<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
[ X ] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: SEPTEMBER 30, 1998
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
[ ] EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM ______ TO______
COMMISSION FILE NUMBER: 0-26520
NEOPROBE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 31-1080091
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
425 METRO PLACE NORTH, SUITE 300, DUBLIN, OHIO 43017
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 614-793-7500
Indicate by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
22,885,017 SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
(Number of shares of issuer's common equity outstanding as of the close of
business on November 3, 1998)
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,921,025 $ 4,422,252
Available-for-sale securities 14,672,496 1,674,893
Accounts receivable, net 793,376 1,323,637
Inventory 413,024 775,961
Note receivable 1,500,000 0
Prepaid expenses and other current assets 2,001,378 1,259,528
----------- -----------
Total current assets 29,301,299 9,456,271
----------- -----------
Property and equipment at cost:
Equipment, net of accumulated depreciation 6,667,763 6,054,992
Construction in progress 3,757,133 4,306,195
----------- -----------
10,424,896 10,361,187
----------- -----------
Intangible assets, net of accumulated amortization 1,715,834 2,131,704
Other assets 131,375 1,615,988
----------- -----------
Total assets $41,573,404 $23,565,150
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
2
<PAGE> 3
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
---------------- -----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,848,172 $ 1,316,897
Accrued expenses 2,743,293 2,201,722
Notes payable to finance company 202,615 424,250
Capital lease obligation, current 156,140 112,274
---------------- -----------------
Total current liabilities 6,950,220 4,055,143
---------------- -----------------
Long term debt 1,813,437 4,479,555
Capital lease obligation 255,355 180,977
---------------- -----------------
Total liabilities 9,019,012 8,715,675
---------------- -----------------
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred Stock; $.001 par value; 5,000,000 shares
authorized at December 31, 1997 and September 30, 1998;
none outstanding (500,000 shares designated as Series A,
$.001 par value, at September 30, 1998; none outstanding) 0 0
Common stock; $.001 par value; 50,000,000 shares
authorized; 22,673,430 shares issued and outstanding at
December 31, 1997; 22,885,017 shares issued and
outstanding at September 30, 1998 22,763 22,885
Additional paid in capital 120,034,876 120,231,097
Deficit accumulated during development stage (87,362,531) (105,292,162)
Unrealized loss on available-for-sale securities (9,290) 13,879
Cumulative foreign currency translation adjustment (131,426) (126,224)
---------------- -----------------
Total stockholders' equity 32,554,392 14,849,475
---------------- -----------------
Total liabilities and stockholders' equity $ 41,573,404 $ 23,565,150
================ =================
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
3
<PAGE> 4
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NOVEMBER 16,
1983
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
--------------------------------- ---------------------------------- ---------------
1997 1998 1997 1998 1998
------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net sales $ 1,274,786 $ 1,702,338 $ 3,451,631 $ 3,821,262 $ 13,008,176
Cost of goods sold 295,514 454,024 988,423 1,019,081 4,723,077
------------- ------------- ------------- ------------- -------------
Gross profit 979,272 1,248,314 2,463,208 2,802,181 8,285,099
------------- ------------- ------------- ------------- -------------
Operating expenses:
Research and development 4,149,621 2,232,530 13,334,609 11,074,695 75,630,833
Marketing and selling 977,961 1,561,904 2,790,308 3,780,418 9,618,724
General and administrative 1,543,060 1,236,696 5,170,029 4,403,232 35,482,847
Facility closure costs 0 1,961,804 0 1,961,804 1,961,804
------------- ------------- ------------- ------------- -------------
Total operating expenses 6,670,642 6,992,934 21,294,946 21,220,149 122,694,208
------------- ------------- ------------- ------------- -------------
Loss from operations (5,691,370) (5,744,620) (18,831,738) (18,417,968) (114,409,109)
------------- ------------- ------------- ------------- -------------
Other income (expense):
Interest income 338,072 105,861 1,545,737 555,317 6,477,497
Interest expense (4, 959) (100,886) (14,807) (152,982) (720,467)
Other (54,519) 134,682 (73,101) 86,002 3,359,917
------------- ------------- ------------- ------------- -------------
Total other income 278,594 139,657 1,457,829 488,337 9,116,947
------------- ------------- ------------- ------------- -------------
Net loss $ (5,412,776) $ (5,604,963) $ (17,373,909) $ (17,929,631) $(105,292,162)
============= ============= ============= ============= =============
Net loss per common share
(basic and diluted) $ (0.24) $ (0.24) $ (0.76) $ (0.79)
============= ============= ============= =============
Weighted average shares
outstanding during the period 22,766,834 22,884,528 22,723,007 22,823,382
============= ============= ============= =============
</TABLE>
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
NOVEMBER 16,
1983
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER 30,
1997 1998 1997 1998 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net loss $ (5,412,776) $ (5,604,963) $ (17,373,909) $ (17,929,631) $(105,292,162)
Other comprehensive (losses) gains 70,074 26,959 (146,724) 28,369 (112,347)
------------- ------------- ------------- ------------- -------------
Comprehensive loss $ (5,342,702) $ (5,578,004) $ (17,520,633) $ (17,901,262) $(105,404,509)
============= ============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
4
<PAGE> 5
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NOVEMBER 16,
1983
NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, TO SEPTEMBER 30,
1997 1998 1998
----------------- ---------------- -----------------
<S> <C> <C> <C>
Net cash used in operating activities $ (16,496,677) $ (18,674,539) $ (95,038,133)
Cash flows from investing activities:
Purchases of available-for-sale securities (9,915,474) (1,738,512) (109,901,702)
Proceeds from sales of available-for-sale securities 1,828,927 3,741,357 51,615,619
Maturities of available-for-sale securities 15,739,201 11,050,000 56,753,943
Purchase of property and equipment (4,090,456) (2,405,865) (13,614,463)
Other (127,815) (430,870) (1,467,902)
----------------- ---------------- -----------------
Net cash provided by (used in) investing activities 3,434,383 10,216,110 (16,614,505)
----------------- ---------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 750,381 196,343 102,732,033
Proceeds from bank loan credit 708,835 2,666,118 4,479,555
Proceeds from line of credit 0 700,000 700,000
Repayment of line of credit 0 (275,750) (275,750)
Other (250,797) (320,886) 8,475,839
----------------- ---------------- -----------------
Net cash provided by financing activities 1,208,419 2,965,825 116,111,677
----------------- ---------------- -----------------
Effect of exchange rate changes on cash (11,159) (6,169) (36,787)
----------------- ---------------- -----------------
Net (decrease) increase in cash and cash equivalents (11,865,034) (5,498,773) 4,422,252
Cash and cash equivalents at beginning of period 30,168,412 9,921,025 0
----------------- ---------------- -----------------
Cash and cash equivalents at end of period $ 18,303,378 $ 4,422,252 $ 4,422,252
================= ================ =================
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements.
5
<PAGE> 6
NEOPROBE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The information presented for September 30, 1997 and 1998, and for the
periods then ended is unaudited, but includes all adjustments (which
consist only of normal recurring adjustments) which the management of
Neoprobe Corporation (the "Company") believes to be necessary for the
fair presentation of results for the periods presented. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The results for
the interim period are not necessarily indicative of results to be
expected for the year. The financial statements should be read in
conjunction with the Company's audited financial statements for the
year ended December 31, 1997, which were included as part of the
Company's Annual Report on Form 10-K. Certain 1997 amounts have been
reclassified to conform with the 1998 presentation.
Included in other assets at September 30, 1998 is an investment in XTL
Biopharmaceuticals Ltd. ("XTL"). The investment resulted from the
conversion of a note receivable from XTL, which was held by the Company
related to an Investment Research and Development Agreement. The
debenture was due on February 13, 1998 and bore interest at 5% payable
annually. On January 30, 1998, the Company exercised its option to
convert the debentures into 443,690 shares of Class A Common stock of
XTL. Since the date of conversion, the Company has accounted for its
approximate 15% investment in XTL on the cost method. There is
currently no publicly quoted market value for shares of XTL; however,
management believes, based on a recently completed private security
transaction, that the market value of its investment in XTL
approximates book value.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No.130 ("SFAS 130")
"Reporting Comprehensive Income." This Statement establishes standards
for reporting and display of comprehensive income in a full set of
general purpose financial statements. The Company adopted SFAS 130 as
of January 1, 1998. Other comprehensive losses of the Company include
the effects of translation gain or loss related to the Company's
foreign operations and unrealized gains and losses on
available-for-sale securities.
In June 1997, the FASB issued SFAS No.131 "Disclosures about Segments
of an Enterprise and Related Information." This Statement establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. This Statement is
effective for financial statements for periods beginning after December
15, 1997. In the initial year of application, comparative information
for earlier years is to be restated. This Statement need not be applied
to interim financial statements in the initial year of its application.
The Company intends to adopt SFAS No.131 effective December 31, 1998.
Management does not believe adoption of this Statement will have a
significant effect on the financial disclosures of the Company.
The Company is a development stage enterprise engaged in the
development and commercialization of technologies for the diagnosis and
treatment of cancers. There can be no assurance that the Company will
be able to commercialize its proposed products. There can also be no
assurance that adequate financing will be available when needed or on
terms attractive to the Company.
6
<PAGE> 7
2. INVENTORY
The components of inventory are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
----------------- ------------------
<S> <C> <C>
Materials and component parts $ 36,890 $ 0
Work-in-process 145,234 393,860
Finished goods 230,900 382,101
================= ==================
$ 413,024 $775,961
================= ==================
</TABLE>
3. LONG-TERM DEBT
Neoprobe (Israel) Ltd. ("Neoprobe (Israel)"), a 95%-owned subsidiary of
the Company, is completing construction of a radiolabeling facility
near Dimona, Israel, for use in future operations of the Company.
Construction of the facility is being partially financed under a $9.9
million investment program approved by the state of Israel's Finance
Committee (the "Committee"). Under the approved program, Neoprobe
(Israel) is entitled to government grants and government loan
guarantees equal to a percentage of the total loan taken for the
construction and operation of the facility. Amounts received under the
agreement are collateralized by certain property obtained through the
use of proceeds received. The loan portion of the investment program
has expired but will cover capital costs incurred through September 12,
1998; however, the Company successfully negotiated an extension of the
grant portion of the program for an additional year. As of September
30, 1998, Neoprobe (Israel) has received $4.5 million and $1.3 million
in the form of loans and grants, respectively.
In September 1998, the Company renegotiated the terms of its $3 million
revolving line of credit arrangement with a bank. The maximum eligible
borrowing limit was decreased to $1 million and is secured by cash and
investments of the Company. Interest on the line of credit is based on
the prime rate or LIBOR, as elected by the Company. As of September 30,
1998, $424,000 was outstanding and $576,000 was available under the
line of credit.
4. EQUITY
During the first nine months of 1998, the Board granted options to
employees and certain directors of the Company under the 1996 Stock
Incentive Plan (the "Plan") for 608,000 shares of common stock,
exercisable at an average exercise price of $5.42 per share, vesting
over two to four years. As of September 30, 1998, the Company has 1.9
million options outstanding under two stock option plans. On September
28, 1998, the Company repriced 367,000 outstanding options with
exercise prices of $5.06 to $17.75 held by non-officer employees of the
Company. In exchange for surrendering the outstanding options, these
employees were granted 183,440 options with an exercise price of $1.50
per share, and the average vesting term of the options was extended by
one year from their original term. Of the outstanding options, 1.1
million options have vested as of September 30, 1998, at an average
exercise price of $6.09 per share.
During the third quarter, the Company issued 45,000 shares of
restricted stock to its President and CEO. This stock vests and becomes
transferable only on a change in control of the Company.
5. AGREEMENTS
In April 1998, the Company executed an agreement with Ethicon
Endo-Surgery, Inc. ("EES"), a Johnson & Johnson company, to market and
promote the Neoprobe(R) 1500 Portable Radioisotope Detector and its
14mm and 19mm reusable probes for gamma guided lymphatic mapping and
minimally invasive surgery in the United States. During October 1998,
the agreement with EES was amended to cover marketing and promotion of
the aforementioned products in Europe. During the initial one-year term
of the agreement, EES will promote and sell the aforementioned products
and train physicians in the use of Neoprobe's devices. In exchange for
promoting and selling the device products, EES will receive sales
commissions based on qualifying net sales of the aforementioned
products.
7
<PAGE> 8
The Company and Cira Technologies, Inc. ("Cira") entered into a License
and Option Agreement (the "Agreement") dated April 1, 1998 which
replaced the Technology Option Agreement between the Company and Cira
dated March 1996. The Company's chairman is a director and shareholder
of Cira. Under the terms of the Agreement, Cira granted the Company an
exclusive, royalty bearing license to make, have made, use and sell
products ("Licensed Products") containing activated lymph node derived
cells for the treatment of human immunodeficiency virus ("HIV")
infected human patients including HIV-infected human patients
co-infected with other viruses. In exchange for the license, the
Company agreed to continue funding of an ongoing pilot study on HIV, to
pay Cira up to $50,000 to fund research activities at Cira as incurred,
to pay royalties at variable rates based on sales of Licensed Product,
and to prepare a research plan outlining the research to be conducted
to support a Biologic License Application ("BLA") or a New Drug
Application ("NDA") to be filed with the United States Food and Drug
Administration ("FDA"). No royalties are due to Cira until the Company
recovers out-of-pocket expenditures for research and development
through net sales of Licensed Product, up to a maximum of $2 million.
6. SUBSIDIARIES
Due to anticipated changes in the production of RIGScan CR49, the
Company determined during the second quarter of 1998 that Neoprobe
Europe AB ("Neoprobe Europe"), the Company's biologics manufacturing
and purification facility located in Lund, Sweden, was no longer
critical to the manufacturing process, and that research and
development activities being carried on at the facility could be
performed more efficiently elsewhere. As a result, the Company took
action in the second quarter to initiate the sale of Neoprobe Europe.
As of June 30, 1998, activities regarding the potential sale were in
the preliminary stages, and management was unable to estimate the
effect on the Company's financial position. However, management did not
believe the $2.5 million book value of the net assets of Neoprobe
Europe to be impaired at that time.
