SUPPLY AND DISTRIBUTION AGREEMENT

Exhibit 10.1

SUPPLY AND DISTRIBUTION AGREEMENT

     THIS AGREEMENT, entered into the 15th day of November, 2007, by and between Neoprobe Corporation, a Delaware corporation having a place of business at 425 Metro Place North, Suite 300, Dublin, Ohio 43017 (“Supplier”), and Cardinal Health 414, LLC, a Delaware limited liability company, having a place of business at 7000 Cardinal Place, Dublin, Ohio 43017 (“Cardinal Health”).

     WHEREAS, Supplier intends to manufacture and sell various radiopharmaceutical products, including a product identified as Lymphoseek ^® , as hereinafter described in greater detail (the “Product”); and

     WHEREAS, Cardinal Health desires to purchase from Supplier on an exclusive basis, and Supplier desires to manufacture and sell to Cardinal Health on an exclusive basis within the Territory, the Product on the terms and conditions hereinafter set forth;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, the parties mutually agree as follows:

1. DEFINITION OF TERMS

	1.1		“Affiliate(s)” means any corporation, firm, partnership or other entity that controls, is controlled by or is under common control with a party. For purposes of this definition, “control” shall mean the ownership of at least fifty percent (50%) of the voting share capital of such entity or any other comparable equity or ownership interest.
	1.2		“Applicable Laws” means all laws, ordinances, rules and regulations applicable to the Product or any aspect thereof and to the obligations of Cardinal Health or Supplier, as the context requires, under this Agreement, including, without limitation, (a) all applicable federal, state and local laws and regulations, (b) the U.S. Food, Drug and Cosmetic Act (21 U.S.C. §201, et seq.), and (c) the current Good Manufacturing Practices promulgated by the FDA, each as amended from time to time.
	1.3		“Contract Year” means four calendar quarters beginning with the first calendar quarter following the Effective Date, and each twelve (12) month period beginning with the corresponding month in subsequent calendar years. Contract Year 1 shall also include the also include those days prior to the first calendar quarter following the Effective Date.
	1.4		“Effective Date” means the date of approval by the FDA of a New Drug Application for the Product.
	1.5		“FDA” means the U.S. Food and Drug Administration.

	1.6		“Procedure” means a single diagnostic procedure (specifically, a single surgical or preoperative imaging application of Sentinel Lymph Node Biopsy) for which the Product is dispensed by Cardinal Health for administration to a single patient.
	1.7		“Product” shall mean Lymphoseek, as more specifically described in Schedule 1.7 , which is incorporated into this Agreement.
	1.8		“Provisional Transfer Cost” means (a) through the end of the first Contract Year, [*] per Vial delivered to Cardinal Health, and (b) beginning with the second Contract Year and continuing thereafter during the Term, the dollar amount per Vial that is equal to the greater of (i) [*] percent ([*]%) of the average retail sales price of the Product per Procedure by Cardinal Health during the prior Contract Year, or (ii) [*] Dollars ([*]) per Vial delivered to Cardinal Health.
	1.9		“Revenue” means the sales revenue received by Cardinal Health, net of any rebates, returns, credits and allowances, resulting directly from the sale of the Product.
	1.10		“Revenue Share Amount” means the dollar amount due to Supplier that is equal to Revenue multiplied by the applicable percentage set forth on Schedule 1.10 , but only to the extent such amount exceeds the Provisional Transfer Cost paid to Supplier by Cardinal Health.
	1.11		“Specifications” shall mean the manufacturing, labeling and packaging specifications defined in an FDA New Drug Application for the Product.
	1.12		“Term” means the duration of this Agreement as set forth in Section 2 below.
	1.13		“Territory” means the fifty states of the United States of America.
	1.14		“Vial” shall mean one vial of the Product, as further identified in Schedule 1.7.

2. TERM OF AGREEMENT

2.1

Unless earlier terminated pursuant to the terms herein, this Agreement shall commence upon the date set forth in the first paragraph hereof and shall continue in effect for a period of sixty (60) months from the Effective Date.

2.2

The Term of this Agreement will automatically renew for an additional Contract Year (and shall continue to renew annually thereafter), unless either party gives notice of non-renewal to the other party at least six (6) months before the expiration of the then-current Term.

