or transfer of any equity securities,
phantom stock or appreciation rights, profit participation, or other securities
(whether or not convertible) of the Company, including options, warrants,
puts,
or calls.
5
3.3 Authorization.
The
Company has all requisite corporate right, power and authority to execute
and
deliver the Transaction Documents and to consummate the transactions
contemplated thereby. All corporate action on the part of the Company, its
directors and stockholders necessary for the authorization, execution, delivery
and performance of the Transaction Documents by the Company has been taken.
Each
Transaction Document has been duly executed and delivered by the Company
and
constitutes a legal, valid and binding obligation of the Company enforceable
in
accordance with its terms, subject to laws of general application relating
to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, and
to
limitations of public policy as they may apply to the indemnification provisions
set forth in the Registration Rights Agreement. Upon their issuance and delivery
(a) pursuant to the Warrant, the Warrant Shares, and (b) pursuant to the
Note,
the Conversion Shares, will be validly issued, fully paid and nonassessable
and
will be free of any liens or encumbrances except for those imposed by or
on
behalf of Purchasers, their creditors or agents.
3.4 No
Conflict.
The
execution and delivery of each Transaction Document does not, and the
consummation of the transactions contemplated thereby will not, conflict
with,
or result in any violation of, or default (with or without notice or lapse
of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit, under,
any
provision of the certificate of incorporation, and any amendments thereto,
bylaws and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule
or
regulation applicable to the Company, its properties or assets.
3.5 Accuracy
of Reports and Information.
The
Company is in compliance, to the extent applicable, with all reporting
obligations under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”),
except where the failure to so comply would not have a material adverse effect
on the condition (financial or otherwise) or on the earnings, business affairs,
properties or assets of the Company. The Company has registered its Common
Stock
pursuant to Section 12 of the Exchange Act and the Common Stock is admitted
for
quotation on the OTC Bulletin Board.
3.6 Absence
of Undisclosed Liabilities.
The
Company has no material liabilities or obligations, absolute or contingent
(individually or in the aggregate), except as disclosed in the reports filed
by
the Company under Section 13 of the Exchange Act in the twelve month period
prior to the Closing Date (collectively, the “Reports”),
as
incurred in the ordinary course of business after the date of the Reports,
and
obligations to Purchasers incurred under the Transaction Documents.
3.7 Governmental
Consent, etc.
No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Company is required in connection
with the valid execution and delivery of this Agreement or any other Transaction
Document, or the offer, sale or issuance of the Note or Warrant, or the
consummation of any other transaction contemplated hereby or thereby, except
the
filing with the United States Securities and Exchange Commission (“SEC”)
of a
registration statement for the purpose of registering under the Securities
Act
resales by Purchasers of the Conversion Shares and Warrant Shares as provided
in
the Registration Rights Agreement.
6
3.8 Litigation.
Except
as disclosed in the Reports, there is no action, proceeding or investigation
pending, or to the Company's knowledge threatened, against the Company which
might result, either individually or in the aggregate, in any material adverse
change in the business, prospects, conditions, affairs or operations of the
Company. The Company is not a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or
instrumentality. There is no action, suit, proceeding or investigation by
the
Company currently pending or which the Company currently intends to initiate
which will materially affect the Company.
3.9 Title
to Assets.
Except
as disclosed in the Reports, the Company has good and marketable title to
all
properties and material assets described in the Reports as owned by it, free
and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
interest other than such as are not material to the business of the
Company.
3.10 Required
Governmental Permits.
The
Company is in possession of and operating in material compliance with all
authorizations, licenses, certificates, consents, orders and permits from
state,
federal and other regulatory authorities which are material to the conduct
of
its business, all of which are valid and in full force and effect.
3.11 Other
Outstanding Securities.
Except
as disclosed in the Reports and excluding outstanding options to employees
and
directors, and except for the securities issuable under this Agreement, the
Note
and the Warrant, there are no other outstanding debt or equity securities
of the
Company presently convertible into or exercisable for shares of Common Stock.
Section
4. Representations,
Warranties and Covenants of Purchasers.
Each of
the Purchasers represents and warrants to, and covenants with, the Company
that
the following are true and correct as of the date hereof and as of the Closing
Date.
4.1 Authority.
Such
Purchaser has all requisite right, power, authority and capacity to execute
and
deliver this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by such Purchaser and
constitutes the legal, valid and binding obligation of such Purchaser,
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of
law
governing specific performance, injunctive relief or other equitable remedies,
and to limitations of public policy as they may apply to the indemnification
provisions set forth in the Registration Rights Agreement.
4.2 Investment
Experience.
Such
Purchaser is an “accredited investor” as defined in Rule 501(a) under the Act,
and resides in the state described as his or her state of residence in the
first
paragraph of this Agreement. Such Purchaser acknowledges that ▇▇▇▇▇ ▇. ▇▇▇▇
(“▇▇.
▇▇▇▇”),
the
chief executive officer and a director of the Company, has acted as such
Purchaser’s representative and advisor in connection with the purchase of the
Note and Warrant, that ▇▇. ▇▇▇▇ is aware of the Company’s business affairs and
financial condition, has had access to and has acquired sufficient information
about the Company, including the Reports, and has communicated that information
to such Purchaser, so as to allow such Purchaser to reach an informed and
knowledgeable decision to acquire the Note and Warrant. Such Purchaser
independently has such business and financial experience as is required to
give
him or her the capacity to protect his or her own interests in connection
with
the purchase of the Note and Warrant.