During October 1998, the Company reached an agreement to sell
substantially all of the assets of Neoprobe Europe to a Swedish
company. In exchange for the assets, the Swedish company agreed to pay
the Company $125,000 and assume certain obligations of Neoprobe Europe,
such as the lease commitment. In connection with this agreement, the
Company has recorded a provision of approximately $2.0 million as of
September 30, 1998, principally to write down the remaining assets of
Neoprobe Europe to their estimated realizable value of approximately
$200,000. These assets are classified as held-for-sale and included in
Other Assets at September 30, 1998.
7. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management, the
amount of ultimate liability with respect to these actions will not
materially affect the financial position of the Company.
As of September 30, 1998, the Company had cash and cash equivalents and
available-for-sale securities of $6.1 million. Of this amount, $2.0
million is pledged as security associated with the Company's revolving
line of credit and the debt outstanding under its financing program for
the construction of Neoprobe (Israel). However, an additional $576,000
is available and unused under the line of credit at September 30, 1998,
bringing total available cash to fund fourth quarter operations of $4.7
million. The Company currently anticipates that approximately $4.5
million in cash will be used to finance operating activities during the
fourth quarter of 1998, and that the Company will end the year with a
limited amount of cash which is not contractually restricted. The
Company is actively pursuing other sources of improving its projected
liquidity position as of December 31, 1998. Potential sources of
capital include, but are not limited to, sale of non-strategic assets
and raising of funds through private security placements. However,
there can be no assurances that the Company will be able to raise funds
on a timely basis, in the amounts required, at terms acceptable to the
Company, or at all. The Company anticipates an approximate 45% increase
in sales during the fourth quarter of 1998 compared to the same period
in 1997 due to increased sales volumes of its gamma guided surgery
products, at prices and margins similar to what has been achieved year
to date in 1998. However, there can be no assurance that the increase
in sales volumes and revenue will occur or that the prices and margins
achieved on instrument sales in the fourth quarter of 1998 will be able
to be maintained. The Company is engaged in discussions regarding the
sale of approximately $2.0 million non-strategic assets. However, there
can be
8
<PAGE> 9
no assurance that these discussions will be successfully concluded
prior to December 31, 1998, at terms acceptable to the Company, or at
all. If the Company does not receive adequate anticipated funds, it
will need to further modify its business plan and seek other financing
alternatives. Such financing may require sales of equity securities
that could be dilutive to current holders of common stock, debt
financing which may be on unfavorable terms, or asset dispositions that
could force the Company to further change its business plan.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Report contain forward-looking statements
that involve risks and uncertainties. The Company's actual results in 1998 and
future periods may differ significantly from the prospects discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, government regulations, absence of
government approval for marketing the Company's products, limited revenues,
continuing net losses, accumulated deficit, uncertainty of capital funding for
future capital needs, dependence on patents, proprietary technology and trade
secrets, limited marketing experience, limited manufacturing capacity and
experience, dependence on principal product line, uncertainty of market
acceptance, no assurance of continued rights to targeting agents, royalty
payments, competition, limited third party reimbursement, risk of technological
obsolescence, possible volatility of stock price, anti-takeover provisions,
product liability, dependence on key personnel, ability to attract new
personnel, and ability to manage a changing business.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private and public offerings of its equity securities, from which it has raised
gross proceeds of approximately $120 million. As of September 30, 1998, the
Company had cash, cash equivalents, and available-for-sale securities of $6.1
million. However, portions of these funds secure the outstanding debt of the
Company. The Company has access to approximately $4.7 million in unrestricted
funds to finance its operating activities for the fourth quarter of 1998. The
Company is actively pursuing sources of funds to improve its projected liquidity
position as of December 31, 1998. Potential sources include, but are not limited
to, sale of non-strategic assets and private security placements. However, there
can be no assurances that the Company will be able to raise funds, on a timely
basis, in the amounts required, at terms acceptable to the Company, or at all.
To date, the Company has devoted substantially all of its efforts and resources
to research and clinical development of innovative systems for the
intraoperative diagnosis and treatment of cancers. During the first quarter of
1998, the Company implemented a business plan to reduce operating expenses and
focus on three main business activities: commercializing the Company's first
RIGS(R) system (radioimmunoguided surgery) product, called RIGScan(R) CR49
((125)I - CC49 monoclonal antibody) for the surgical detection of metastatic
colorectal cancer, increasing the Company's market position in gamma guided
surgery applications, and developing activated cellular therapy ("ACT") products
for cancer and viral diseases.
During the second quarter of 1998, the Company engaged the services of Lehman
Brothers to assist in securing development partners and in the strategic
assessment of the Company's business. To date, the Company has not entered into
any definitive development agreements as a result of these efforts. There can be
no assurances that a development partner will be identified on a timely basis,
on terms acceptable to the Company, or at all. During the third quarter of 1998,
based on further assessments of its RIGScan CR49 development plans with clinical
and regulatory advisors and on discussions with Lehman Brothers, the Company
further modified its business plan.
The Company's modified business plan focuses the Company's operating activities
on its core gamma guided surgery instrument business for use in intraoperative
lymphatic mapping ("ILM") while efforts are made to identify business partners
who would assume financial development responsibility for RIGScan CR49 and ACT.
The modified plan also involves marketing certain non-strategic assets, and
performing only non-product specific plant validation at the Company's facility
in Israel. Additionally, the Company will record approximately $170,000 during
the fourth quarter in severance expenses related to employees identified for
separation in October 1998. Since the beginning of the year, the Company has
decreased its worldwide headcount by approximately 60% and has ended or is in
the process of ending the majority of its research and development activities
that are not related to ILM. In addition, the Company is liquidating its
subsidiary in Sweden, Neoprobe Europe, in order to realize additional future
cost savings. These actions were taken to arrive at the minimum support
structure
9
<PAGE> 10
management believes is necessary to support the gamma guided surgery business
and to move the Company towards profitability.
In October 1997, the Company launched the Neoprobe(R) 1500 Portable Radioisotope
Detector in response to an emerging surgical technique called ILM for treating
patients with melanoma, a potentially deadly form of skin cancer, and for
patients with breast cancer. Physicians use ILM to help trace the lymphatic
patterns in a patient to evaluate tumor drainage and, therefore, potential
metastatic tumor spread. ILM represents a less invasive surgical technique than
existing techniques for staging cancer or determining whether the cancer has
spread to the lymph nodes. ILM gives surgeons a map to find the first lymph
nodes (i.e. sentinel node(s)) to which tumor is likely to drain or spread. For
cutaneious malignant melanoma, ILM has become the standard of care in major
cancer centers and community hospitals in the U.S. and is beginning to be
adopted in countries outside the U.S. For breast cancer, the technique is
rapidly becoming the standard of care at major cancer centers.
In an ILM procedure, a patient is injected at the site of the main tumor with a
nonspecific radioactive tracing element. The surgeon tracks the agent's path
with a hand-held radiation detection probe. ILM identifies the appropriate lymph
nodes to be biopsied for determination of cancer spread. Clinical studies,
involving nearly two thousand patients and published in well-known peer review
medical journals, have shown ILM is 97% accurate in predicting the presence or
absence of disease spread in melanoma or breast cancers. Physicians are also
evaluating the application of ILM to other solid tumors.
The Company is currently selling the Neoprobe 1500 Portable Radioisotope
Detector for ILM applications and is expanding its line of instruments to
provide a variety of gamma-detecting probes for specialized uses. In March 1998,
the Company introduced a smaller (14mm diameter) detection probe whose
performance has been optimized for use in lymphatic mapping procedures. In
October 1998, the Company launched its newest product, the neo2000(TM). The
Company intends to continue to sell the Neoprobe 1500 as a basic ILM system
without the additional features of the neo2000. The Company intends to expand
its current gamma guided surgery product line with products which would produce
positive cash flow in the near term. However, there can be no assurances that
the Company will be successful in developing or acquiring additional products or
that such products will contribute positive cash flow once developed or
acquired. The Company recorded revenue of $1.7 million and $3.8 million during
the third quarter and the first nine months of 1998, respectively, related to
sales of instruments used in application of ILM.
Also, the Company holds proprietary development and marketing rights to the RIGS
surgical system. The RIGS system integrates radiolabeled targeting agents and
radiation detection instruments. Prior to 1996, the Company completed testing in
Phase III clinical trials for the detection of metastatic and primary colorectal
cancer using its first generation antibody, RIGScan CR49, as a targeting agent.
During 1996, the Company submitted applications to the European regulatory
agencies and to the FDA to request permits to begin marketing and selling the
Company's RIGS products for the detection of metastatic colorectal cancer. In
late 1997, the european regulatory agency (EMEA) requested additional
manufacturing and clinical information for RIGScan CR49 before approval could be
granted. Under EMEA guidelines, the Company's original application could not be
amended to supply the requested information. As a result, the Company withdrew
its application for European regulatory approval. At approximately the same
time, the FDA indicated that the BLA for RIGScan CR49 was not approvable without
the submission of additional information. Both the FDA and the EMEA required
additional clinical data to demonstrate prospective clinical benefit of RIGScan
CR49 in addition to the diagnostic findings demonstrated in the Phase III
studies which the Company has determined cannot be obtained without the
completion of additional clinical studies.
During the first half of 1998, the Company engaged in discussions with the FDA
to address the clinical and manufacturing questions outlined in its December
1997 response letter. Subsequent to these discussions, the Company determined in
discussions with expert clinical and regulatory advisors that regulatory action
plans with respect to the RIGScan surgical methodology would be most effectively
implemented with a second generation antibody. Because of the costs and risks
associated with this research and development activity, the Company has
determined that it will not commit additional financial resources to RIGScan
CR49 or the second generation antibody. Clinical trial activity and
product-specific manufacturing validation activities related to RIGScan CR49 or
the second generation antibody would be the financial responsibility of a
development partner. However, the Company will move forward with the
manufacturing validation of the Neoprobe Israel facility to better support the
viability of a partnership or outsourcing opportunities at the facility. To
date, the Company has not entered into
10
<PAGE> 11
any definitive agreements with a development partner for the RIGS technology.
There can be no assurances that a development partner will be identified on a
timely basis, on terms acceptable to the Company, or at all.
As a result of its RIGScan CR49 research, the Company has been studying the
safety and efficacy of a RIGS based autologous Activated Cellular Therapy
(RIGS/ACT(TM)) for cancer, which boosts the patient's own immune system by
removing lymph nodes targeted by RIGScan CR49 during surgery and then, in a cell
processing facility, activating and expanding "helper" T-cells found in the
nodes. Within 10 to 14 days, the patient's own immune cells, now activated and
numbering more than 20 billion, are infused into the patient to trigger an
effective immune response to the cancer. An in vitro program has shown
significant chemotherapy enhancement in a number of tumor cell lines for a
variety of chemotherapeutic agents. The in vitro assessment correlates with an
observation of potential chemotherapy enhancement in an earlier Phase I clinical
study of unresectable colorectal patients. During 1998, the Company opened its
first Investigational New Drug (IND) application for Phase I/II and Phase II
multicenter trials with RIGS/ACT for resectable and unresectable colorectal
cancer patients.
In addition, the Company has begun to evaluate the application of a non-RIGS
based ACT therapy for the treatment of chronic viral diseases. Non-RIGS/ACT uses
peripheral lymph nodes, obtained in an outpatient setting, as its initial
culture material. After using the Company's activation and expansion procedures,
the cells are infused in 10-14 days. A Phase I study has been completed with
HIV/AIDS patients with encouraging results. Also, the Company recently opened a
new Phase I trial in additional viral diseases, extending the use of activated
cellular therapy in patients co-infected with HIV/AIDS and chronic active
hepatitis B or C. In addition, the Company has been working with researchers to
isolate and characterize a soluble factor which appears to be present in the
lymph nodes of both cancer and viral disease patients.
Results of the aforementioned ACT trials will give direction and targeted
endpoints for designing larger multicenter pivotal trials, to be pursued by a
strategic partner. The Company does not currently intend to expend financial
resources on further research and development or clinical evaluations of ACT
without financial assistance from a development partner. To date, the Company
has not entered into any definitive agreements with a development partner for
ACT. There can be no assurances that a development partner will be identified on
a timely basis, on terms advantageous to the Company, or at all.
For the period from inception to September 30, 1998, the Company has incurred
cumulative net losses of $105 million. The Company's only approved products are
instruments used in gamma guided surgery related to the application of ILM. The
Company does not currently have a RIGS drug product approved for commercial sale
in any major market. Based on the Company's modified business plan which focuses
Company resources on ILM, the Company does not anticipate commercial sales of
sufficient volume to generate positive cash flow from operations until the year
2000, at the earliest. The Company has incurred, and will continue to incur,
substantial expenditures for research and development activities related to
enhancing and expanding its current gamma guided surgery product portfolio and
to fund marketing development in bringing its products to the commercial market.
The Company currently estimates it will require approximately $15 million to
fund research and development, marketing, and general and administrative
activities in 1999. The Company anticipates a significant portion of the cash
necessary to fund such operating activities will be generated from sales of its
gamma guided surgery products. There can be no assurance that additional gamma
guided surgery products will be approved for marketing by the FDA or any foreign
government agency, or that any such products will be successfully introduced or
achieve market acceptance.
As of September 30, 1998, the Company had cash and cash equivalents and
available-for-sale securities of $6.1 million. Of this amount, $2.0 million is
pledged as security associated with the Company's revolving line of credit and
the debt outstanding under its financing program for the construction of
Neoprobe (Israel). However, an additional $576,000 is available and unused under
the line of credit at September 30, 1998, bringing total available cash to fund
fourth quarter operations of $4.7 million. The Company currently anticipates
that approximately $4.5 million in cash will be used to finance operating
activities during the fourth quarter of 1998, and that the Company will end the
year with a limited amount of cash which is not contractually restricted. The
Company is actively pursuing other sources of improving its projected liquidity
position as of December 31, 1998. Potential sources of capital include, but are
not limited to, sale of non-strategic assets and raising of funds through
private security placements. However, there can be no assurances that the
Company will be able to raise funds on a timely basis, in the amounts required,
at terms acceptable to the Company, or at all. The Company anticipates an
approximate 45% increase in sales during the fourth quarter of 1998 compared to
the same period in 1997 due to increased sales volumes of its gamma guided
surgery products, at prices and margins similar to what has been achieved
year-to-
11
<PAGE> 12
date in 1998. However, there can be no assurance that the increase in sales
volumes and revenue will occur or that the prices and margins achieved on
instrument sales in the fourth quarter of 1998 will be able to be maintained.