3. EXCLUSIVE SALE AND PURCHASE OF THE PRODUCTS

3.1

Following the Effective Date, Supplier agrees to manufacture and sell the Product exclusively to Cardinal Health in the Territory, and Cardinal Health agrees to purchase the Product exclusively from Supplier in the Territory in accordance with

			the provisions of this Agreement. Cardinal Health shall be entitled to compound and distribute unit doses (i.e., prescriptions for a single Procedure) to customers located within the Territory for use within the Territory, and to distribute the Product in bulk form to end-users or subdistributors located within the Territory for use within the Territory, including, but not limited to, hospitals, clinics and mobile imaging services; provided however that (i) no such subdistributor may appoint any other subdistributor, (ii) Cardinal Health assumes full responsibility for compliance with all applicable restrictions and obligations by each subdistributor, and (iii) all payments and reports due on account of subdistributor activity will be made by and through Cardinal Health together with Cardinal Health’s other payments and reports.
	3.2		For purposes of calculating the Revenue Share Amounts below, sales of Product in bulk form (i.e., not compounded) shall be presumed to be on the basis of [*] per Vial. The volume, price and ratio per vial of sales in bulk form will be reviewed periodically by the Steering Committee and may be adjusted as deemed appropriate by the Steering Committee.

4. REVENUE SHARE AMOUNT

	4.1		Within thirty (30) days following the end of each month during the Term, Cardinal Health shall provide to Supplier data on the sales of the Product sufficiently detailed to allow Supplier to calculate the number of Procedures performed and the applicable Revenue Share Amount.
	4.2		Within forty-five (45) days following the end of each calendar quarter of the Term, Cardinal Health will pay to Supplier the Revenue Share Amount by annualizing the number of Procedures sold during the applicable quarter (the “Quarterly Revenue Share Amount”) and will provide to Supplier a report setting forth in reasonable detail the basis for the calculation of the Quarterly Revenue Share Amount.
	4.3		For each Contract Year, Cardinal Health shall calculate the annual Revenue Share Amount due to Supplier (the “Annual Revenue Share Amount”). If the Annual Revenue Share Amount is less than the sum of the Quarterly Revenue Share Amounts paid during the applicable Contract Year, Supplier shall refund the excess to Cardinal Health within forty-five (45) days of notice of such excess. If the Annual Revenue Share Amount is greater than the sum of the Quarterly Revenue Share Amounts for the applicable Contract Year, Cardinal Health shall remit the balance due to Supplier within forty-five (45) days following the last day of the applicable Contract Year.
	4.4		In the event the Provisional Transfer Cost of Vials used related to Procedures sold during a given quarter exceeds the amount calculated pursuant to Schedule 1.10 , Cardinal Health shall be entitled to a credit against the Revenue Share Amount due to Supplier in the next applicable period or periods in the amount of such excess. However, for purposes of calculating the Revenue Share Amount for the applicable

period, in no case can the number of Vials used for any given calendar quarter included in the calculation exceed the number of Procedures sold in the calculation.

5. PROVISIONAL TRANSFER COST; SHIPMENT TERMS; MILESTONE PAYMENTS

	5.1		The price to be paid for Vials of the Products purchased by Cardinal Health under this Agreement shall be the Provisional Transfer Cost.
	5.2		All prices are F.O.B. Cardinal Health’s national radiopharmaceutical distribution center.
	5.3		Prices do not include any sales, use, excise or other similar taxes or duties. Cardinal Health shall pay all such taxes and duties and any personal property taxes or other similar charges assessed on the Product after delivery to the carrier.
	5.4		Unless otherwise agreed by the parties in writing, Cardinal Health shall make payment separately for each purchase order filled by Supplier. Cardinal Health shall pay all invoice amounts within thirty (30) days of the date of Cardinal Health’s shipment of the Product from Cardinal Health’s national distribution center to another point of destination (i.e., Cardinal Health nuclear pharmacy or independent pharmacy).
	5.5		Title to and risk of loss or damage to the Product shall pass to Cardinal Health on placement of Product in the hands of a carrier for shipment from Cardinal Health’s national distribution center to another point of destination.
	5.6		In addition to the Revenue Share Amount and Provisional Transfer Cost, Cardinal Health shall pay to Supplier the following payments (the “Milestone Payments”):

     (a) Upon Cardinal’s sale of [*] cumulative Procedures, [*];

     (b) Upon Cardinal’s sale of [*] cumulative Procedures, [*];

     (c) Upon Cardinal’s sale of [*] cumulative Procedures, [*]; and

     (d) Upon Cardinal’s sale of [*] cumulative Procedures, [*].

5.7

Cardinal Health shall pay the applicable Milestone Payment within forty-five (45) days of the end of the quarter in which Cardinal Health achieves the applicable milestone Procedures amount as set forth in Section 5.5.