7
4.3 Investment
Intent.
Without
limiting the ability to resell the Conversion Shares and Warrant Shares pursuant
to an effective registration statement, or upon any exemption from registration
that may be legally available, such Purchaser represents that he or she is
purchasing the Note and Warrant, and will acquire the Conversion Shares and
Warrant Shares, for such Purchaser’s own account as principal for investment
purposes, and not with a view to a distribution. Such Purchaser understands
that
the acquisition of the Note and Warrant has not been registered under the
Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things,
the
bona fide nature of such Purchaser’s investment intent as expressed herein. Such
Purchaser will not, directly or indirectly, offer, sell, pledge, transfer
or
otherwise dispose of (or solicit any offers to buy, purchaser or otherwise
acquire or take a pledge of) any of the Note, Warrant, Conversion Shares
or
Warrant Shares, except in compliance with the Act and any applicable state
securities laws, and the rules and regulations promulgated
thereunder.
4.4 Registration
or Exemption Requirements.
Such
Purchaser further acknowledges and understands that the Note, Warrant,
Conversion Shares and Warrant Shares may not be resold or otherwise transferred
except in a transaction registered under the Act and any applicable state
securities laws or unless an exemption from such registration is available.
Such
Purchaser understands that the Note and Warrant, as well as any certificate
for
the Conversion Shares or Warrant Shares, will be imprinted with a legend
that
prohibits the transfer of such securities unless (a) it is registered or
such
registration is not required pursuant to an exemption therefrom, and (b)
if the
transfer is pursuant to an exemption from registration other than Rule 144
under
the Act and an opinion of counsel reasonably satisfactory to the Company
is
obtained to the effect that the transaction is so exempt.
4.5 No
Legal, Tax or Investment Advice.
Such
Purchaser understands that nothing in this Agreement or any other materials
presented to Purchasers in connection with the purchase and sale of the Note
and
Warrant constitutes legal, tax or investment advice from the Company, or
on its
behalf by any director, officer, employee, agent or representative of the
Company. Such Purchaser has consulted such legal, tax and investment advisors
as
such Purchaser, in his or her sole discretion, has deemed necessary or
appropriate in connection with the purchase of the Note and the
Warrant.
4.6 Purchaser
Review.
Such
Purchaser hereby represents and warrants that he or she has carefully examined
the Reports, and the financial statements contained therein. Such Purchaser
acknowledges that the Company has made available to him or her all documents
and
information that such Purchaser has requested relating to the Company and
has
been provided answers to all of his or her questions concerning the Company,
the
Note and the Warrant.
8
4.7 Certain
Risks.
Such
Purchaser recognizes that the purchase of the Note and Warrant, and if issued,
the Conversion Shares and Warrant Shares, involves a high degree of risk in
that:
(a)
an
investment in the Company is highly speculative and only investors who can
afford the loss of their entire investment should consider investing in the
Company and the Note, Warrant, Conversion Shares and Warrant
Shares;
(b)
such
Purchaser may not be able to liquidate this investment;
(c)
transferability of the Note, Warrant, Conversion Shares and Warrant Shares
is
extremely limited;
(d)
such
Purchaser could sustain the loss of his or her entire investment in the Note,
Warrant Conversion Shares and Warrant Shares;
(e)
no
return on investment, whether through distributions, appreciation,
transferability or otherwise, and no performance by, through or of the Company,
has been promised, assured, represented or warranted by the Company, or by
any
director, officer, employee, agent or representative thereof;
and
(f)
while
the Common Stock is presently quoted on the OTC Bulletin Board and while such
Purchaser is the beneficiary of certain registration rights provided herein:
(i)
the issuance of the Note, Warrant, and Warrant Shares are not registered under
applicable federal or state securities laws, and thus may not be sold, conveyed,
assigned or transferred unless such transaction is registered under such laws
or
unless an exemption from registration is available under such laws, as more
fully described below; and (i) the Note and Warrant are not quoted, traded
or
listed for trading or admitted for quotation on any organized market or
quotation system, and there is therefore no present public or other market
for
such Note or Warrant, and (iii) there can be no assurance that the Common Stock
will continue to be quoted, traded or listed for trading or authorized for
quotation on the OTC Bulletin Board or on any other organized market or
quotation system.
4.8 No
Registration, Review or Approval.
Such
Purchaser acknowledges and understands that the limited private offering and
sale of the Note and Warrant pursuant to this Agreement, and the offering and
sale of the Conversion Shares and Warrant Shares, have not been reviewed or
approved by the SEC or by any state securities commission, authority or agency,
and is not registered under the Act or under the securities or “blue sky” laws,
rules or regulations of any state. Purchaser acknowledges, understands and
agrees that the Note, Warrant, and Warrant Shares are being offered and sold
hereunder pursuant to (a) a private placement exemption to the registration
provisions of the Act pursuant to Section 3(b) or Section 4(2) of such Act
and
Regulation D promulgated under such Act, and (b) a similar exemption to the
registration provisions of applicable state securities laws.
9
4.9 Disclosure
by Purchaser.