The Company is engaged in discussions regarding the sale of approximately $2.0
million non-strategic assets. However, there can be no assurance that these
discussions will be successfully concluded prior to December 31, 1998, at terms
acceptable to the Company, or at all. The Company also expects to experience
cost savings during the fourth quarter of 1998 as a result of modifications to
its business plan regarding RIGS and ACT. If the Company does not receive these
anticipated funds, it will need to further modify its business plan and seek
financing alternatives not currently being considered. Such financing may
require sales of equity securities that could be dilutive to current holders of
common stock, debt financing which may be on unfavorable terms, or asset
dispositions that could force the Company to further change its business plan.
At December 31, 1997, the Company had U.S. net operating tax loss carryforwards
of approximately $75.8 million to offset future taxable income through 2012.
Additionally, the Company has U.S. tax credit carryforwards of approximately
$2.2 million available to reduce future income tax liability through 2012. Under
Section 382 of the Internal Revenue Code of 1986, as amended, use of prior tax
loss carryforwards is limited after an ownership change. As a result of
ownership changes which occurred in March 1989 and in September 1994, the
Company's tax loss carryforwards and tax credit carryforwards are subject to the
limitations described by Section 382. The Company's international subsidiaries
also have net operating tax loss carryforwards in their respective foreign
jurisdictions.
The Company has executed various agreements with third parties that supplement
the technical and marketing capabilities of the Company. The Company is
generally obligated to such parties to pay royalties or commissions upon
commercial sale of the related product. The Company's estimate of its allocation
of cash resources is based on the current state of its business operations, its
current business plan, and current industry and economic conditions, and is
subject to revisions due to a variety of factors including without limitation,
additional expenses related to marketing and distribution, regulatory licensing
and research and development, and to reallocation among categories and to new
categories. The Company may need to supplement its funding sources from time to
time.
Neoprobe Europe AB, formerly called (New)MonoCarb AB, is a wholly-owned
subsidiary of the Company, located in Lund, Sweden, where it operated a
biologics manufacturing and purification facility. The Company used the
facility to perform research and development activities and prepare the CC49
monoclonal antibody for final radiolabeling. Due to anticipated changes in the
production of RIGScan CR49, it was determined that the facility was no longer
critical to the manufacturing process, and that research and development
activities being carried on at the facility could be performed more efficiently
elsewhere. As a result, the Company took action in the second quarter to
initiate the sale of Neoprobe Europe. During October 1998, the Company reached
an agreement to sell substantially all of the assets of Neoprobe Europe AB to a
Swedish company, In exchange for the assets, the Swedish company agreed to pay
the Company $125,000 and assume certain obligations of Neoprobe Europe, such as
the facility lease commitment. In connection with this agreement, the Company
has commenced liquidation of Neoprobe Europe and has recorded a provision of
$2.0 million as of September 30, 1998, to reflect the estimated realizable
value of the remaining assets of Neoprobe Europe as well as the estimated
$200,000 in cash exit costs expected to be incurred during the fourth quarter.
In 1994, the Company formed Neoprobe (Israel) to construct and operate a
radiolabeling facility near Dimona, Israel, for radiolabeling of the Company's
targeting agents. The Company owns 95% of Neoprobe (Israel), with Rotem
Industries Ltd. ("Rotem"), the private arm of the Israeli atomic energy
authority, owning the balance and managing the facility. Construction of the
facility is being financed through a financial program approved by the state of
Israel's Finance Committee (the "Committee"). The total amount of the approved
program is $9.9 million. Neoprobe (Israel) is entitled to receive grants based
on a percentage of its investment and a government guarantee of 75% to 85% of
the principal balance of bank loans taken to build and operate the facility. The
loan portion of the investment program expired in September 1998; however, the
Company still expects to receive funds related to capital costs incurred prior
to the expiration of the loan program. The Company has successfully negotiated
an extension of the grant portion of the program for an additional year. During
nine months ended September 30, 1998, the Company received loan proceeds of
approximately $2.7 million under the government sponsored program. The Company
expects to receive an additional $500,000 in loan and grant proceeds under the
approved program during the remainder of 1998. The Company anticipates advancing
$300,000 to Neoprobe (Israel) to fund operations during the remainder of 1998.
12
<PAGE> 13
As many computer systems and other equipment with embedded chips or processors
(collectively, "Business Systems") use only two digits to represent the year,
they may be unable to process accurately certain data before, during or after
the year 2000. As a result, business and governmental entities are at risk for
possible miscalculations or system failures causing disruptions in their
business operations. This is commonly known as the Year 2000 ("Y2K") issue or
Century Date Change ("CDC") issue. The CDC issue can arise at any point in the
Company's supply, manufacturing, distribution and financial chains. The Company
and each of its operating subsidiaries are in the process of implementing an
assessment and readiness plan with the objective of having all their significant
internal Business Systems functioning properly with respect to the Y2K issue
before January 1, 2000 and minimizing the possible disruptions to the Company's
business which could result from the Y2K problem.
As part of its readiness plan, the Company is in the process of conducting a
company-wide assessment of its Business Systems to identify elements which are
not Y2K compliant. Based on assessment activity to date, the Company presently
believes that the majority of its critical Business Systems have been purchased
and installed in recent years and are already Y2K compliant. The Company's
internal Business Systems have not internally generated programmed software
coding to correct, as substantially all of the software utilized by the Company
has been recently purchased or licensed from external vendors. At the completion
of the assessment phase, the Company intends to perform comprehensive testing of
its Business Systems in early 1999.
Those Business Systems which are not presently Y2K compliant are anticipated to
be replaced, upgraded or modified in the normal replacement cycle prior to 2000.
The Company estimates the total cost to the Company of completing any required
modifications, upgrades or replacements of its internal systems will not have a
material adverse effect on the Company's business. This estimate is being
monitored and will be revised as additional information becomes available.
The Company has also initiated communications with third parties whose Business
Systems functionality could impact the Company. These communications will
facilitate coordination of Y2K solutions and will permit the Company to
determine the extent of which it may be vulnerable to failures of third parties
to address their own Y2K issues. Because the manufacturing and distribution of
the Company's products are almost entirely outsourced to other entities, the
failure of these third parties to achieve Y2K compliance could have a material
impact on the Company's business, financial position, results of operations and
cash flows. The Company has attempted, where possible, to establish contractual
requirements for Y2K compliance by such third parties. However, the Company has
limited control over the actions of these third parties on which the Company
directly or indirectly places reliance. There can be no guarantee that such
systems that are not now Y2K compliant will be timely converted to Y2K
compliance.
The Company has also assessed the potential Y2K related exposure it may have
with respect to gamma detection instrumentation which it has delivered to
customers. The Company does not believe products it has distributed to date or
that may be distributed in the future face any significant Y2K problems which
will affect their functionality or utility by the customer.
The Company does not yet have a comprehensive contingency plan with respect to
the Y2K issue but intends to establish such a plan during calendar 1999 as part
of its ongoing Y2K compliance effort.
The foregoing assessment of the impact of the Y2K problem on the Company is
based on management's best estimates at the present time and could change
substantially. The assessment is based on numerous assumptions as to future
events. There can be no guarantee that these estimates will prove accurate, and
actual results could differ from those estimates if these assumptions prove
inaccurate.
RESULTS OF OPERATIONS
Since inception, the Company has dedicated substantially all of its resources to
research and development of its RIGS technology for the intraoperative diagnosis
and treatment of cancer. Until the appropriate regulatory approvals are
received, the Company is limited in its ability to generate revenue. During the
third quarter and nine months ended September 30, 1998, the Company generated
sales of Neoprobe 1500 systems of $1.7 and $3.8 million, respectively. Results
of operations for the first three quarters of 1998 include approximately
$800,000 in costs associated with the reorganization activities of the Company
during the first quarter.
Research and development expenses during the first three quarters of 1998 were
$11.1 million, or 55% of operating expenses for the period. Marketing and
selling expenses were $3.8 million, or 19% of operating
13
<PAGE> 14
expenses during the period, and general and administrative expenses were $4.4
million, or 21% of operating expenses for the period. The Company anticipates
that 1998 total operating expenses will decrease over 1997 in relation to
expected increases in sales. The Company expects research and development and
general and administrative expenses to decrease from 1997 levels as a result of
the refocused business plan adopted in February. However, the Company also
expects marketing and selling expenses to increase from 1997 levels. In
addition, the Company recorded a $2.0 million change in the third quarter,
related to the closure of its facility in Lund, Sweden.
Three Months ended September 30, 1998, and 1997.
Revenue and Other Income
The Company had net sales of approximately $1.7 million during the third quarter
of 1998, compared to $1.3 million during the same period in 1997. Net sales in
both years were composed almost entirely of instrument sales. Instrument sales
in 1997 reflect contributions from the Company's marketing arrangement with the
United States Surgical Corporation which was terminated in October 1997.
Instrument sales during the third quarter of 1998 were based on leads generated
primarily by the Company's clinical specialists' sales force and representatives
of EES. Other income during the third quarter of 1998 and 1997 was $488,000 and
$1.5 million, respectively, and represented primarily interest income earned
during both periods.
Research and Development Expenses
Research and development expenses decreased during the third quarter of 1998 to
$2.4 million from $4.1 million for the same period in 1997. The decrease in
research and development expenses reflects decreased activity in all phases of
the Company's development programs consistent with the implementation of the
Company's modified business plan. Expenses related to RIGScan CR49, including
internal headcount and overhead costs, continued to decrease as clinical and
manufacturing validation activity declined pending identification of a
development partner. Instrument-related expenses decreased due to the wind-down
of the design phase of next-generation products. Pipeline projects development
decreased related to the refocused business plan. Clinical trial activity in
both periods related to the Company's therapeutic projects and remained
constant.
Marketing and Selling Expenses
During the third quarter of 1998, marketing and selling expenses increased by
$584,000 over the same period in 1997. The increase in marketing expenses during
the third quarter of 1998, as compared to the same period in 1997, relates to
increased internal marketing efforts to meet competitive pressure and further
penetrate the lymphatic mapping market. The increased expenses were the result
of a greater number of sales and marketing personnel in 1998, coupled with
relative increases in travel and entertainment as well as promotional costs
associated with new product launched during the second quarter.
General and Administrative Expenses
General and administrative expenses were $1.2 million for the third quarter of
1998 compared to $1.5 million for the same period in 1997. The decrease is due
primarily to lower average headcount and related overhead costs during the third
quarter of 1998 compared to the same period in 1997.
Facility Closure Costs
During the third quarter of 1998, the Company recorded a $2.0 million expense
related to costs to close its antibody production and research facility located
in Lund, Sweden. The majority of the costs ($1.7 million) related to impairment
of fixed assets down to their estimated realizable value. The remainder of the
costs related to accruing severance costs during the closure period.
Nine Months ended September 30, 1998 and 1997
Revenue and Other Income
The Company had net sales of approximately $3.8 million during the first nine
months of 1998, compared to $3.5 million during the same period in 1997. Net
sales in both years were composed almost entirely of instrument sales.
Instrument sales in 1997 reflect contributions from the Company's marketing
arrangement with the United States Surgical Corporation which was terminated in
October 1997. Instrument sales during the first nine months of 1998 were based
on leads generated primarily by the Company's clinical specialists' sales force
and representatives
14
<PAGE> 15
of EES. Other income (loss) during the first nine months of 1998 and 1997 was
$488,000 and $1.5 million, respectively, and represented primarily interest
income earned during both periods.
Research and Development Expenses
Research and development expenses decreased during the first nine months of 1998
to $11.1 million from $13.3 million for the same period in 1997. The decrease
reflects the Company's efforts to reduce costs consistent with the refocused
business plan announced in February 1998, which was further modified in the
third quarter of 1998. Year-to-date costs in 1998 include approximately $800,000
related to severance and other separation-related costs, but such costs were
offset by decreases in expenses related to RIGScan CR49 pending identification
of a development partner. Instrument-related expenses decreased due to the
wind-down of the design phase of next-generation products. Pipeline projects
decreased related to the refocused business plan. Clinical trial activity
related to the Company's therapeutic projects increased approximately $200,000
in 1998 over 1997 levels.
Marketing and Selling Expenses
During the first nine months of 1998, marketing and selling expenses increased
by $1.0 million over the same period in 1997. The increase in marketing expenses
during the first three quarters of 1998, as compared to the same period in 1997,
relates to an increased marketing effort to meet competitive pressure and
further penetrate the lymphatic mapping market. The increased expenses were the
result of a greater number of sales and marketing personnel in 1998, coupled
with relative increases in travel and entertainment as well as promotional costs
associated with the launch of new products.
General and Administrative Expenses
General and administrative expenses were $4.4 million for the first nine months
of 1998 compared to $5.1 million for the same period in 1997. Severance and
other overhead and employee separation costs related to the February
reorganization were offset by an overall lower headcount during the first half
of 1998 than the same period in 1997.
Facility Closure Costs
During the third quarter of 1998, the Company recorded a $2.0 million expense
related to costs to close its antibody production and research facility located
in Lund, Sweden. The majority of the costs ($1.7 million) related to impairment
of fixed assets down to their estimated realizable value. The remainder of the
costs related to accruing severance costs during the closure period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
15
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) LIST OF EXHIBITS
3. ARTICLES OF INCORPORATION AND BY-LAWS
Exhibit 3.1
Complete Restated Certificate of Incorporation of Neoprobe
Corporation, as corrected February 18, 1994 and as amended
June 27, 1994, July 25, 1995 and June 3, 1996 (incorporated by
reference to Exhibit 99.2 to the Registrant's Current Report
on Form 8-K dated June 20, 1996; Commission File No. 0-26520).
Exhibit 3.2
Amended and Restated By-Laws dated July 21, 1993 as amended
July 18, 1995 and May 30, 1996 (incorporated by reference to
Exhibit 99.4 to the Registrant's Current Report on Form 8-K
dated June 20, 1996; Commission File No. 0-26520).