6. ORDERING PROCEDURES; NO MINIMUM PURCHASE REQUIREMENT; MINIMUM SALES REQUIREMENT

	6.1		Cardinal Health shall submit its orders for the Product through Supplier’s Customer Service representative. Cardinal Health may also submit orders by facsimile to (614) 793-7522. Each order submitted by facsimile or in other written form must specify (a) the number of Vials of the Product to be purchased and (b) the desired delivery dates. Except for the information specified in the preceding clauses (a) and (b), the terms of the Cardinal Health’s purchase orders or any other documents submitted by Cardinal Health shall be of no force and effect, and the terms of such purchase and sale shall be governed solely by this Agreement.
	6.2		Cardinal Health will provide Supplier with real-time electronic access to inventory quantity and shipment information regarding Product distributed from its national radiopharmaceutical distribution center referenced in 5.2.
	6.3		Supplier will use reasonable commercial efforts to manufacture and supply the Product in the amounts and at the times specified by Cardinal Health.
	6.4		Cardinal Health has no obligation to purchase from Supplier any minimum dollar volume of the Product, however, commencing with the second Contract Year and, for each Contract Year thereafter, Cardinal Health shall be required to sell not less than the greater of (i) [*] percent ([*]%) of the number of Procedures sold during the prior Contract Year or (ii) [*] Procedures (the “Minimum Sales Requirement”). In the event Cardinal Health does not meet the Minimum Sales Requirement for any Contract Year, within thirty (30) days following the expiration of such Contract Year, Cardinal must either (a) pay to Supplier the additional Revenue Share Amount (based on the average sales price and Procedure/Vial ratio that existed for the first three quarters of the Contract Year) that Supplier would have earned if Cardinal Health had met the Minimum Sales Requirement or (b) terminate Supplier’s exclusivity obligation under this Agreement.

7. STEERING COMMITTEE; RETAIL PRICE

	7.1		Cardinal Health and Supplier agree to establish a Steering Committee comprised of an equal number of representatives from each party. The Steering Committee will meet periodically, but no less frequently than semi-annually. The Steering Committee shall be responsible for reviewing performance and economics of the distribution of the Product including, without limitation, consideration of reimbursement rate, actual product labeling, average selling price, number of Procedures per Vial, market penetration and Supplier production forecasts.
	7.2		The Steering Committee will discuss and suggest the retail sales price for the Product; provided however, that Cardinal Health has sole discretion to establish the retail sales price and that the Provisional Transfer Price per vial may not be decreased below $[*] per Vial

8. AUDIT RIGHTS

	8.1		Each party (each such party, an “Obligated Party”) agrees to permit the other party (each such party, an “Auditing Party”) to appoint an independent certified accountant, acceptable and approved by the Obligated Party, to examine during reasonable business hours, upon ten (10) business days prior written notice and not more frequently than once each rolling twelve (12) calendar months, the books and records of the Obligated Party only to the extent necessary to verify compliance with this Agreement. The Auditing Party shall make such examination at its sole cost and expense; provided however, that in the event such audit reveals a material breach of the Obligated Party’s obligations under this Agreement, such Obligated Party shall bear the reasonable costs and expenses of the audit.
	8.2		Unless otherwise agreed to by the Parties, if as a result of the audit performed pursuant to Section 8.1, the independent certified accountant determines that Cardinal Health has under-reported any information necessary to calculate Revenue Share Amount for the Product and as a result Supplier has received less than it should have under the Agreement, Cardinal Health shall, no later than forty-five (45) business days after receiving notice of such underpayment, remit to Neoprobe the amount of the underpayment. If as a result of the audit performed pursuant to Section 8.1, the independent certified accountant determines that Cardinal Health has over-reported any information used to calculate the Revenue Share Amount for the Product and as a result Supplier has received more than it should have under the Agreement, Cardinal Health shall be entitled to a credit against the Revenue Share Amount due to Supplier in the next applicable period in the amount of such excess.
	8.3		The Auditing Party shall treat the information provided by the Obligated Party as confidential information except that the Auditing Party may disclose such information to its auditors, accountants and attorneys to the extent reasonably necessary to conduct such audit.

9. DUTIES OF CARDINAL HEALTH

9.1

In addition to all other obligations set forth in this Agreement, Cardinal Health shall:

	(a)		use diligent efforts to market the Product, including creating promotional, educational, marketing and sales materials and a marketing plan acceptable to the Supplier; provided that Supplier may at its expense undertake certain promotional and/or marketing activities; and
	(b)		secure any governmental or regulatory approvals, at its own expense, necessary for its purchase, use or resale of the Product and provide proof of regulatory notification or approval as requested by Supplier; and
	(c)		comply at all times with all Applicable Laws governing the performance of its obligations hereunder.

10. DUTIES OF SUPPLIER

10.1

In addition to all other obligations set forth in this Agreement, Supplier shall:

	(a)		manufacture, label and package the Product in accordance with the Specifications;
	(b)		notify Cardinal Health promptly in writing should Supplier become aware of any defect or condition which may render the Product in violation of any Applicable Laws; and
	(c)		comply at all times with all Applicable Laws