Such
Purchaser represents and warrants that all material facts as to ▇▇. ▇▇▇▇’▇
relationship or interest in the transactions contemplated by this Agreement
have
been disclosed to the special committee of the Board of Directors (the
“Special
Committee”)
that
negotiated the terms of this Agreement with Purchasers, and that ▇▇. ▇▇▇▇ has
disclosed to the Special Committee and to the Board of Directors all contracts,
negotiations, events, corporate developments, results of operations and other
facts of which he has knowledge that a reasonable person would consider likely
to have a material effect, whether positive or adverse, on the business, assets,
liabilities, operations, prospects, and condition (financial or otherwise)
of
the Company, including without limitation all acquisition and financing
proposals from third parties and the substance of any discussions relating
thereto in which he participated.
4.10 Purchaser’s
Knowledge of Breach.
Such
Purchaser is not aware of any facts or circumstances that would be sufficient,
in the absence of other facts or circumstances not currently known to such
Purchaser, to constitute a breach of any of the representations and warranties
of the Company contained in this Agreement or in any of the Transaction
Documents. Such Purchaser shall be deemed to have waived in full any breach
of
any of the Company’s representations and warranties of which any Purchaser has
knowledge at the Closing.
Section
5. Conditions
to Purchaser’s Obligation to Purchase.
The
Company understands that Purchasers’ obligation to purchase the Note and Warrant
is conditioned upon the truth and accuracy of the representations and warranties
of the Company in Section 3 as of the Closing Date, and:
(a) Execution
and delivery by the Company of the original Note and Warrant to Purchaser;
and
(b) Execution
and delivery by the Company of the Registration Rights Agreement, in the form
of
Exhibit
C.
Section
6. Conditions
to Company’s Obligation to Sell.
Purchasers understand that the Company’s obligation to sell the Note and Warrant
is conditioned upon the truth and accuracy of the representations and warranties
of Purchasers in Section 4 as of the Closing Date, and:
(a) Delivery
by Purchasers to the Company of good funds as payment in full for the purchase
of the Note and Warrant; and
(b) Execution
and delivery by Purchasers of the Registration Rights Agreement, in the form
of
Exhibit
C.
Section
7. Default.
7.1 Events
of Default.
An
“Event of Default” shall
exist if any of the following conditions or events shall occur and be
continuing:
(a) the
Company defaults in the payment of any principal on the Note when the same
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise; or
10
(b) the
Company defaults in the payment of any interest on the Note for more than five
Business Days after the same becomes due and payable; or
(c) the
Company defaults in the performance of or compliance with any term contained
herein (other than those referred to in paragraphs (a) and (b) of this Section
7.1) and such default is not remedied within 30 days after the Company receives
written notice of such default from any Holder (any such written notice to
be
identified as a “notice of default” and to refer specifically to this paragraph
(c) of Section 7.1); or
(d) one
or
more defaults under any bond, debenture, note or other evidence of indebtedness
of the Company owed to any Person other than Purchaser, or under any indenture
or other instrument under which any such evidence of indebtedness has been
issued or by which it is governed, or under any lease of any asset, in any
case
in which the aggregate amount of all such defaults are in excess of $100,000.00,
and the expiration of the applicable period of grace, if any, specified in
such
evidence of indebtedness, indenture, other instrument or lease; or
(e) any
representation or warranty made in writing by or on behalf of the Company or
by
any officer of the Company in this Agreement or in any writing furnished in
connection with the transactions contemplated hereby proves to have been false
or incorrect in any material respect on the date as of which made, and no
Purchaser had knowledge at the Closing that such representation or warranty
was
false or incorrect; or
(f) the
rendering against the Company of one or more final judgments, decrees or orders
for the payment of money which in the aggregate exceed $100,000.00 and the
continuance of such judgments, decrees or orders unsatisfied and in effect
for
any period of 30 consecutive days without a stay of execution; or
(g) the
Company (i)
is
generally not paying, or admits in writing its inability to pay, its debts
as
they become due, (ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any
jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi)
takes corporate action for the purpose of any of the foregoing; or
(h) a
court
or governmental authority of competent jurisdiction enters an order appointing,
without consent by the Company, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a petition
for
relief or reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any jurisdiction,
or
ordering the dissolution, winding-up or liquidation of the Company, or any
such
petition shall be filed against the Company and such petition shall not be
dismissed within 60 days; or
11
(i) an
event
of default shall occur under any other Transaction Document; or
(j) the
sale,
exchange, or other disposition (in a single transaction or a series of related
transactions) of all or substantially all of the assets of the Company that
is
subject to Section 271(a) of the Delaware General Corporation Law, without
the
consent of the Holder;
or
(k) a
merger
or consolidation of the Company without the consent of the Holder, other than
a
merger or consolidation in which the voting equity securities of the Company
immediately prior to the merger or consolidation continue to represent (either
by remaining outstanding or being converted into securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the
Company or surviving entity immediately after the merger or consolidation with
another entity.
7.2. Acceleration
and Remedies.
(a) If
any
Event of Default has occurred and is continuing, the Holder may at any time
at
its option, by notice or notices to the Company, declare the Note to be
immediately due and payable.
(b) Upon
the
Note becoming due and payable under this Section 7.2, the Note will forthwith
mature, and the entire unpaid Principal Sum, plus all accrued and unpaid
interest thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, protest or further notice, all of which are
hereby waived.