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
Exhibit 4.1
See Articles FOUR, FIVE, SIX and SEVEN of the Restated
Certificate of Incorporation of the Registrant (see Exhibit
3.1).
Exhibit 4.2
See Articles II and VI and Section 2 of Article III and
Section 4 of Article VII of the Amended and Restated By-Laws
of the Registrant (see Exhibit 3.2).
16
<PAGE> 17
Exhibit 4.3
Rights Agreement dated as of July 18, 1995 between the
Registrant and Continental Stock Transfer & Trust Company
(incorporated by reference to Exhibit 1 of the registration
statement on Form 8-A; Commission File No. 0-26520).
10. MATERIAL CONTRACTS
Exhibit 10.4.26
Letter amendment dated October 14, 1998 to the Sales and
Marketing Agreement dated April 21, 1998 between the
Registrant and Ethicon Endo-Surgery, Inc., an Ohio corporation
(filed pursuant to Rule 24b-2 under which the Registrant has
requested confidential treatment of certain portions of this
Exhibit).
Page 22 in the manually signed original.
Exhibit 10.4.27
Promissory Note, dated September 25, 1998, issued by
Registrant to Bank One, NA.
Page 24 in the manually signed original.
Exhibit 10.4.28
Addendum to the Promissory Note dated September 25, 1998
issued by Registrant to Bank One, NA.
Page 26 in the manually signed original.
Exhibit 10.4.29
Covenant Agreement dated September 25, 1998 between the
Registrant and Bank One, NA.
Page 32 in the manually signed original.
Exhibit 10.4.30
Assignment of Deposit Account dated September 25, 1998 between
Registrant and Bank One, NA.
Page 35 in the manually signed original.
Exhibit 10.4.31
Asset Purchase Agreement dated October 14, 1998 between the
Registrant, Neoprobe Europe AB, a corporation organized and
existing under the laws of Sweden, and Bioinvent Production
AB, a corporation organized and existing under the laws of
Sweden.
Page 39 in the manually signed original.
11. STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Exhibit 11.1
Computation of Net Loss Per Share.
17
<PAGE> 18
27. FINANCIAL DATE SCHEDULE
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC
information only).
(b) REPORTS ON FORM 8-K.
No current report on Form 8-K was filed by the Registrant
during the third quarter of fiscal 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEOPROBE CORPORATION
(the "Registrant")
Dated: November 16, 1998
By: /s/ David C. Bupp
-----------------
David C. Bupp,
President and Chief Executive Officer
(duly authorized officer; principal
executive officer)
By: /s/ Brent Larson
----------------
Brent Larson
Vice President, Finance and
Administration (principal financial
and accounting officer)
18
<PAGE> 19
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
NEOPROBE CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE FISCAL QUARTER ENDED:
SEPTEMBER 30, 1998
EXHIBITS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19
<PAGE> 20
INDEX
Exhibit 3.1
Complete Restated Certificate of Incorporation of Neoprobe Corporation, as
corrected February 18, 1994 and as amended June 27, 1994, July 25, 1995 and
June 3, 1996 (incorporated by reference to Exhibit 99.2 to the Registrant's
Current Report on Form 8-K dated June 20, 1996; Commission File No. 0-26520).
Exhibit 3.2
Amended and Restated By-Laws dated July 21, 1993 as amended July 18, 1995 and
May 30, 1996 (incorporated by reference to Exhibit 99.4 to the Registrant's
Current Report on Form 8-K dated June 20, 1996; Commission File No. 0-26520).
Exhibit 4.1
See Articles FOUR, FIVE, SIX and SEVEN of the Restated Certificate of
Incorporation of the Registrant (see Exhibit 3.1).
Exhibit 4.2
See Articles II and VI and Section 2 of Article III and Section 4 of Article VII
of the Amended and Restated By-Laws of the Registrant (see Exhibit 3.2).
Exhibit 4.3
Rights Agreement dated as of July 18, 1995 between the Registrant and
Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit
1 of the registration statement on Form 8-A; Commission File No. 0-26520).
Exhibit 10.4.26
Letter amendment dated October 14, 1998 to the Sales and Marketing Agreement
dated April 21, 1998 between the Registrant and Ethicon Endo-Surgery, Inc., an
Ohio corporation (filed pursuant to Rule 24b-2 under which the Registrant has
requested confidential treatment of certain portions of this Exhibit).
Exhibit 10.4.27
Promissory Note, dated September 25, 1998, issued by Registrant to Bank One, NA.
Exhibit 10.4.28
Addendum to the Promissory Note dated September 25, 1998 issued by Registrant to
Bank One, NA.
Exhibit 10.4.29
Covenant Agreement dated September 25, 1998 between the Registrant and Bank One,
NA.
Exhibit 10.4.30
Assignment of Deposit Account dated September 25, 1998 between Registrant and
Bank One, NA.
20
<PAGE> 21
Exhibit 10.4.31
Asset Purchase Agreement dated October 14, 1998 between the Registrant, Neoprobe
Europe AB, a corporation organized and existing under the laws of Sweden, and
Bioinvent Production AB, a corporation organized and existing under the laws of
Sweden.
Exhibit 11.1
Computation of Net Loss Per Share.
Exhibit 27.1
Financial Data Schedule (submitted electronically for SEC information only).
21
<PAGE> 1
EXHIBIT 10.4.26
Omitted portions of this Exhibit are subject to a Request for
Confidential Treatment under rule 24b-2.
October 14, 1998
Neoprobe Corporation
Attn: Mr. David C. Bupp, President and CEO
425 Metro Place North
Suite 300
Dublin, OH 43017-1367
Ladies and Gentlemen:
Reference is hereby made to that certain Sales and Marketing Agreement, dated as
of April 21, 1998 (the "Original Agreement"), by and between Neoprobe
Corporation, a Delaware corporation ("Neoprobe"), and Ethicon Endo-Surgery,
Inc., an Ohio corporation ("EES"). Each of EES and Neoprobe deems it to be in
its best interest to amend the terms of the Original Agreement and, in
consideration of the premises and mutual covenants contained herein, the parties
hereto agree, and this letter will confirm our agreement, to amend the Original
Agreement as follows:
1. Territory. Section 1 shall be amended by deleting the words "Japan" and
"Australia" appearing in the first sentence thereof.
2. Responsibilities in Europe. Section 3(b) shall be amended by adding the
following language at the end thereof:
"EES and Neoprobe shall mutually agree on the specific accounts in Europe
(the "European Accounts") that shall be subject to this Agreement and shall
as soon as reasonably practicable after the date hereof, create a list
thereof (the "Account List") which will be continually updated as necessary
and subject to a formal review and revision, as mutually agreed upon, by
both parties between January 1, 1999 and January 15, 1999. EES shall
support the European Accounts and EES shall receive commissions with
respect to all sales of Neoprobe(R) Systems made to such European Accounts
from and after the date hereof as set forth hereinafter. The responsibility
of EES shall be to use its reasonable efforts to generate leads for
additional European Accounts, to introduce the European Accounts to
Neoprobe clinical specialists and to otherwise assist in facilitating the
sales of Neoprobe(R) Systems by Neoprobe clinical specialists to such
European Accounts, as appropriate. EES represents that the EES sales
representative that facilitates a sale of a Neoprobe(R) System will receive
a reasonable level of commission representing this sale."
Text which has been omitted and filed separately under Rule 24-b2, pursuant to
which Neoprobe Corporation has requested confidential treatment of this
information, has been replaced by "****" in this Exhibit.
<PAGE> 2
Omitted portions of this Exhibit are subject to a Request for
Confidential Treatment under rule 24b-2.
3. Commissions on European Sales. Section 4(a) shall be amended by (i) adding
a new subsection (iv) which shall read in its entirety as follows:
"(iv) Neoprobe shall pay EES a commission of ****% of the invoice amount
net of shipping, value added taxes, and any other duties, on all systems
and accessories sold during the term of this agreement with respect to all
Neoprobe(R) Systems sold to European Accounts."
; and (ii) renumbering subsections "(iv), (v) and (vi)" as "(v), (vi) and
(vii)", respectively.
Please acknowledge your acquiescence with the terms and provisions of this
letter by countersigning where indicated below and, upon such countersigning,
the provisions of this letter shall become effective and in full force and
effect.
Very truly yours,
ETHICON ENDO-SURGERY, INC.
By: /s/ Katja Kreutzer
----------------------------------
Name: Katja Kreutzer
Title: Vice President, Breast
Care Management, Europe
AGREED TO AND ACCEPTED:
- -----------------------
NEOPROBE CORPORATION
By: /s/ David C. Bupp
-------------------------------
Name: David C. Bupp
Title: President/CEO
Text which has been omitted and filed separately under Rule 24-b2, pursuant to
which Neoprobe Corporation has requested confidential treatment of this
information, has been replaced by "****" in this Exhibit.
2
<PAGE> 1
EXHIBIT 10.4.27
<TABLE>
<CAPTION>
PROMISSORY NOTE
- ------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,000,000.00 09-25-1998 08-31-1999 010 0164044165 97300
- ------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item.
- ------------------------------------------------------------------------------------------------
</TABLE>
Borrower: NEOPROBE CORPORATION Lender: Bank One, NA
425 METRO PLACE NORTH, SUITE 400 Home Office - Columbus
DUBLIN, OH 43017 100 East Broad Street
Columbus, OH 43271
================================================================================
Principal Amount: $1,000,000.00 Date of Note: September 25, 1998
PROMISE TO PAY. For value received, NEOPROBE CORPORATION ("Borrower") promises
to pay to Bank One, NA ("Lender"), or order, in lawful money of the United
States of America, the principal amount of One Million & 00/100 Dollars
($1,000,000.00) ("Total Principal Amount") or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance from the date
advanced until paid in full.
PAYMENT. This Note shall be payable as follows: Interest shall be due and
payable monthly as it accrues, commencing on November 1, 1998 and continuing on
the same day of each month thereafter during the term of this Note, and the
outstanding principal balance of this Note, together with all accrued but unpaid
interest, shall be due and payable on August 31, 1999. The annual interest rate
for this Note is computed on a 365/360 basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at the address designated by Lender
from time to time in writing. If any payment of principal of or interest on this
Note shall become due on a day which is not a Business Day, such payment shall
be made on the next succeeding Business Day. As used herein, the term "Business
Day" shall mean any day other than a Saturday, Sunday or any other day on which
national banking associations are authorized to be closed. Unless otherwise
agreed to, in writing, or otherwise required by applicable law, payments will be
applied first to accrued, unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs, late charges and other charges, provided,
however, upon delinquency or other default, Lender reserves the right to apply
payments among principal, interest, late charges, collection costs and other
charges at its discretion. The books and records of Lender shall be prima facie
evidence of all outstanding principal of and accrued but unpaid interest on this
Note. If this Note is governed by or is executed in connection with a loan
agreement, this Note is subject to the terms and provisions thereof.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to fluctuation
based upon the Prime Rate of interest in effect from time to time (the "Index")
(which rate may not be the lowest, best or most favorable rate of interest which
Lender may charge on loans to its customers). "Prime Rate" shall mean the rate
announced from time to time by Lender as its prime rate. Each change in the rate
to be charged on this Note will become effective without notice on the same day
as the Index changes. Except as otherwise provided herein, the unpaid principal
balance of this Note will accrue interest at a rate per annum which will from
time to time be equal to the sum of the Index, plus 0.000%. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT. Borrower may pay without fee all or a portion of the principal
amount owed hereunder earlier than it is due. All prepayments shall be applied
to the indebtedness owing hereunder in such order and manner as Lender may from
time to time determine in its sole discretion.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment of $25.00, whichever is greater, up to
the maximum amount of $250.00 per late charge.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment of principal or interest when due under this
Note or any other indebtedness owing now or hereafter by Borrower to Lender; (b)
failure of Borrower or any other party to comply with or perform any term,
obligation, covenant or condition contained in this Note or in any other
promissory note, credit agreement, loan agreement, guaranty, security agreement,
mortgage, deed of trust or any other instrument, agreement or document, whether
now or hereafter existing, executed in connection with this Note (the Note and
all such other instruments, agreements, and documents shall be collectively
known herein as the "Related Documents"); (c) Any representation or statement
made or furnished to Lender herein, in any of the Related Documents or in
connection with any of the foregoing is false or misleading in any material
respect; (d) Borrower or any other party liable for the payment of this Note,
whether as maker, endorser, guarantor, surety or otherwise, becomes insolvent or
bankrupt, has a receiver or trustee appointed for any part of its property,
makes an assignment for the benefit of its creditors, or any proceeding is
commenced either by any such party or against it under any bankruptcy or
insolvency laws; (e) the occurrence of any event of default specified in any of
the other Related Documents or in any other agreement now or hereafter arising
between Borrower and Lender; (f) the occurrence of any event which permits the
acceleration of the maturity of any indebtedness owing now or hereafter by
Borrower to any third party; (g) the liquidation, termination, dissolution,
death or legal incapacity of Borrower or any other party liable for the payment
of this Note, whether as maker, endorser, guarantor, surety, or otherwise; or
(h) Lender deems itself insecure by in good faith believing the prospect of
payment or performance hereunder or under any of the Related Documents is
impaired.
LENDER'S RIGHTS. Upon default, Lender may at its option, without further notice
or demand (i) declare the entire unpaid principal balance on this Note, all
accrued unpaid interest and all other amounts, costs and expenses for which
borrower is responsible under this Note or any other Related Document
immediately due, (ii) refuse to advance any additional amounts under this Note,
(iii) foreclose all liens securing payment hereof, (iv) pursue any other rights,
remedies and recourses available to the Lender, including without limitation,
any such rights, remedies or recourses under the Related Documents, at law or in
equity, or (v) pursue any combination of the foregoing. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a) increase
the variable interest rate on this Note to 3.000 percentage points over the
Index, and (b) add any unpaid accrued interest to principal and such sum will
bear interest therefrom until paid at the rate provided in this Note (including
any increased rate). The interest rate will not exceed the maximum rate
permitted by applicable law. Lender may hire an attorney to help collect this
Note if Borrower does not pay and Borrower will pay Lender's reasonable
attorneys' fees and all costs of collection, unless prohibited by applicable
law. This Note has been delivered to Lender and accepted by Lender in the State
of Ohio. Subject to the provisions on arbitration, this Note shall be governed
by and construed in accordance with the laws of the State of Ohio without regard
to any conflict of laws or provisions thereof.
