Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated this 11th day of
December, 2017, by and among SORRENTO THERAPEUTICS, INC., a Delaware corporation
(the “Company”), and the purchasers identified on Schedule A hereto (each, a
“Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, the Purchasers desire to purchase convertible promissory notes in the
form attached hereto as Exhibit A in an aggregate principal amount of
$50,000,000 (each, a “Note” and collectively, the “Notes”), which are
convertible into shares of common stock, $0.0001 par value (the “Common Stock”),
of the Company (the “Note Shares”), and warrants in the form attached hereto as
Exhibit B (each, a “Warrant” and collectively, the “Warrants” and, together with
the Notes, the “Securities”) to purchase an aggregate of 12,121,210 shares of
Common Stock (the “Warrant Shares”), and the Company desires to sell the
Securities to the Purchasers (the “Sale”), all on the terms and conditions set
forth in this Agreement; and

 

WHEREAS, in reliance upon the representations made by the Purchasers and the
Company in this Agreement, the transactions contemplated by this Agreement are
such that the offer and sale of securities by the Company under this Agreement
will be exempt from registration under applicable United States securities laws
as a result of the Sale being undertaken pursuant to Section 4(a)(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation S
promulgated thereunder; and

 

WHEREAS, on the Closing Date, the parties hereto will execute and deliver a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit C (the “Registration Rights Agreement”), pursuant to which, among other
things, the Company will agree to provide certain registration rights with
respect to the Note Shares and the Warrant Shares under the Securities Act and
the rules and regulations promulgated thereunder and applicable state securities
laws.

 

NOW, THEREFORE, in consideration of the terms and conditions contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Company and each of the Purchasers hereby agree as
follows:

 

Section 1. Sale. Subject to and upon the terms and conditions set forth in this
Agreement, each Purchaser agrees to purchase from the Company, and the Company
agrees to sell to such Purchaser, severally and not jointly, a Note in the
aggregate principal amount set forth opposite such Purchaser’s name on Schedule
A hereto (the “Applicable Note”), and a Warrant to purchase such number of
shares of Common Stock set forth opposite such Purchaser’s name on Schedule A
hereto (the “Applicable Warrant”) in exchange for a payment by such Purchaser to
the Company of an amount in cash equal to the aggregate principal amount of the
Applicable Note as set forth opposite such Purchaser’s name on Schedule A hereto
(the “Applicable Purchase Price”).

 

 

 

 

1.1 Closing. On the Closing Date (as defined below), upon the terms and subject
to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell
to each Purchaser, and each Purchaser agrees to purchase, such Purchaser’s
Applicable Note and such Purchaser’s Applicable Warrant at the Applicable
Purchase Price. The closing of the Sale (the “Closing”) shall occur after 4:00
PM Eastern Time on the fifth (5th) business day following the Purchasers’
receipt of a written notice from the Company indicating that all the conditions
set forth in Section 4 and Section 5 have been satisfied or waived in accordance
with this Agreement (other than those conditions that by their terms are to be
satisfied at the Closing, it being understood that the occurrence of the Closing
shall remain subject to the satisfaction or waiver of such conditions at the
Closing), but in any event not earlier than ten (10) business days after the
date of this Agreement, or on such other date as the parties may mutually agree
in writing (the “Closing Date”). The Securities issuable at the Closing shall
bear a restrictive legend as follows:

 

THIS [NOTE/WARRANT] AND THE SECURITIES ISSUABLE UPON [CONVERSION/EXERCISE]
HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY
BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE
DISPOSED OF (EACH, A “TRANSFER”) ONLY IF SUCH SECURITIES ARE REGISTERED UNDER
THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR IF SUCH TRANSFER
IS MADE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND
SUCH STATE SECURITIES LAWS AFTER PROVIDING AN OPINION OF COUNSEL TO SUCH EFFECT.

 

1.2 Section 4(a)(2). Assuming the accuracy of the representations and warranties
of each of the Company and the Purchasers set forth in Section 2 and Section 3,
respectively, the parties acknowledge and agree that the purpose of such
representations and warranties is, among other things, to ensure that the Sale
qualifies as a sale of securities under Section 4(a)(2) of the Securities Act.

 

1.3 Deliveries.

 

(a)       On or prior to the Closing Date, the Company shall deliver or cause to
be delivered to each Purchaser the following:

 

(i)       such Purchaser’s Applicable Note, registered in the name of such
Purchaser;

 

(ii)       such Purchaser’s Applicable Warrant, registered in the name of such
Purchaser;

 

(iii)       the Registration Rights Agreement, duly executed by the Company;

 

(iv)       a certificate executed by the principal executive officer and the
principal financial or accounting officer of the Company (solely in their
capacities as such), dated the Closing Date, in form and substance reasonably
satisfactory to the Purchasers, to the effect that: (A) the representations and
warranties of the Company set forth in Section 2 are true and correct in all
material respects (other than representations and warranties which are already
qualified as to materiality, which shall be true and correct in all respects) as
of the date when made and as of the Closing Date, as though made on and as of
such date, except for such representations and warranties that speak as of a
specific date, which shall be true and correct as of such specified date, and
(B) the Company has complied with all the agreements and satisfied all the
conditions herein on its part to be performed or satisfied by the Company on or
prior to the Closing Date (the “Officer’s Certificate”);

 

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(v)       an updated group chart of the Company in the same form as the group
chart on Schedule B hereto that is accurate and complete as of the Closing Date;

 