(c) If
any
Event of Default has occurred and is continuing, and irrespective of whether
the
Note has been declared immediately due and payable under paragraph (a) of this
Section 7.2, the Holder may proceed to protect and enforce its rights by an
action at law, suit in equity or other appropriate proceeding, whether for
the
specific performance of any agreement contained herein or in the Note, or for
an
injunction against a violation of any of the terms hereof or thereof, or in
aid
of the exercise of any power granted hereby or thereby or by law or
otherwise.
8.
Registration;
Exchange; Substitution of Note.
8.1. Registration
of Note.
The
Company shall keep at its principal executive office a register for the
registration and registration of transfers of the Note. The name and address
of
each Holder, each transfer of the Note and the name and address of each
transferee shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name the Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to
the
contrary.
12
8.2. Transfer
and Exchange of Note.
Upon
surrender of the Note at the principal executive office of the Company for
registration of transfer or exchange (and in the case of a surrender for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered Holder or the Holder’s attorney duly
authorized in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute and deliver,
at the Company’s expense (except as provided below), a new Note (as requested by
the Holder thereof) in exchange therefor, in an aggregate principal amount
equal
to the unpaid principal amount of the surrendered Note. Each such new Note
shall
be payable to such Person as such Holder may request and shall be substantially
in the form of Exhibit
A.
Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company shall
not be required to register or otherwise recognize any transfer that purports
to
be for less than the entire unpaid principal amount of the Note. Any transferee,
by its acceptance of a Note registered in its name (or the name of its nominee),
shall be required to make in writing the representations set forth in Sections
4.2 through 4.8, and shall be bound by the provisions of this Agreement to
the
same extent as if the transferee were originally a party to this Agreement.
Notwithstanding any provision of this Agreement to the contrary, the Company
may
refuse to register the transfer of the Note to any Person that is not an
“accredited investor” as defined in Rule 501 of Regulation D.
8.3. Replacement
of Note.
Upon
receipt by the Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any Note, and
(a)
in the case of loss, theft or destruction, of indemnity reasonably satisfactory
to it or (b) in the case of mutilation, upon surrender and cancellation thereof,
then in either case, the Company at its own expense shall execute and deliver,
in lieu thereof, a new Note, dated and bearing interest from the date to which
interest shall have been paid on such lost, stolen, destroyed or mutilated
Note
or dated the date of such lost, stolen, destroyed or mutilated Note if no
interest shall have been paid thereon.
Section
9. Conversion
of Note to Common Stock.
9.1
Optional
Conversion.
At the
option of the Holder, at any time following July 30, 2007 and prior to the
Maturity Date, the Principal Sum then outstanding (or any portion thereof equal
to or greater than $100,000), plus accrued and unpaid interest (the
“Conversion
Amount”),
may
be converted, either in whole or in part, into shares of Common Stock (the
“Conversion
Shares”)
(calculated as to each such conversion to the nearest whole share), at any
time,
and from time to time at a price per share (the “Conversion
Price”)
equal
to the Average Market Price. The number of Conversion Shares due upon conversion
shall be determined by dividing the Conversion Amount by the Conversion
Price.
13
9.2
Exercise
of Conversion Privilege.
The
conversion right provided in Section 9.1 may be exercised by the Holder by
delivering to the Company an executed and completed notice of conversion in
the
form of Exhibit
D
to this
Agreement (the “Conversion
Notice”),
accompanied by the Note. Each date on which a Conversion Notice is delivered
to
the Company in accordance with the provisions of this Section 9.2 shall
constitute a “Conversion
Date.”
As
promptly as practicable after the receipt of the Conversion Notice as aforesaid,
but in any event not more than five Business Days after the Company’s receipt of
such Conversion Notice, the Company shall, at its sole cost and expense (i)
issue the Conversion Shares (together with any other securities or property
to
which the Holder is entitled upon such exercise) in accordance with the
provisions of Section 9.1 in such denominations as the Holder may request,
each registered in the name of the Holder or such other name as may be
designated by the Holder, and (ii) cause to be mailed for delivery by overnight
courier to the Holder (x) a certificate or certificate(s) representing the
number of Conversion Shares to which the Holder is entitled by virtue of such
conversion, (y) cash, as provided in Section 9.3, in respect of any
fraction of a share issuable upon such conversion, and (z) if less than all
of
the outstanding Principal Sum shall have been converted, a new Note in the
remaining unconverted Principal Sum, identical in form to the Note, duly
executed by an officer of the Company. The Conversion Notice shall constitute
a
contract between the Holder and the Company, whereby the Holder shall be deemed
to subscribe for the number of Conversion Shares which it will be entitled
to
receive upon such conversion and, in payment and satisfaction of such
subscription (and for any cash adjustment or new Note to which it is entitled
pursuant to Section 9.3), to surrender the Note and to release the Company
from
all liability under the Note.
9.4 Fractional
Shares.
No
fractional Conversion Shares or scrip representing fractional Conversion Shares
shall be issued upon conversion of the Conversion Amount. Instead of any
fractional Conversion Shares which otherwise would be issuable upon conversion
of the Conversion Amount, the Company shall pay a cash adjustment in respect
of
such fraction in an amount equal to the same fraction times the Conversion
Price.
9.5 Certain
Events.