PURPOSE. Borrower agrees that no advances under this Note shall be used for
personal, family, or household purposes and that all advances hereunder shall be
used solely for business, commercial, agricultural or other similar purposes.
JURY WAIVER. THE BORROWER AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) BETWEEN BORROWER AND LENDER ARISING OUT OF OR IN ANY WAY RELATED
TO THIS NOTE OR THE OTHER RELATED DOCUMENTS. THIS PROVISION IS A MATERIAL
INDUCEMENT TO LENDER TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and empowers any
attorney-at-law to appear in any court of record and to confess judgment against
Borrower for the unpaid amount of this Note, plus attorneys' fees as provided in
this Note, plus costs of suit, and to release all errors, and waive all rights
of appeal. If a copy of this Note, verified by an affidavit, shall have been
filed in the proceeding, it will not be necessary to file the original as a
warrant of attorney. Borrower waives the right to any stay of execution and the
benefit of all exemption laws now or hereafter in effect. No single exercise of
the foregoing warrant and power to confess judgment will be deemed to exhaust
the power, whether or not any such exercise shall be held by any court to be
invalid, voidable, or void; but the power will continue undiminished and may be
exercised from time to time as Lender may elect until all amounts owing on this
Note have been paid in full.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Unless a lien would be prohibited by law or would render a
nontaxable account taxable, Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, conveys, delivers, pledges, and
transfers to Lender all Borrower's right, title and interest in and to,
<PAGE> 2
09-25-1998 PROMISSORY NOTE Page 2
Loan No. (Continued)
================================================================================
Borrower's accounts with Lender (whether checking, savings, or any other
account), including without limitation all accounts held jointly with someone
else and all accounts Borrower may open in the future. Borrower authorizes
Lender, to the extent permitted by applicable law, to charge or setoff all sums
owing on this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Borrower may
request advances and make payments hereunder from time to time, provided that it
is understood and agreed that the aggregate principal amount outstanding from
time to time hereunder shall not at any time exceed the Total Principal Amount.
The unpaid principal balance of this Note shall increase and decrease with each
new advance or payment hereunder, as the case may be. Subject to the terms
hereof, Borrower may borrow, repay and reborrow hereunder. Advances under this
Note may be requested orally by Borrower or by an authorized person. Lender may,
but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. Borrower agrees to be liable
for all sums either: (a) advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's accounts with Lender.
ARBITRATION. Lender and borrower agree that upon the written demand of either
party, whether made before or after the institution of any legal proceedings,
but prior to the rendering of any judgment in that proceeding, all disputes,
claims and controversies between them, whether individual, joint, or class in
nature, arising from this Note, any Related Document or otherwise, including
without limitation contract disputes and tort claims, shall be arbitrated
pursuant to the Commercial Rules of the American Arbitration Association. Any
arbitration proceeding held pursuant to this arbitration provision shall be
conducted in the city nearest the Borrower's address having an AAA regional
office, or at any other place selected by mutual agreement of the parties. No
act to take or dispose of any collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration agreement. This
arbitration provision shall not limit the right of either party during any
dispute, claim or controversy to seek, use, and employ ancillary, provisional or
preliminary rights and/or remedies, judicial or otherwise, for the purposes of
realizing upon, preserving, protecting, foreclosing upon or proceeding under
forcible entry and detainer for possession of, any real or personal property,
and any such action shall not be deemed an election of remedies. This includes,
without limitation, obtaining injunctive relief or a temporary restraining
order, invoking a power of sale under any deed of trust or mortgage, obtaining a
writ of attachment or imposition of a receivership, or exercising any rights
relating to personal property, including taking or disposing of such property
with or without judicial process pursuant to Article 9 of the Uniform Commercial
Code. Any disputes, claims, or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right or remedy, concerning any
collateral, including any claim to rescind, reform, or otherwise modify any
agreement relating to the collateral, shall also be arbitrated; provided however
that no arbitrator shall have the right or the power to enjoin or restrain any
act of either party. Judgment upon any award rendered by any arbitrator may be
entered in any court having jurisdiction. Nothing in this arbitration provision
shall preclude either party from seeking equitable relief from a court of
competent jurisdiction. The statute of limitations, estoppel, waiver, laches and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding, and the commencement of
an arbitration proceeding shall be deemed the commencement of any action for
these purposes. The Federal Arbitration Act (Title 9 of the United States Code)
shall apply to the construction, interpretation, and enforcement of this
arbitration provision.
ADDITIONAL PROVISION REGARDING LATE CHARGES. The "Late Charge" provision set
forth above in this Note is hereby deleted and the following provision shall
apply to this Note: Borrower agrees that if a payment is 10 days or more late,
Borrower will be charged 5.000% of the regularly scheduled payment or Twenty
Five Dollars ($25.00), whichever is greater, up to the maximum amount of One
Thousand Five Hundred Dollars ($1,500.00).
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. In particular, this section means (among other
things) that Borrower does not agree or intend to pay, and Lender does not agree
or intend to contract for, charge, collect, take, reserve or receive
(collectively referred to herein as "charge or collect"), any amount in the
nature of interest or in the nature of a fee for this loan, which would in any
way or event (including demand, prepayment, or acceleration) cause Lender to
charge or collect more for this loan than the maximum Lender would be permitted
to charge or collect by federal law or the law of the State of Ohio (as
applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. Lender may delay or forego enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this Note, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this Note without the consent of or
notice to anyone other than the party with whom the modification is made.
Borrower agrees and consents to Lender's sale or transfer, whether now or later,
or one or more participation interests in this Note to one or more purchasers,
whether related or unrelated to Lender. Lender may provide, without any
limitation whatsoever, to any one or more purchasers, or potential purchasers,
any information or knowledge Lender may have about Borrower or about any other
matter relating to this Note, and Borrower hereby waives any rights to privacy
Borrower may have with respect to such matters. Borrower additionally waives any
and all notices of sale of any participation interests, as well as all notices
of any repurchase of any such participation interests.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
- --------------------------------------------------------------------------------
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
- --------------------------------------------------------------------------------
BORROWER:
NEOPROBE CORPORATION
By: /s/ Brent L. Larson
-------------------------
AUTHORIZED SIGNER
================================================================================
<PAGE> 1
EXHIBIT 10.4.28
ADDENDUM
THIS ADDENDUM is executed with respect to the Promissory Note in the original
principal amount of $ 1,000,000.00 dated September 25, 1998 [and maturing on
August 31, 1999] (the "Note"), made by Neoprobe Corporation (referred to in this
Addendum as "Borrower") payable to the order of Bank One, NA ("Lender"), and is
hereby incorporated into and made a part of the Note. Terms used in this
Addendum with their initial letters capitalized are used as defined in the Note,
unless they are otherwise expressly defined herein.
1. The paragraph in the Note having the caption "VARIABLE INTEREST RATE" is
hereby deleted in its entirety and the following is hereby substituted in
lieu thereof:
VARIABLE INTEREST RATE. Subject to designation of a different interest rate
index by Borrower as provided below, the interest rate on this Note is
subject to fluctuation based upon the Prime Rate of interest in effect from
time to time (the "Index") (which rate may not be the lowest, best or most
favorable rate of interest which Lender may charge on loans to its
customers). "Prime Rate" shall mean the rate announced from time to time by
Lender as its prime rate. Each change in the variable interest rate to be
charged on this Note will become effective without notice on the same day
as the Index changes. Except as otherwise provided herein, the unpaid
principal balance of this Note will accrue interest at a rate per annum
which will from time to time be equal to the sum of the Index, plus 0.00%.
INTEREST RATE OPTIONS. The following interest rate options are available
under this Note:
(a) Default Option. The interest rate margin and index described in the
"VARIABLE INTEREST RATE" paragraph above (the "Default Option").
(b) ONE MONTH LONDON INTERBANK OFFERED RATE. A margin of 2.25 percentage
points over the one month LONDON INTERBANK OFFERED RATE ("LIBOR"). For
purposes of this Note, the one month LIBOR rate shall mean the one month
offered rate for U.S. Dollar deposits of not less than $1,000,000.00 as of
11:00 A.M. City of London, England time two London Business Days prior to
the first date of each one month Interest Period (as defined below) of this
Note as shown on the display designated as "British Bankers Assoc. Interest
Settlement Rates" on the Dow Jones Telerate Service ("Telerate"), Page 3750
(or such other page as may replace that page on that service for the
purpose of displaying such rate). Provided, however, that if such LIBOR
rate is not available on Telerate then such offered rate shall be otherwise
independently determined by Lender from an alternate, substantially similar
independent source or service available to Lender or shall be calculated by
Lender by a substantially similar methodology as that theretofore used to
determine such offered rate in Telerate.
Page 1 of 6
<PAGE> 2
(c) TWO MONTH LONDON INTERBANK OFFERED RATE. A margin of 2.25 percentage
points over the two month LONDON INTERBANK OFFERED RATE ("LIBOR"). For
purposes of this Note, the two month LIBOR rate shall mean the two month
offered rate for U.S. Dollar deposits of not less than $1,000,000.00 as of
11:00 A.M. City of London, England time two London Business Days prior to
the first date of each two month Interest Period (as defined below) of this
Note as shown on the display designated as "British Bankers Assoc. Interest
Settlement Rates" on the Dow Jones Telerate Service ("Telerate"), Page 3750
(or such other page as may replace that page on that service for the
purpose of displaying such rate). Provided, however, that if such LIBOR
rate is not available on Telerate then such offered rate shall be otherwise
independently determined by Lender from an alternate, substantially similar
independent source or service available to Lender or shall be calculated by
Lender by a substantially similar methodology as that theretofore used to
determine such offered rate in Telerate
(d) THREE MONTH LONDON INTERBANK OFFERED RATE. A margin of 2.25 percentage
points over the three month LONDON INTERBANK OFFERED RATE ("LIBOR"). For
purposes of this Note, the three month LIBOR rate shall mean the three
month offered rate for U.S. Dollar deposits of not less than $1,000,000.00
as of 11:00 A.M. City of London, England time two London Business Days
prior to the first date of each three month Interest Period (as defined
below) of this Note as shown on the display designated as "British Bankers
Assoc. Interest Settlement Rates" on the Dow Jones Telerate Service
("Telerate"), Page 3750 (or such other page as may replace that page on
that service for the purpose of displaying such rate). Provided, however,
that if such LIBOR rate is not available on Telerate then such offered rate
shall be otherwise independently determined by Lender from an alternate,
substantially similar independent source or service available to Lender or
shall be calculated by Lender by a substantially similar methodology as
that theretofore used to determine such offered rate in Telerate.
(e) SIX MONTH LONDON INTERBANK OFFERED RATE. A margin of 2.25 percentage
points over the six month LONDON INTERBANK OFFERED RATE ("LIBOR"). For
purposes of this Note, the six month LIBOR rate shall mean the six month
offered rate for U.S. Dollar deposits of not less than $1,000,000.00 as of
11:00 A.M. City of London, England time two London Business Days prior to
the first date of each six month Interest Period (as defined below) of this
Note as shown on the display designated as "British Bankers Assoc. Interest
Settlement Rates" on the Dow Jones Telerate Service ("Telerate"), Page 3750
(or such other page as may replace that page on that service for the
purpose of displaying such rate). Provided, however, that if such LIBOR
rate is not available on Telerate then such offered rate shall be otherwise
independently determined by Lender from an alternate, substantially similar
independent source or service available to Lender or shall be calculated by
Lender by a substantially similar methodology as that theretofore used to
determine such offered rate in Telerate.
If used in this Note, "London Business Day" means any day other than a
Saturday, Sunday or a day on which banking institutions are generally
authorized or obligated by law or executive order to close in the City of
London, England.
Page 2 of 6
<PAGE> 3
When the interest rate is based on a LIBOR rate, a Treasury Securities Rate
or a Fixed Rate (an "Option Rate"), the rate shall be in effect for a
period of the number of months as indicated in the rate option description
(the "Interest Period"), in any case extended to the next succeeding
business day when necessary, beginning on a borrowing date, conversion date
or expiration date of the then current Interest Period. Adjustments in the
interest rate due to changes in the maximum nonusurious interest rate
allowed (the "Highest Lawful Rate") shall be made on the effective day of
any change in the Highest Lawful Rate.
Provided Borrower is not in default under this Note, Borrower may designate
in advance which of the above interest rate indexes shall be applicable to
any loan advance under this Note. In the absence of any such designation
the interest rate option shall be the Default Option. Thereafter unpaid
principal balances under this Note may be converted (at the end of an
Interest Period if the index used to determine the interest rate therefore
is an Option Rate) to another of the above interest rate options, or
continued for an additional interest period, when applicable, as designated
by Borrower in advance; and in the absence of sufficient advance
designation as determined by the Lender as to conversion to or continuation
of an Option Rate index, the rate shall be converted to the Default Option.
Notwithstanding the foregoing, an Option Rate index may not be elected for
a loan or advance under this Note, nor any conversion to or continuation of
an Option Rate index be elected, if the Interest Period thereof would
extend beyond the maturity of this Note.
Each loan or advance under this Note at conversion into or continuation of
an Option Rate shall be in a minimum amount of $250,000.00. Unless
otherwise provided herein, accrued interest on amounts for which the
interest rate is based on a LIBOR rate or a Treasury Securities Rate shall
be due and payable at the end of the respective Interest Period therefor.