In case
at any time prior to the conversion or payment of all of the principal of the
Note, the Company:
(a) declares
any cash dividend (or authorizes any other distribution) on its Common Stock;
(b) authorizes
the granting to the holders of its Common Stock of rights to subscribe for
or
purchase any shares of its capital stock or assets, other than a dividend
payable solely in shares of Common Stock;
(c) authorizes
a reclassification, split or combination of the Common Stock, or a consolidation
or merger to which the Company is a party or a sale or transfer of all or
substantially all the assets of the Company that is subject to Section 271(a)
of
the Delaware General Corporation Law; or
14
(d) authorizes
a voluntary or involuntary dissolution, liquidation or winding up of the
Company;
then,
in
any one or more of said cases, the Company shall give, by certified or
registered mail, postage prepaid, addressed to the Holder at the address of
such
Holder as shown on the books of the Company, (i) at least 30 days’ prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such dissolution, liquidation
or
winding-up; (ii) at least 10 days’ prior written notice of the date on which the
books of the Company shall close or a record shall be taken for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger or sale, and (iii) in the case of any such reorganization,
reclassification, consolidation; merger, sale, dissolution, liquidation or
winding-up, at least 30 days’ written notice of the date when the same shall
take place. Any notice given in accordance with clause (i) above shall also
specify, in the case of any such dividend, distribution or option rights, the
date on which the holders of Common Stock shall be entitled thereto. Any notice
given in accordance with clause (iii) above shall also specify the date on
which
the holders of Common Stock shall be entitled to exchange their Common Stock
for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be. Anything herein to the contrary notwithstanding,
the Holder may give a notice of conversion of all or a portion of the Note
as
contemplated in Section
9.1,
which
may be conditioned upon the actual occurrence of the event which is the subject
of the notice, it being the intention of Company and Holder that Holder shall
be
entitled to obtain the benefits of such conversion if such event actually
occurs, but shall be entitled to retain this Note in full at its option if
such
event does not occur for any reason, and the Company agrees to take all such
action, including issuing a new Note in order to assure to the Holder the
benefits contemplated by this Section 9.5.
9.6 Adjustment
of Conversion Price.
The
Conversion Price shall be adjusted from time to time in the following manner
upon the occurrence of the following events:
(a) Dividend,
Subdivision, Combination or Reclassification of Common Stock.
If the
Company shall, at any time or from time to time, (A) declare a dividend on
the
Common Stock payable in shares of its capital stock (including Common Stock),
(B) subdivide the outstanding Common Stock into a larger number of shares of
Common Stock, (C) combine the outstanding Common Stock into a smaller number
of
shares of its Common Stock, or (D) issue any shares of its capital stock in
a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then in each such case, the Conversion Price in effect at the
time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification shall be adjusted so that the
Holder upon conversion after such date shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if this Note had
been converted immediately prior to such date, such holder would have owned
upon
such conversion and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. Any such adjustment shall become
effective immediately after the record date of such dividend or the effective
date of such subdivision, combination or reclassification. Such adjustment
shall
be made successively whenever any event listed above shall occur. If a dividend
is declared and such dividend is not paid, the Conversion Price shall again
be
adjusted to be the Conversion Price, in effect immediately prior to such record
date (giving effect to all adjustments that otherwise would be required to
be
made pursuant to this Section 9.6 from and after such record date).
15
(b) Certain
Distributions.
If the
Company shall, at any time or from time to time, fix a record date for the
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, assets or other property
(other than regularly scheduled cash dividends or cash distributions payable
out
of consolidated earnings or earned surplus or dividends payable in capital
stock
for which adjustment is made under Section 9.6(a)) or subscription rights,
options or warrants, upon conversion of the Note after that corporate event,
the
Holder will be entitled to receive the securities or assets the Holder would
have received if the Holder had converted the Note immediately before the first
such corporate event and not disposed of the securities or assets received
as a
result of the or any subsequent corporate event.
(c) Issuance
of Common Stock Below Conversion Price.
(i) If
the
Company shall, at any time and from time to time, after the date hereof,
directly or indirectly, sell or issue shares of Common Stock (regardless of
whether originally issued or from the Company’s treasury), or rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock) at a price per share of Common
Stock (determined, in the case of rights, options, warrants or convertible
or
exchangeable securities (collectively, “Securities”), by dividing (x) the total
consideration received or receivable by the Company in consideration of the
sale
or issuance of such Securities, plus the total consideration payable to the
Company upon exercise or conversion or exchange thereof, by (y) the total number
of shares of Common Stock covered by such Securities) which is lower than the
Conversion Price in effect immediately prior to such sale or issuance, then,
subject to Section 9.6(c)(ii), the Conversion Price shall be reduced to a price
determined by multiplying the Conversion Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of the number
of
shares of Common Stock outstanding immediately prior to such sale or issuance
plus the number of shares of Common Stock which the aggregate consideration
received (in the case of Securities, determined as provided below) for such
sale
or issuance would purchase at the Conversion Price in effect immediately prior
to such sale or issuance and the denominator of which shall be the total number
of shares of Common Stock outstanding immediately after such sale or issuance.