Borrower shall pay to Lender from time to time such amounts as Lender may
determine to be necessary to compensate Lender for any costs incurred by
Lender which Lender determines are attributable to its making or
maintaining any LIBOR rates hereunder or its obligation to make any such
LIBOR rates hereunder, or any reduction in ant amount receivable by Lender
under this Note in respect of any such rates or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any change after the date of this Note
in U.S. federal, state, municipal, or foreign laws or regulations
(including Regulation D), or the adoption or making after such date of ant
interpretations, directives, or requirements applying to a class of banks
including Lender of or under any U.S. federal, state, municipal, or any
foreign laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation
or administration thereof ("Regulatory Change"), which: (1) changes the
basis of taxation of any amounts payable to Lender under this Note in
respect of any such LIBOR rates (other than taxes imposed on the overall
net income of the Lender); or (2) imopses or modifies any reserve, special
deposit, compulsory loan, or similar requirements relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of. Lender (including any of such
Page 3 of 6
<PAGE> 4
LIBOR rates or any deposits referred to in the definition of any LIBOR
rate); or (3) imposes any other condition affecting this Note (or any of
such extensions of credit or liabilities). Lender will notify the Borrower
of any event occurring after the date of this Note which will entitle
Lender to compensation pursuant to this paragraph as promptly as
practicable after it obtains knowledge thereof and determines to request
such compensation. Determinations by Lender for purposes of this paragraph
of the effect of any Regulatory change in its costs of making or
maintaining LIBOR rates or on amounts receivable by it in respect of LIBOR
rates, and of the additional amounts required to compensate Lender in
respect of any Additional Costs, shall be presumes prima facie correct.
In respect of any LIBOR Loans, in the event that Lender shall have
determined that dollar deposits of the relevant amount for the relevant
Interest Period for such LIBOR Loans are not available or that, by reason
of circumstances affecting such market, adequate and reasonable means do
not exist for ascertaining the LIBOR rate applicable to such Interest
Period, as the case may be, Lender shall promptly give notice of such
determination to the Borrower and (i) any notice of new LIBOR Loans (or
conversion of existing loans to LIBOR Loans) previously given by the
Borrower and not yet borrowed (or converted, as the case may be) shall be
deemed a notice to make loans bearing interest at the Default Option, and
(ii) the Borrower shall be obligated either to prepay or to convert any
outstanding LIBOR Loans on the last day of the then current Interest Period
or Periods with respect thereto, as Borrower shall elect.
Without prejudice to any other provisions of this Note, the Borrower agrees
to indemnify Lender against any loss or expense which Lender may sustain or
incur as a consequence of any default by the Borrower in payment when due
of any amount due hereunder in respect of any LIBOR Loan, including, but
not limited to, any loss of profit, premium or penalty incurred by Lender
in respect of funds borrowed by it for the purpose of making or maintaining
such LIBOR Loan, as determined by Lender in the exercise of its sole but
reasonable discretion. A certificate as to any such loss or expense shall
be promptly submitted by Lender to the Borrower and shall, in the absence
of manifest error, be conclusive and binding as to the amount thereof.
If at any time any new law, treaty or regulation enacted after the date
hereof, or any change after the date hereof in any existing law, treaty or
regulation, or any interpretation thereof after the date hereof by any
governmental or other regulatory authority charged with the administration
thereof, shall make it unlawful for Lender to fund any LIBOR Loans which it
is committed to make hereunder with moneys obtained in the Eurodollar
market, the commitment of Lender to fund LIBOR Loans shall, upon the
happening of such event forthwith be suspended for the duration of such
illegality, and Lender shall by written notice to the Borrower declare that
the commitment with respect to such loans has been so suspended and, if and
when such illegality ceases to exist, such suspension shall cease and
Lender shall similarly notify the Borrower. If any such change shall make
it unlawful for Lender to continue in effect the funding in the applicable
Eurodollar market of any LIBOR Loan previously made by it hereunder, Lender
shall, upon the happening of such event, notify the Borrower in writing
stating the reasons therefor, and the Borrower shall, on the earlier of (i)
the last day of the then current Interest Period or (ii) if required by
such law, regulation or
Page 4 of 6
<PAGE> 5
interpretation, on such date as shall be specified in such notice, either
convert all LIBOR Loans to loans bearing interest at the Default Option or
prepay all LIBOR Loans to Lender in full, as Borrower shall elect.
Lender may, but shall not be required to, make LIBOR Loans hereunder with
funds obtained outside the United States.
2. The paragraph of the Note having the caption "PREPAYMENT" is hereby deleted
in its entirety and the following paragraph is hereby substituted in lieu
thereof:
PREPAYMENT. Borrower may prepay all or any portion of the principal balance
outstanding on this Note which is accruing at the Default Option at any
time without payment of premium or penalty. Borrower may not prepay all or
any portion of the principal balance outstanding on this Note which is
accruing interest based on a LIBOR rate without obtaining Lender's prior
written consent, which Lender can grant or refuse to grant in its sole
discretion. All permitted prepayments shall be applied to the indebtedness
owing hereunder in such order and manner as Lender may from time to time
determine.
3. The paragraph of the Note having the caption "LENDER'S RIGHTS" is hereby
deleted in its entirety and the following paragraph is hereby substituted
in lieu thereof:
LENDER'S RIGHTS. Upon default, Lender may, at its option, without further
notice or demand (i) declare the entire unpaid principal balance on this
Note, all accrued unpaid interest and all other coats and expenses for
which Borrower is responsible under this Note and any other Related
Document immediately due, (ii) refuse to advance any additional amounts
under this Note, (iii) foreclose all liens securing payment hereof, (iv)
pursue any other rights, remedies and recourses available to Lender,
including without limitation, any such rights, remedies or recourses under
the Related Documents, at law or in equity, or (v) pursue any combination
of the foregoing. Upon default, including failure to pay upon final
maturity, Lender, at its option, may also, if permitted by applicable law,
do one or both of the following: (a) accrue interest on this Note at the
Default Option and increase the variable interest rate on this Note to 3.00
percentage points over the Default Option, and (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid
at the rate provided in this Note (including any increased rate). The
interest rate will not exceed the maximum rate permitted by applicable law.
This Note has been delivered to Lender and is performable in Ohio. Courts
within the State of Ohio have jurisdiction over any dispute arising under
or pertaining to this Note and venue for such dispute shall be in Franklin
County, Ohio. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF OHIO AND APPLICABLE FEDERAL LAWS.
Page 5 of 6
<PAGE> 6
4. Except as expressly modified by this Addendum, all of the terms and
conditions of the Note continue unchanged and in full force and effect.
5. The paragraph of the Note having the caption "CONFESSION OF JUDGMENT" is
hereby ratified and confirmed.
Dated with effect as of the date of the Note.
================================================================================
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
================================================================================
Neoprobe Corporation
By: /s/ Brent L. Larson
-----------------------------
Its: Vice President, Finance
<PAGE> 1
EXHIBIT 10.4.29
COVENANT AGREEMENT
THIS IS AN AGREEMENT (the "Agreement") dated as of September 25 ,1998, by Bank
One, NA (Lender); and Neoprobe Corporation (individually, collectively and
interchangeably, "Borrower").
RECITALS
--------
Lender has extended or is extending one or more loans to Borrower (individually,
collectively and interchangeably, and including any renewals, extensions or
modifications thereof, the "Loan") evidenced by one or more promissory notes
(individually, collectively and interchangeably, and including any renewals,
extensions or modifications thereof, the "Note") as follows:
Date of Note Principal Amount of Note
------------ ------------------------
September 25, 1998 $1,000,000.00
AGREEMENT
---------
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
RECITALS. The above Recitals are incorporated by reference into the body of this
Agreement as if they were repeated verbatim herein.
FINANCIAL INFORMATION. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower shall:
QUARTERLY STATEMENTS. As soon as available, and in no event later than
forty-five (45) days after the end of each fiscal quarter of Borrower,
furnish to Lender Borrower's financial statements for the period ended,
including a balance sheet and income statement, prepared and certified
as correct (subject to year-end review adjustments), to the best
knowledge and belief, by Borrower's chief financial officer or other
person reasonably acceptable to Lender. All such statements shall be
prepared in accordance with generally accepted accounting principles or
such other accounting principles acceptable to Lender in its sole
discretion.
ANNUAL STATEMENTS. As soon as available, and in no event later than one
hundred twenty [120] days after the end of each fiscal year of
Borrower, furnish to Lender Borrower's annual financial statements for
the year ended, including a balance sheet, income statement and
statement of cash flows, such financial statements to be reviewed by
certified public accountants reasonably acceptable to Lender. All such
statements shall be prepared in accordance with generally accepted
accounting principles or such other accounting principles acceptable to
Lender in its sole discretion.
ADDITIONAL INFORMATION. Furnish Lender with such additional
information, statements and reports with respect to Borrower's
financial condition and business operations as Lender may request from
time to time.
LETTER(S) OF CREDIT; FURTHER RESTRICTIONS ON ADVANCES UNDER THE NOTE. Borrower
may request that Lender issue a letter or letters of credit in an aggregate
undrawn amount of the Note (the "Letters of Credit") from time to time for the
benefit of Borrower (the "Letters of Credit Commitment). The letters of Credit
Commitment shall be available to the Borrower subject to the limitations herein,
in whole or in part and from time to time until July 30, 1999; provided that the
maturity of any Letters of Credit shall not be greater than
<PAGE> 2
one year from the date of issuance nor later than August 31, 1999. Prior to the
issuance of any Letter of Credit, Borrower agrees to execute and deliver to
Lender such standard application and/or reimbursement agreement in use by lender
at that time (each a "Letter of Credit Agreement"). Borrower agrees that, at the
sole discretion of Lender, whenever amounts become due to Lender from Borrower
for reimbursement under a Letter of Credit Agreement, Lender may (but shall not
be obligated to) treat such event as a request for an advance under this note
and directly apply the proceeds of such advance to the payment of the then
outstanding reimbursement obligations of Borrower under the Letter of Credit
Agreement. The Letter of Credit Agreement with respect to the issuance of any
letter of Credit pursuant to this Note shall provide, among other things, for
the payment to Lender by Borrower of an annual commission of one percent [1.00%]
per annum, based on a 360 day year basis and subject to a minimum of Two Hundred
Dollars [$200.00] per annum.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each request for an advance or
disbursement of Loan proceeds, as of the date of any renewal, extension or
modification of any Loan, and at all times any indebtedness exists thereunder,
or any commitment or obligation to make any Loan exists hereafter: (a) Borrower,
if not an individual, is an entity duly organized and validly existing under the
laws of Delaware. (b) The execution, delivery and performance of this Agreement
and all other Related Documents (as defined in the Note) to which Borrower is a
party have been duly authorized by all necessary action, require no further
consent of any person, regulatory authority or governmental body, and do not
conflict with, result in a violation of, or constitute a default under any
agreement binding upon Borrower, or any law, regulation or court decree or order
applicable to Borrower. (c) This Agreement and all other Related Documents to
which Borrower is a party constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms.
TERM. This Agreement shall be effective until the Loan has been paid in full and
Lender has no commitments or obligations to make or allow advances or draws
under the Loan.
DEFAULT. Failure of Borrower to abide by any of the terms, conditions, covenants
or provisions of this Agreement shall, in addition to all other defaults or
events of default, be a default or an event of default under the Note.
MISCELLANEOUS PROVISIONS.
GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of Ohio, without giving effect to conflict of
laws rules.
ENTIRE AGREEMENT; BINDING EFFECT. This Agreement, together with the
Note and all Related Documents, constitutes the entire understanding
and agreement of the parties as to the matters set forth herein, and
shall be binding upon, and inure to the benefit of, the parties hereto
and their respective successors and assigns.
AMENDMENT. No alteration, amendment, rescission, supplementation,
modification or waiver of this Agreement shall be effective unless
given in writing and signed by the party or parties sought to by
charged or bound thereby.
TIME. Time is of the essence in the performance of this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, or any course of dealing between
Lender and Borrower, or between Lender and any party to any other
Related Document, shall constitute a waiver of any of Lender's rights
or of any obligations of Borrower
2
<PAGE> 3
or such other party as to any future transactions. Whenever the consent
of Lender is required under this Agreement, the granting of such
consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in the sole
discretion of Lender.
HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the
provisions of this Agreement.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including attorneys' fees, incurred in connection with the
preparation, execution, enforcement, modification and collection of
this Agreement or in connection with the Loan made pursuant to this
Agreement. Lender may hire one or more attorneys to help collect the
Loan if Borrower does not pay, and Borrower will pay Lender's
reasonable attorneys' fees.
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other person or circumstance. If feasible, any
such offending provision shall be deemed to be modified to be within
the limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid
and enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above, but actually on the dates set forth below.
BORROWER: Neoprobe Corporation
By: /s/ Brent L. Larson
-----------------------------
Title: Vice President, Finance
Date: 9/28/98
LENDER: BANK ONE, NA
By: /s/ David T. Clark
-----------------------------
Title: Vice President
Date: 9/28/98
3
<PAGE> 1
EXHIBIT 10.4.30
<TABLE>
<CAPTION>
ASSIGNMENT OF DEPOSIT ACCOUNT
- ------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,000,000.00 09-25-1998 08-31-1999 010 0164044165 97300
- ------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of
this document to any particular loan or item.
- ------------------------------------------------------------------------------------------------
</TABLE>
Borrower: NEOPROBE CORPORATION Lender: Bank One, NA
425 METRO PLACE NORTH, SUITE 400 Home Office - Columbus
DUBLIN, OH 43017 100 East Broad Street
Columbus, OH 43271
================================================================================
THIS ASSIGNMENT OF DEPOSIT ACCOUNT is entered into by NEOPROBE CORPORATION
(referred to below as "Grantor") for the benefit of Bank One, NA (referred to
below as "Lender").
ASSIGNMENT. For valuable consideration, Grantor assigns, pledges and grants to
Lender, a security interest in all of Grantor's rights, title and interest in
the Collateral, including without limitation the Account described below, to
secure the indebtedness and agrees that Lender shall have the rights stated in
this Agreement with respect to the Collateral, in addition to all other rights
which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code as adopted in
the State of Ohio (the "Code"). All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
ACCOUNT. The word "Account" means the deposit account described below in the
definition for "Collateral."
AGREEMENT. The word "Agreement" means this Assignment of Deposit Account, as
this Assignment of Deposit Account may be amended or modified from time to
time, together with all exhibits and schedules attached to this Assignment
of Deposit Account from time to time.
COLLATERAL. The word "Collateral" means the following described deposit
account:
BANK ONE SAVINGS ACCOUNT # 1565503917 ISSUED BY LENDER IN AN AMOUNT NOT
LESS THAN $1,000,000.00
together with (a) all interest, whether now accrued or hereafter accruing on
the Account; (b) all additional deposits hereafter made to the Account; (c)
all instruments, certificates, passbooks, documents, agreements and other
writings evidencing the Account; (d) all records relating to the Account;
and (e) all renewals, replacements and substitutions for any of the
foregoing.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of the
Events of Default set forth below in the section titled "Events of Default."