Such adjustment shall be made successively whenever such sale or issuance is
made. For the purposes of such adjustments, the shares of Common Stock which
the
holder of any such Securities shall be entitled to subscribe for or purchase
shall be deemed to be issued and outstanding as of the date of such sale or
issuance of such Securities and the consideration “received” by the Company
therefor shall be deemed to be the consideration actually received or receivable
by the Company (plus any underwriting discounts or commissions in connection
therewith) for such Securities, plus the consideration stated in such Securities
to be payable to the Company for the shares of Common Stock covered thereby.
If
the Company shall sell or issue shares of Common Stock for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then in determining the “price per share of Common Stock” and the
“consideration” received or receivable by or payable to the Company for purposes
of the first sentence and the immediately preceding sentence of this Section
9.6(c)(i), the fair value of such property shall be determined in good faith
by
the Board of Directors of the Company. Except as provided below, the
determination of whether any adjustment is required under this Section 9.6(c)(i)
by reason of the sale or issuance of Securities and the amount of such
adjustment, if any, shall be made only at the time of such issuance or sale
and
not at any subsequent time.
16
(ii) No
adjustment shall be made to the Conversion Price pursuant to Section 9.6(c)(i)
in connection with the (A) issuance of shares in any of the transactions
described in Section 9.6(a), 9.6(b), or 9.6(e) hereof; (B) issuance of shares
upon exercise of the Warrants; (C) issuance of shares upon conversion of the
Notes; (D) issuance of shares of Common Stock upon the exercise of options
or
the grant of options provided that such options were or are issued pursuant
to
stock option plans approved by the stockholders of the Company; (E) issuance
of
shares of Common Stock or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock as part of a unit in connection with an arm’s length
institutional debt financing, (F) issuance of shares of Common Stock upon the
exercise or conversion of rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock outstanding on the Effective Date; (G) issuance of shares of
Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock in connection with licenses, assignments or other transfers of
intellectual property of the Company or Subsidiaries, or rights therein, in
connection with cooperative research and development agreements, strategic
alliances, or agreements providing for the manufacturing, distribution or sale
of products or services of the Company or Subsidiaries; (H) issuance of shares
of Common Stock pursuant to the Common Stock Purchase Agreement, dated December
1, 2006, between the Company and Fusion Capital Fund II, LLC, and (I)
contributions of Common Stock to the Company’s 401(k) Plan.
(iii) In
the
event of any change in the number of shares of Common Stock deliverable or
any
change in the consideration payable to the Company upon exercise, conversion
or
exchange of any Securities (including, without limitation, by operation of
the
anti-dilution provisions of such Securities other than those anti-dilution
provisions contained within the Securities that are substantially similar to
the
provisions of Section 9.6(a) hereof), any adjustment to the Conversion Price
which was made upon the issuance of such Securities, and any subsequent
adjustments based thereon, shall be recomputed to reflect such change, except
as
provided below, no further adjustment shall be made for the actual issuance
of
Common Stock or any payment of such consideration upon the exercise, conversion
or exchange of any such Securities. The Company shall make all necessary
adjustments (including successive adjustments if required) to the Conversion
Price in accordance with Section 9.6. Upon the expiration or termination of
the
right to exercise, convert or exchange any Securities, any adjustment to the
Conversion Price which was made upon the issuance of such Securities, and any
subsequent adjustments based thereon, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock actually issued upon
the
exercise, conversion or exchange of such Securities and the actual consideration
received therefor (as determined in this Section 9.6).
17
(d) De
Minimis Adjustments.
No
adjustment shall be made under this Section 9.6 if the amount of such adjustment
would result in a change in the Conversion Price of less than one percent (1%),
but in such case any adjustment that would otherwise be required to be made
shall be carried forward and shall be made at the time of and together with
the
next subsequent adjustment, which together with any adjustment so carried
forward, would result in a change of at least one percent (1%). Notwithstanding
the provisions of the first sentence of this Section 9.6(d), any adjustment
postponed pursuant to this Section 9.6(d) shall be made no later than the
earlier of the Maturity Date or the date on which the Note is
converted.
(e) Reorganization,
Reclassification, Merger and Sale of Assets.
If
there occurs any capital reorganization or any reclassification of the Common
Stock of the Company, the consolidation or merger of the Company with or into
another Person (other than a merger or consolidation of the Company in which
the
Company is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of its Common Stock) or the
sale or conveyance of all or substantially all of the assets of the Company
to
another Person, then the Holder will thereafter be entitled to receive, upon
the
conversion of this Note in accordance with the terms hereof, the same kind
and
amounts of securities (including shares of stock) or other assets, or both,
which were issuable or distributable to the holders of outstanding Common Stock
of the Company upon such reorganization, reclassification, consolidation,
merger, sale or conveyance, in respect of that number of shares of Common Stock
then deliverable upon the conversion of this Note if this Note had been
exercised immediately prior to such reorganization, reclassification,
consolidation, merger, sale or conveyance; and, in any such case, appropriate
adjustments (as determined in good faith by the Board of Directors of the
Company) shall be made to assure that the provisions hereof (including, without
limitation, provisions with respect to changes in, and other adjustments of,
the
Conversion Price) shall thereafter be applicable, as nearly as reasonably may
be
practicable, in relation to any securities or other assets thereafter
deliverable upon conversion of this Note.
(f) Certificate
as to Adjustments.
Whenever the Conversion Price shall be adjusted pursuant to the provisions
hereof, the Company shall promptly give written notice thereof to the Holder,
in
accordance with Section 11, in the form of a certificate signed by the Chairman
of the Board, President or one of the Vice Presidents of the Company, and by
the
Chief Financial Officer, Treasurer or one of the Assistant Treasurers of the
Company, stating the adjusted Conversion Price, and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment and
upon which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment is required.
18
9.7 Other
Provisions Relating to Rights of The Holder.
If all
or any part of the Note is duly converted, the Holder will for all purposes
be
deemed to become the holder of record of the Conversion Shares as to which
the
Note is converted, and the certificate for such shares will be dated on the
date
the Note (or any successor Note) is surrendered for conversion, except if such
date is not a Business Day, the Holder will be deemed to become the record
holder of the Conversion Shares, and the certificate will be dated, on the
next
succeeding Business Day. The Holder will not be entitled to any rights as a
holder of the Conversion Shares, including the right to vote and to receive
dividends, until the Holder becomes or is deemed to become the holder of such
shares pursuant to the terms hereof. The issuance of certificates for shares
of
Common Stock upon the conversion of the Note shall be made without charge to
the
Holder for any issue tax in respect thereof, provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Note being exercised.
Section
10. Covenants.
10.1 Reservation
of Shares.
The
Company shall at all times reserve and keep available out of its authorized
capital stock, solely for the purpose of issuance or delivery upon conversion
of
the Notes and exercise of the Warrants, the maximum number of shares of capital
stock that may be issuable or deliverable upon such conversion or exercise,
as
the case may be. Such shares of capital stock shall, when issued or delivered
in
accordance with the Notes and the Warrants, as the case may be, be duly and
validly issued and fully paid and non-assessable. The Company shall issue such
capital stock in accordance with the provisions of the Notes and the Warrants,
as the case may be, and shall otherwise comply, in each case, with the terms
thereof. The Company covenants that it will take all reasonable action as may
be
necessary to assure that such Common Stock may be issued as provided herein
without violation of any applicable law or regulation, or of any requirements
of
any domestic securities exchange or automated quotation system upon which the
Common Stock may be listed, or any agreement to which the Company may be a
party.
10.2 Limitation
on Indebtedness.
Without
the prior written consent of the Holder, the Company shall not issue, assume
or
otherwise incur any indebtedness for borrowed money, other than:
(a) indebtedness
created under this Agreement;
(b) indebtedness
to banks or other financial institutions under working capital facilities not
to
exceed $500,000 in the aggregate;
19
(c) the
Senior Indebtedness; or
(d) indebtedness
incurred to finance the acquisition of equipment or other personal property
by
purchase or lease.
Section
11. Notices.
All
notices and communications provided for hereunder shall be in writing and sent
(a) by fax if the sender on the same day sends a confirming copy of such notice
by a recognized overnight delivery service (charges prepaid), or (b) by
registered or certified mail with return receipt requested (postage prepaid),
or
(c) by a recognized overnight delivery service (with charges prepaid). Any
such
notice must be sent:
| (a) |
if
to the Company, to
Neoprobe
Corporation
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Attn:
Chief Financial Officer
(fax)
(▇▇▇) ▇▇▇-▇▇▇▇
copy
to:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, ▇▇.
Porter,
Wright, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
|
or
to
such other Person at such other place as the Company shall designate to
Purchaser in writing;
| (b) |
if
to the Purchasers, to
▇▇▇▇▇
▇. ▇▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
copy
to:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
|
or
at
such other address as a majority in interest of Purchasers shall designate
to
the Company in writing; or
20
(c) if
to any
transferee or transferees of Purchasers, at such address or addresses as shall
have been furnished to the Company at the time of the transfer or transfers,
or
at such other address or addresses as may have been furnished by such transferee
or transferees to the Company in writing.
Section
12. Miscellaneous.
12.1 Entire
Agreement.
This
Agreement, including all Exhibits and Attachments embody the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior oral or written agreements and understandings
relating to the subject matter hereof. No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms
and
provisions of this Agreement.
12.2 Amendments.
This
Agreement may not be modified or amended except pursuant to an instrument in
writing signed by the Company and by Purchaser.
12.3 Headings.
The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
12.4 Severability.
In case
any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
12.5 Governing
Law/Jurisdiction.
This
Agreement will be construed and enforced in accordance with and governed by
the
laws of the State of Ohio, without reference to principles of conflicts of
law,
except to the extent that the Delaware General Corporation Law shall govern.
Each party hereby agrees that if the other party to this Agreement obtains
a
judgment against it in such a proceeding, the party which obtained such judgment
may enforce same by summary judgment in the courts of any country having
jurisdiction over the party against whom such judgment was obtained, and each
party hereby waives any defenses available to it under local law and agrees
to
the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set provided for notices under Section 11. Nothing herein shall
affect the right of any party to serve process in any other manner permitted
by
law.