GRANTOR. The word "Grantor" means NEOPROBE CORPORATION, its successors and
assigns.
GUARANTOR. The word "Guarantor" means and includes without limitation, each
and all of the guarantors, sureties, and accommodation parties in connection
with the indebtedness.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and accrued interest thereon, together
with all other liabilities, costs and expenses for which Grantor is
responsible under this Agreement or under any of the Related Documents. In
addition, the word "Indebtedness" includes all other obligations, debts and
liabilities, plus any accrued interest thereon, owing by Grantor, or any one
or more of them, to Lender of any kind or character, now existing of
hereafter arising, as well as all present and future claims by Lender
against Grantor, or any one or more of them, and all renewals, extensions,
modifications, substitutions and rearrangements of any of the foregoing;
whether such Indebtedness arises by note, draft, acceptance, guaranty,
endorsement, letter of credit, assignment, overdraft, indemnity agreement or
otherwise; whether such Indebtedness is voluntary or involuntary, due or not
due, direct or indirect, absolute or contingent, liquidated or unliquidated;
whether Grantor may be liable individually or jointly with others; whether
Grantor may be liable primarily or secondarily or as debtor, maker, comaker,
drawer, endorser, guarantor, surety, accommodation party or otherwise.
LENDER. The word "Lender" means Bank One, NA, its successors and assigns.
NOTE. The word "Note" means the promissory note dated September 25, 1998, in
the principal amount of $1,000,000.00 from NEOPROBE CORPORATION to Lender,
together with all renewals of, extensions of, modifications of, refinancings
of, consolidations of and substitutions for such promissory note.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation the Note and all credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Note.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and warrants to Lender that:
OWNERSHIP. Grantor is the lawful owner of the Collateral free and clear of
all loans, liens, encumbrances, and claims except as disclosed to and
accepted by Lender in writing.
RIGHT TO GRANT ASSIGNMENT AND SECURITY INTEREST. Grantor has the full right,
power, and authority to enter into this Agreement and to assign and grant a
security interest in the Collateral to Lender.
NO FURTHER TRANSFER. Grantor shall have no right to withdraw, possess or
control the Collateral or any funds in the Account and agrees not to sell,
assign, encumber, or otherwise dispose of any of Grantor's rights in the
Collateral.
<PAGE> 2
- --------------------------------------------------------------------------------
09-25-1998 ASSIGNMENT OF DEPOSIT ACCOUNT Page 2
Loan No. (Continued)
- --------------------------------------------------------------------------------
NO DEFAULTS. There are no defaults relating to the Collateral, and there are
no offsets or counterclaims to the same. Grantor will strictly and promptly
do everything required of Grantor under the terms, conditions, promises, and
agreements contained in or relating to the Collateral.
PROCEEDS. Any and all replacement or renewal certificates, instruments, or
other benefits or proceeds related to the Collateral that are received by
Grantor shall be held by Grantor in trust for Lender and immediately shall
be delivered by Grantor to Lender to be held as part of the Collateral.
SOLVENCY. Grantor further represents and warrants that, as of the date
hereof, and after giving effect to this Agreement and the completion of all
other transactions contemplated by Grantor at the time of the execution of
this Agreement, (i) Grantor is and will be solvent, (ii) the fair saleable
value of Grantor's assets exceeds and will continue to exceed Grantor's
liabilities (both fixed and contingent), (iii) Grantor is paying and will
continue to pay Grantor's debts as they mature, and (iv) if Grantor is not
an individual, Grantor has and will have sufficient capital to carry on
Grantor's businesses and all businesses in which Grantor is about to engage.
LIEN NOT RELEASED. The lien, security interest and other security rights of
Lender hereunder shall not be impaired by any indulgence, moratorium or
release granted by Lender, including but not limited to, the following: (a)
any renewal, extension, increase or modification of any of the Indebtedness;
(b) any surrender, compromise, release, renewal, extension, exchange or
substitution granted in respect of any of the Collateral; (c) any release or
indulgence granted to any endorser, guarantor or surety of any of the
Indebtedness; (d) any release of any other collateral for any of the
Indebtedness; (e) any acquisition of any additional collateral for any of
the Indebtedness; and (f) any waiver or failure to exercise any right, power
or remedy granted herein, by law or in any of the Related Documents.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. While this
Agreement is in effect, Lender shall retain the rights to possession of the
Collateral, together with any and all evidence of the Collateral, such as
certificates or passbooks. Lender shall use ordinary reasonable care in the
physical preservation and custody of any certificate or passbook for the
Collateral but shall have no other obligation to protect the Collateral or its
value. This Agreement will remain in effect until all of the following have been
satisfied: (a) there no longer is any Indebtedness owing to Lender; (b) all
other obligations and commitments secured by this Agreement have been fulfilled,
expired or terminated; and (c) Lender's receipt of a written request from
Grantor for the termination hereof.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when due on
the Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement, the
Note, any of the other Related Documents or in any other agreement now
existing or hereafter arising between Lender and Grantor.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender under this Agreement, the Note or any of the other
Related Documents is false or misleading in any material respect.
DEFAULT TO THIRD PARTY. The occurrence of any event which permits the
acceleration of the maturity of any indebtedness owing by Grantor or any
Guarantor to any third party under any agreement or undertaking.
BANKRUPTCY OR INSOLVENCY. If the Grantor or any Guarantor: (i) becomes
insolvent, or makes a transfer in fraud of creditors, or makes an assignment
for the benefit of creditors, or admits in writing its inability to pay its
debts as they become due; (ii) generally is not paying its debts as such
debts become due; (iii) has a receiver, trustee or custodian appointed for,
or take possession of, all or substantially all of the assets of such party
or any of the Collateral, either in a proceeding brought by such party or in
a proceeding brought against such party and such appointment is not
discharged or such possession is not terminated within sixty (60) days after
the effective date thereof or such part consents to or acquiesces in such
appointment or possession; (iv) files a petition for relief under the United
States Bankruptcy Code or any other present or future federal or state
insolvency, bankruptcy or similar laws (all of the foregoing hereinafter
collectively called "APPLICABLE BANKRUPTCY LAW") or an involuntary petition
for relief is filed against such party under any Applicable Bankruptcy Law
and such involuntary petition is not dismissed within sixty (60) days after
the filing thereof, or an order for relief naming such party is entered
under any Applicable Bankruptcy Law, or any composition, rearrangement,
extension, reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; (v) fails to have
discharged within a period of sixty (60) days any attachment, sequestration
or similar writ levied upon any property of such party; or (vi) fails to pay
within thirty (30) days any final money judgment against such party.
LIQUIDATION, DEATH AND RELATED EVENTS. If Grantor or any Guarantor is an
entity, the liquidation, dissolution, merger or consolidation of any such
entity or, if any of such parties is an individual, the death or legal
incapacity of any such individual.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the Indebtedness.
INSECURITY. Lender deems itself insecure by in good faith believing the
prospect of payment or performance hereunder or under any of the Related
Documents is impaired.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default, or
at any time thereafter, Lender may exercise any one or more of the following
rights and remedies, in addition to any rights or remedies that may be available
at law, in equity, or otherwise:
<PAGE> 3
- --------------------------------------------------------------------------------
09-25-1998 ASSIGNMENT OF DEPOSIT ACCOUNT Page 3
Loan No. (Continued)
- --------------------------------------------------------------------------------
ACCELERATE INDEBTEDNESS. Lender may declare all Indebtedness of Grantor to
Lender immediately due and payable, without notice of any kind to Grantor.
APPLICATION OF ACCOUNT PROCEEDS. Lender may, without notice to Grantor,
withdraw the funds in the Account (or, if the Account was not issued by
Lender, obtain all funds in the Account from the issuer of the Account) and
apply them to the Indebtedness in such manner as Lender shall at its
discretion determine in accordance with applicable law. If the Account is
subject to an early withdrawal penalty, that penalty may be deducted from
the Account before its application to the Indebtedness, whether the Account
is with Lender or some other institution. Any excess funds remaining after
application of the Account proceeds to the Indebtedness will be paid to
Grantor as the interest of Grantor may appear. Lender also shall have all
the rights of a secured party under the Code, even if the account is not
otherwise subject to the Code concerning security interests.
DEFICIENCY JUDGMENT. If permitted by applicable law, Lender may obtain a
judgment for any deficiency remaining in the Indebtedness due to Lender
after application of all amounts received from the exercise of the rights
provided in this section.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether evidenced
by this Agreement or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to pursue any
remedy shall not exclude pursuit of any other remedy, and an election to
make expenditures or to take action to perform an obligation of Grantor
under this Agreement, after Grantor's failure to perform, shall not affect
Lender's right to declare a default and to exercise its remedies. Grantor
waves any right to require Lender to proceed against any third party,
exhaust any other security for the Indebtedness or pursue any other right or
remedy available to Lender.
MISCELLANEOUS PROVISIONS.
AMENDMENTS. This Agreement, together with all Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement and supercedes all prior written and oral agreements
and understandings, if any, regarding same. No alteration of or amendment to
this Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. This Assignment has been delivered to Lender and accepted by
Lender in the State of Ohio. Subject to the provisions on arbitration in any
Related Document, this Assignment shall be governed by and construed in
accordance with the laws of the State of Ohio without regard to any conflict
of laws or provisions thereof.
JURY WAIVER. THE UNDERSIGNED AND LENDER (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWLINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE UNDERSIGNED AND LENDER
ARISING OUT OF OR IN ANY WAY RELATED TO THIS DOCUMENT OR ANY OTHER RELATED
DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE
FINANCING DESCRIBED HEREIN OR IN THE OTHER RELATED DOCUMENTS.
ATTORNEYS' FEES; EXPENSES. Grantor will upon demand pay to Lender the amount
of any and all costs and expenses (including without limitation, reasonable
attorneys' fees and expenses) which Lender may incur in connection with (i)
the perfection and preservation of the collateral assignment and security
interests created under this Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from, or other realization upon,
the Collateral, (iii) the exercise or enforcement of any of the rights of
Lender under this Agreement, or (iv) the failure by Grantor to perform or
observe any of the provisions hereof.
INDEMNITY. Grantor hereby agrees to indemnity, defend and hold harmless
Lender, and its officers, directors, shareholders, employees, agents and
representatives (each an "INDEMNIFIED PERSON") from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the "CLAIMS") which may be imposed on, incurred by or
asserted against, any Indemnified Person (whether or not caused by any
Indemnified Person's sole, concurrent or contributory negligence) arising in
connection with the Related Documents, the Indebtedness or the Collateral
(including, without limitation, the enforcement of the Related Documents,
and the defense of any Indemnified Person's action and/or inactions in
connection with the Related Documents), except to the limited extent that
the Claims against the Indemnified Person are proximately caused by such
Indemnified Person's gross negligence or willful misconduct. The
indemnification provided for in this Section shall survive the termination
of this Agreement and shall extend and continue to benefit each individual
or entity who is or has at any time been an Indemnified Person hereunder.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in the
United States mail, first class, postage prepaid, addressed to the party to
whom the notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by applicable law, if
there is more than one Grantor, notice to any Grantor will constitute notice
to all Grantors. For notice purposes, Grantor will keep Lender informed at
all times of Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby irrevocably appoints Lender as its true
and lawful attorney-in-fact, such power of attorney being coupled with an
interest, with full power of substitution to do the following in the place
and stead of Grantor and in the name of Grantor: (a) to demand, collect,
receive, receipt for, sue and recover all sums of money or other property
which may now or hereafter become due, owing or payable from the Collateral;
(b) to execute, sign and endorse any and all claims, instruments, receipts,
checks, drafts or warrants issued in payment for the Collateral; (c) to
settle or compromise any and all claims arising under the Collateral, and,
in the place and stead of Grantor, to execute and deliver its release and
settlement for the claim; (d) to file any claim or claims or to take any
action or institute or take part in any proceedings, either in its own name
of in the name of Grantor, or otherwise, which in the discretion of Lender
may seem to be necessary or advisable; (e) transfer the Account into the
name of Lender or its nominee; and (f) take any other action which Lender
may deem necessary or appropriate to protect and preserve the rights,
<PAGE> 4
- --------------------------------------------------------------------------------
09-25-1998 ASSIGNMENT OF DEPOSIT ACCOUNT Page 4
Loan No. (Continued)
- --------------------------------------------------------------------------------
title and interest of Lender hereunder. This power is given as security for
the Indebtedness, and the authority hereby conferred is and shall be
irrevocable and shall remain in full force and effect until renounced by
Lender.
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on transfer
of the Collateral, this Agreement shall be binding upon and inure to the
benefit of the parties, their successors and assigns; provided, however,
Grantor's rights and obligations hereunder may not be assigned or otherwise
transferred without the prior written consent of Lender.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right to thereafter demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS ASSIGNEMENT OF
DEPOSIT ACCOUNT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 25,
1998.
GRANTOR:
NEOPROBE CORPORATION
By: /s/ Brent L. Larson
-----------------------------
AUTHORIZED SIGNER
================================================================================
<PAGE> 1
EXHIBIT 10.4.31
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made
by and between
NEOPROBE EUROPE AKTIEBOLAG, reg. no 556440-1510, a corporation organized and
existing under the laws of Sweden, whose registered office is at Solvegatan 41,
SE-223 70 LUND (the "Seller"),
and
BIOINVENT PRODUCTION AKTIEBOLAG, reg. no 556230-7537, a corporation organized
and existing under the laws of Sweden, whose registered office is at Solvegatan
41, SE-223 70 LUND (the "Purchaser"),
WHEREAS, the Seller desires to sell to the Purchaser and the Purchaser desires
to acquire from the Seller certain assets owned by the Seller relating to the
business of the Seller;
NOW, therefore, the parties, intending to be legally bound hereby agree as
follows:
1. SALE AND PURCHASE
1.1 The Seller hereby sells and assigns to the Purchaser and the Purchaser
hereby purchases and assumes the assets related to the business of the
Seller as specified below (the "Assets");
(i) all the Seller's rights and obligations as of October 1st,
1998, in respect of the lease concerning the facilities of the
Seller (the "Facilities") annexed hereto as Schedule 1 (the
"Lease"), which has been validly assigned in accordance with
its terms and applicable law;
(ii) the machinery and equipment listed in Schedule 2 hereto (the
"Machinery");
(iii) the inventory listed in Schedule 3 hereto (the "Inventory");
and
(iv) lists and books, records and other documentation and
information related to the Machinery and Inventory, including
validation and operational documents for use of the Machinery,
set forth in Schedule 4 (the "Books").