12.6 Disputes.
Any
controversy, claim or dispute arising out of or relating to this Agreement
or
the breach, termination, enforceability or validity of this Agreement, including
the determination of the scope or applicability of the agreement to arbitrate
set forth in this Section 10.6 shall be determined exclusively by binding
arbitration in the City of Columbus, Ohio. The arbitration shall be governed
by
the rules and procedures of the American Arbitration Association (the “AAA”)
under its Commercial Arbitration Rules and its Supplementary Procedures for
Large, Complex Disputes; provided that Persons eligible to be selected as
arbitrators shall be limited to attorneys-at-law each of whom (i) is on the
AAA’s Large, Complex Case Panel or a Center for Public Resources (“CPR”) Panel
of Distinguished Neutrals, or has professional credentials comparable to those
of the attorneys listed on such AAA and CPR Panels and (ii) has actively
practiced law (in private or corporate practice or as a member of the judiciary)
for at least 15 years in the State of Ohio concentrating in either general
commercial litigation or general corporate and commercial matters. Any
arbitration proceeding shall be before one arbitrator mutually agreed to by
the
parties to such proceeding (who shall have the credentials set forth above)
or,
if the parties are unable to agree to the arbitrator within 15 business days
of
the initiation of the arbitration proceedings, then by the AAA. No provision
of,
nor the exercise of any rights under, this Section 12.6 shall limit the right
of
any party to request and obtain from a court of competent jurisdiction in the
State of Ohio, County of Franklin (which shall have exclusive jurisdiction
for
purposes of this Section 12.6) before, during or after the pendency of any
arbitration, provisional or ancillary remedies and relief including injunctive
or mandatory relief or the appointment of a receiver. The institution and
maintenance of an action or judicial proceeding for, or pursuit of, provisional
or ancillary remedies shall not constitute a waiver of the right of any party,
even if it is the plaintiff, to submit the dispute to arbitration if such party
would otherwise have such right. Each of the parties hereby submits
unconditionally to the exclusive jurisdiction of the state and federal courts
located in the County of Franklin, State of Ohio for purposes of this provision,
waives objection to the venue of any proceeding in any such court or that any
such court provides an inconvenient forum and consents to the service of process
upon it in connection with any proceeding instituted under this Section 10.6
in
the same manner as provided for the giving of notice under this Agreement.
Judgment upon the award rendered may be entered in any court having
jurisdiction. The parties hereby expressly consent to the nonexclusive
jurisdiction of the state and federal courts situated in the County of Franklin,
State of Ohio for this purpose and waive objection to the venue of any
proceeding in such court or that such court provides an inconvenient forum.
The
arbitrator shall have the power to award recovery of all costs (including
attorneys’ fees, administrative fees, arbitrators' fees and court costs) to the
prevailing party. The arbitrator shall not have power, by award or otherwise,
to
vary any of the provisions of this Agreement.
21
12.7 Recovery
of Attorneys’ Fees.
In any
action arising under this Agreement, the Note, the Warrant, or the Registration
Rights Agreement then the prevailing party shall be entitled to recovery of
its
legal fees and expenses incurred in connection therewith, to the extent such
legal fees and expenses have not been awarded by an arbitrator.
12.8 Counterparts/Facsimile.
This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other party. In
lieu
of the original, a facsimile transmission or copy of the original shall be
as
effective and enforceable as the original.
12.9 Publicity.
Neither
Purchaser nor the Company shall issue any press releases or otherwise make
any
public statement with respect to the transactions contemplated by this Agreement
without the prior written consent of the other, except as may be required by
applicable law or regulation.
22
12.10 Survival.
The
representations and warranties in this Agreement shall survive
Closing.
12.11 Expenses.
Each of
the parties shall bear its own legal and other expenses in connection with
the
negotiation and closing of the transactions contemplated hereby, except that
the
Company will reimburse Purchasers for $25,000.00 in legal and investment
advisory fees and expenses incurred by Purchasers hereunder.
12.12 No
Strict Construction.
The
parties hereto have participated jointly in the negotiation and drafting of
this
Agreement and the other Transaction Documents. In the event an ambiguity or
question of intent or interpretation arises under any provision of this
Agreement or any Transaction Document, this Agreement or such other Transaction
Document shall be construed as if drafted jointly by the parties thereto, and
no
presumption or burden of proof shall arise favoring or disfavoring any party
by
virtue of the authorship of any of the provisions of this Agreement or any
other
Transaction Document.
12.13
Power
of Attorney.
With
respect to any Purchaser executing and delivering this Agreement pursuant to
a
power of attorney, the attorney in fact so appointed by such Purchaser
represents and warrants that as of the date hereof and on the Closing Date:
(a)
he is the attorney in fact designated by such power of attorney; (b) the
principal is not deceased, and has not revoked or partially or fully terminated
or suspended the power of attorney; (c) there is currently no petition to
determine incapacity or appoint a guardian for the principal; and (d) the power
of attorney is in full force and effect.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by
their duly authorized representatives the day and year first above
written.
[Signatures
on following pages]
23
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NEOPROBE
CORPORATION
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| By | /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
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▇▇▇▇▇
▇. ▇▇▇▇▇▇, Vice President of
Finance
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Signature
page to Note Purchase Agreement
24
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PURCHASERS
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| /s/ ▇▇▇▇▇ ▇. ▇▇▇▇ | ||
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▇▇▇▇▇
▇. ▇▇▇▇
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/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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||
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▇▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
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/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇▇▇
▇. ▇▇▇▇, by ▇▇▇▇▇ ▇. ▇▇▇▇, his attorney in fact,
under power of attorney
dated April 22,
2005
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||
Signature
page to Note Purchase Agreement
25