1.2 By entering into this Agreement, the Buyer does not acquire or assume
any assets, claims, debts or liabilities of the Seller other than
expressly set out in this Agreement.
<PAGE> 2
1.3 The Seller shall upon both parties signature to this Agreement, deliver
to the Purchaser any and all keys, keycards and similar to the
Facilities in the Seller's possession and the Seller, including its
officers and employees, shall not be entitled to keep any copies
thereof.
2. PURCHASE PRICE
2.1 The total purchase price for the Assets shall be SEK 1.000.000 (the
"Purchase Price"), which shall be paid in full by the Purchaser within
three (3) business days after this Agreement has been signed by both
parties (the "Closing Date").
2.2 On Closing Date, the Purchase Price shall be paid in full in
immediately available funds to the Seller's bank account no 6759 887
233 708 with Svenska Handelsbanken.
2.3 In the event that the Swedish tax authorities should determine that
value added tax is chargeable on the sale of the Assets or on any part
of the Assets, the Purchaser agrees that such value added tax shall be
in addition to the sum specified in article 2.1 and that it shall pay
the amount of any such valued added tax.
3. CONTRACTS
3.1 The Lease shall prior to the Purchasers signing of this Agreement be
validly assigned by the Seller to the Purchaser with effect from
October 1st 1998. Rent due under the Lease prior to October 1st 1998
shall be paid and borne by the Seller and from and including October
1st 1998, by the Purchaser.
3.2 The Seller warrants to the Purchaser (i) that the Lease is validly
assigned to the Purchaser, (ii) that the Lease is valid and that the
Lease is the full agreement with the lessor and no side-agreements
exist that alters the Lease in any respect, and (iii) that the Seller
has or will fulfill all of its obligations and liabilities under the
Lease up to October 1st, 1998. The liabilities of the Seller shall i.a.
include any claims for damages which may be raised by the landlord
under the Lease pursuant to the inspection of the Facilities to be
carried out prior to the assignment of the Lease hereunder.
3.3 The Seller shall, effective as of October 16, 1998, terminate any and
all contracts relating to the Facilities (save for the Lease), such as
service agreements, heating, water, etc., which facilities are not
included in the Lease, unless the Parties prior to said date have
agreed otherwise. Any and all costs for such agreements relating to the
Facilities shall be paid and borne by the Seller.
2
<PAGE> 3
4. ASSETS
4.1 The ownership, title, right to and risk in the Machinery, the Inventory
and the Books shall pass to the Purchaser as of the Closing Date. The
Purchaser shall, however, as of signing, have unlimited access thereto
and the Seller undertakes not to dispose of the Machinery, the
Inventory or the Books in any way, without the prior written consent of
the Purchaser.
4.2 The Seller warrants that it has good and marketable title to all
Machinery and Inventory, in each case free and clear of any mortgage,
pledge, lease, lien, encumbrance, charge or title retention or other
security arrangements.
4.3. The Machinery and Inventory are sold and transferred "as is." However,
the Seller warrants to the Purchaser that the Machinery, up to and
including this day, has been kept and is maintained in accordance with
all relevant laws, regulations and operational instructions applicable
to the Machinery.
4.4 The sale and transfer of Machinery shall include the rights of the
Seller under any pending product warranty in favor of the Seller.
4.5 The Seller warrants that there is no pending action, litigation or
claim relating to the Assets.
5. EMPLOYEES
5.1 The Parties agree that the limited transfer of Assets under this
Agreement, shall not be considered as constituting a transfer of
business within the meaning of the Employment Security Act (Sw. Lag
(1982:80) om anst<W064>llningsskydd). Thus, there shall be no
obligation of the Purchaser to assume any responsibilities of whatever
nature against the employees of the Seller.
5.2 The Seller warrants that no claims will be raised against the Purchaser
by any other former or current employee of the Seller, or their
representatives and organizations, related to, i.a. right to
employment, right to re-instatement, salaries, vacation and vacation
pay, insurance, bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing or any other benefits and
compensations or for damages related to their employment with the
Seller.
6. AUTHORIZATION
The Parties hereby warrants to the other respectively, that
(i) the Party has all corporate power and authority to enter into
this Agreement and to perform the transactions contemplated
hereunder; and
3
<PAGE> 4
(ii) the Party is not prohibited or restrained by its Articles of
Association, or by any other agreements to which it is a party
from entering into this Agreement and consummating the
transactions contemplated herein, and the Agreement and such
transactions have been duly authorized by all necessary
corporation actions.
7. REMEDIES, ETC.
7.1. In event of breach of the warranties given under this Agreement, the
Party in breach shall compensate the other Party in full for any
deficiency or cost relating to such breach. However, the liability of
each Party hereunder shall be limited to an amount equal to the
Purchase Price. The remedy provided in this article 7.1 shall be
exclusive.
7.2 The liability of Seller under this Section 7 shall remain valid for a
period of twelve (12) months following Closing Date. No claim shall be
brought by either Party against the other in respect of any breach of
the Warranties, unless notice in writing of any such claim, specifying
the nature of the breach and the approximate amount claimed in good
faith in respect thereof, has been given to the other Party as soon as
possible and not later than sixty (60) days after the Party became
aware of any circumstance giving rise to a claim.
8. INSURANCE
The Seller represents that it, up to and including October 16, 1998,
will for the benefit of the Purchaser maintain in full force and effect
adequate insurances to cover the full value of the Assets. Should an
insured event occur on or before October 16, 1998, the Seller shall,
against the Purchaser paying the Purchase Price, assign to the
Purchaser any and all insurance amounts due under the applicable
insurance.
9. ADDITIONAL COVENANTS
9.1 It is agreed that the Seller until October 16, 1998, during normal
business hours, shall be entitled to freely access agreed parts of the
Facilities in order to make the necessary arrangements to finalize its
business. During such visits, representatives of Seller shall act with
due and proper care.
9.2 It is further agreed that the Purchaser shall allow an employee of the
Seller (an accountant) to have use of such office space as reasonably
required until the Seller can close the financial accounting year and
complete its financial reporting requirements under Swedish law,
however, not for a period of time extending the month of December 1998.
The Purchaser agrees that the Seller and its successors-in-title may
store Seller's financial and regulatory records at the Facilities for
the earlier of (i) the period of time the Purchaser occupies the
Facilities; or (ii) for the retention period required by law for such
records.
4
<PAGE> 5
9.3 It is further agreed that the Seller and its successors-in-title upon
request, on its own expense, during normal business hours shall be
entitled to access and make photocopies of such product documentation
as validation data, SOPs, etc., included in the Books which refers to
any products of the Neoprobe group of companies which have been
processed by any of the Machinery.
9.4 The Purchaser agrees that, for a period of 24 months following the
Closing Date, the Seller and its successors-in-title may leave the cell
banks currently located in the Facilities (the "Cell Banks" which are
to be listed jointly by the parties), and that the Purchaser will
maintain the Cell Banks and conduct periodic stability testing in
accordance with the established SOPs at no cost to Seller or its
successors-in-title. The SOPs are to be provided to the Purchaser by
Seller free of charge. If requested by the Seller or its
successors-in-title, upon expiration of the 24-month period, the
parties agree to negotiate in good faith continued maintenance and
testing by the Purchaser on the Cell Banks, and the conditions
herefore.
9.5 The Purchaser further agrees that, for a period of 24 months following
the Closing Date, the Seller shall have the right to leave the vialed
monoclonal antibody samples (the "Monoclonal Samples" which are to be
listed jointly by the parties), currently located in the Facilities and
that the Purchaser will maintain the Monoclonal Samples at no cost to
the Seller or its successors-in-title. If requested by the Seller or
its successors-in-title, upon expiration of the 24-month period, the
parties agree to negotiate in good faith continued maintenance by the
Purchaser on the Monoclonal Samples, and the conditions herefore.
9.6 Save for the equipment referred to in article 9.7 below, the Seller
undertakes to remove any and all property kept in the Facilities which
is not subject to the transfer under this Agreement, on or before
October 16, 1998.
9.7 The Purchaser undertakes to dismount the filling machine and the
isolator set forth in Schedule 5 (the "Equipment"), and keep it
available for collection by the Seller upon 14 days prior written
notice from the Seller. Solely provided that Seller has given notice
pursuant hereto, Seller undertakes to collect the dismounted Equipment
within seven (7) days after the Purchaser gives notice to Seller that
the Equipment is ready for removal. The Seller shall in no event
collect the Equipment later than on December 30, 1998. The dismounting
shall take place with due and proper care, but otherwise in a way that
the Purchaser finds convenient.
9.8 The duties of the Purchaser under the articles 9.2, 9.4-9.5 and 9.7
above shall be exercised by the Purchaser using due and proper care.
However, there shall be no liability of the Purchaser for loss or
damage to the property or similar, unless caused by negligence on
behalf of the Purchaser. The Seller or its successors-in-title shall at
all times maintain the appropriate and adequate insurances for the
property of the Seller, held by the Purchaser.
5
<PAGE> 6
10. CONFIDENTIALITY
10.1 The Seller undertakes not to disclose to any third party any
information regarding the Assets that is not already in the public
domain.
10.2 The Seller hereby waives all its rights under the Proprietary
Information Disclosure Agreement signed by and between the Parties on
September 4th, 1998.
10.3 The Purchaser undertakes not to disclose to any third party or to use
for its own purposes any information regarding the Cell Banks, the SOP
or the Monoclonal Samples that is not already in the public domain or
previously known by Purchaser through its own operations.
11. NOTICES
All notices, consents and other communications required or permitted
under this Agreement shall be made in writing and be deemed to have
been duly given by the Parties if addressed and delivered by confirmed
fax or registered mail to the addresses or fax numbers set forth below
(or to such other addresses or fax numbers as may be given by written
notice in accordance with this Section 11).
If to the Seller: Neoprobe Europe AB
c/o Neoprobe Corp.
Attention: David C. Bupp
425 Metro Place North, Suite 300
Dublin, Ohio 43017
USA
Fax no: +1 (614) 793 7520
If to the Purchaser: BioInvent Production AB
Attention: President
SE-223 70 LUND
Sweden
Fax no. +46 46 211 08 06
12. GOVERNING LAW AND ARBITRATION
12.1 This Agreement shall be construed in accordance with and governed by
the laws of Sweden.
12.2 Any dispute, controversy or claim arising out of, or in connection
with, the Agreement or from agreements resulting thereof shall be
exclusively settled by arbitration in accordance with the Rules of
Expedited Arbitration of the Stockholm Chamber of Commerce. The
arbitration shall take place in Malmo and be conducted in the English
language.
6
<PAGE> 7
The parties hereto here cause this Agreement to be duly executed in two copies
by their respective authorized officers as of the respective dates set forth
below.
Date: October 9, 1998 Date: October 14, 1998
Place: Dublin, Ohio Place: Lund
NEORPOBE EUROPE AB BIOINVENT PRODUCTION AB
/s/ David C. Bupp /s/ Sven Mathiesen
- ---------------------------------- ----------------------------------
David C. Bupp Sven Mathiesen
Chairman of the Board of Directors Chairman of the Board of Directors
/s/ Matt Bowman /s/ Roland Carlsson
- ---------------------------------- ----------------------------------
Matt Bowman Roland Carlsson
Director Director
We hereby jointly and severally with Neoprobe Europe AB, guarantee the due
fulfillment of any and all liabilities of Neoprobe Europe AB under this
Agreement, including but not limited to any liabilities arising under the
warranties given by Neoprobe Europe AB hereunder.
Sections 11 and 12 shall apply also to the above guarantee.
Place: Dublin, Ohio
Date: October 9, 1998
NEOPROBE CORP.
/s/ David C. Bupp
- ----------------------------------
David C. Bupp
7
<PAGE> 1
Exhibit 11.1
<TABLE>
NEOPROBE CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS PER SHARE
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Loss $(5,412,776) $(5,604,963) $(17,373,909) $(17,929,631)
Weighted average number of
shares outstanding:
Common shares outstanding
beginning of period 22,758,725 22,840,017 22,586,527 22,763,430
Weighted average common shares
issued during period 8,109 44,511 136,480 59,952
----------- ----------- ------------ ------------
Weighted average number of shares outstanding
used in computing basic net loss per share 22,766,834 22,884,528 22,723,007 22,823,382
=========== =========== ============ ============
Weighted average number of shares used in
computing diluted net loss per share 22,766,834 22,884,528 22,723,007 22,823,382
=========== =========== ============ ============
Earnings (Net Loss) Per Share:
Basic $ (0.24) $ (0.24) $ (0.76) $ (0.79)
=========== =========== ============ ============
Diluted $ (0.24) $ (0.24) $ (0.76) $ (0.79)
=========== =========== ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,422,252
<SECURITIES> 1,674,893
<RECEIVABLES> 1,478,797
<ALLOWANCES> 155,160
<INVENTORY> 775,961
<CURRENT-ASSETS> 9,456,271
<PP&E> 13,890,754
<DEPRECIATION> 3,529,568
<TOTAL-ASSETS> 23,565,150
<CURRENT-LIABILITIES> 4,055,142
<BONDS> 4,660,532
0
0
<COMMON> 22,885
<OTHER-SE> 14,826,589
<TOTAL-LIABILITY-AND-EQUITY> 23,565,150
<SALES> 3,821,262
<TOTAL-REVENUES> 3,821,262
<CGS> 1,019,081
<TOTAL-COSTS> 1,019,081
<OTHER-EXPENSES> 11,074,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 152,982
<INCOME-PRETAX> (17,929,631)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,929,631)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,929,631)
<EPS-PRIMARY> (0.79)
<EPS-DILUTED> (0.79)
</TABLE>