(vi)       an updated capitalization table of the Company in the same form as
the capitalization table on Schedule C hereto that is accurate and complete as
of the Closing Date;

 

(vii)       updated capitalization tables of Concortis Biosystems, Corp., LA
Cell, Inc., Scintilla Pharmaceuticals, Inc., Sorrento Biologics, Inc. and TNK
Therapeutics, Inc., each in the same form as the capitalization tables on
Schedule D hereto that are accurate and complete as of the Closing Date; and

 

(viii)       a copy of the resolutions adopted by the Company’s Board of
Directors approving and authorizing the execution, delivery and performance of
this Agreement and each of the other Transaction Documents and the consummation
of the transactions contemplated hereby and thereby, certified by the Secretary
of the Company; and

 

(ix)       an opinion of counsel to the Company addressed to the Purchasers in
form and substance reasonably satisfactory to the Purchasers.

 

(b)       On or prior to the Closing Date, each Purchaser shall deliver or cause
to be delivered to the Company the following:

 

(i)       the Applicable Purchase Price by wire transfer in immediately
available funds to the account specified by the Company; and

 

(ii)       the Registration Rights Agreement, duly executed by such Purchaser.

 

1.4 Allocation of Purchase Price. The Company and the Purchasers, as a result of
arm’s length bargaining, agree that (a) none of the Purchasers nor any of their
respective Affiliates (as defined below) have rendered services to the Company
in connection with this Agreement, and (b) except as otherwise required by a
final “determination” within the meaning of Section 1313(a)(1) of the U.S.
Internal Revenue Code of 1986, as amended, all tax returns and other information
returns of each party relative to this Agreement, the Securities issued pursuant
hereto shall consistently reflect the matters agreed to in clause (a) of this
Section 1.4.

 

Section 2. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers, as of the date of this Agreement and
as of the Closing Date, that:

 

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2.1 Organization and Qualification. The Company and each majority-controlled
subsidiary of the Company (collectively, the “Subsidiaries”) is an entity duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Neither the Company, nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
reasonably be expected to result in: (a) a material adverse effect on the
legality, validity or enforceability of this Agreement, the Warrants, the Notes,
the Officer’s Certificate or the Registration Rights Agreement (collectively,
the “Transaction Documents”), (b) a material adverse effect on the results of
operations, assets, business, prospects or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (c) a material adverse
effect on the Company’s ability to perform in any material respect on a timely
basis its obligations under any Transaction Document (any of (a), (b) or (c), a
“Material Adverse Effect”) and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification. For purposes of this
Agreement, a “controlled subsidiary of the Company” is a subsidiary of the
Company for which the Company has the power to vote or direct the voting of a
majority of the outstanding voting power, or for which the Company has the power
to elect a majority of the members of the board of directors or similar
governing body, in either case as of the date of this Agreement.

 

2.2 Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and each of the other Transaction Documents and otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, its Board of Directors or the
Company’s stockholders in connection herewith or therewith other than in
connection with the Required Approvals (as defined below). This Agreement and
each other Transaction Document to which it is a party has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms.

 

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2.3 Capitalization, Issuance of Securities, Note Shares and Warrant Shares. The
information contained on (a) the group chart setting forth the ownership
structure of certain of the Company’s Subsidiaries on Schedule B hereto, (b) the
capitalization table of the Company on Schedule C hereto, and (c) the
capitalization tables of five (5) of the Company’s direct Subsidiaries on
Schedule D hereto are accurate and complete as of the date of this Agreement.
Subject to the Company receiving the written confirmation from Nasdaq (as
defined below) as contemplated by Section 5.5, the issuance of the Securities is
duly authorized by all necessary action on the part of the Company and no
further action is required by the Company, its Board of Directors or the
Company’s stockholders in connection herewith or therewith. Subject to the
Company receiving the written confirmation from Nasdaq as contemplated by
Section 5.5, the issuance of the Note Shares is duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, its Board of Directors or the Company’s stockholders in connection
herewith or therewith. The Note Shares have been reserved for issuance upon
conversion of the Notes and, upon issuance in accordance with the terms of the
Notes, the Note Shares will be validly issued, fully paid and non-assessable
shares of Common Stock. Subject to the Company receiving the written
confirmation from Nasdaq as contemplated by Section 5.5, the issuance of the
Warrant Shares is duly authorized by all necessary action on the part of the
Company and no further action is required by the Company, its Board of Directors
or the Company’s stockholders in connection herewith or therewith. The Warrant
Shares have been reserved for issuance upon exercise of the Warrants and, upon
issuance in accordance with the terms of the Warrants, the Warrant Shares will
be validly issued, fully paid and non-assessable shares of Common Stock.
Assuming the truth and accuracy of each of the representations and warranties of
the Purchasers contained in Section 3, the issuance by the Company of the
Securities, upon conversion of the Notes, the Note Shares, and, upon exercise of
the Warrants, the Warrant Shares, is exempt from registration under the
Securities Act and will be free of any Liens (as defined below). The authorized
capital stock of the Company consists of 750,000,000 shares of common stock,
$0.0001 par value, and 100,000,000 shares of preferred stock, $0.0001 par value.
As of December 7, 2017, 82,692,979 shares of the Common Stock and no shares of
Preferred Stock were issued and outstanding, 5,932,998 shares of Common Stock
are issuable upon the exercise of outstanding warrants, 10,782,096 shares of
Common Stock are issuable upon the exercise of options to purchase shares of
Common Stock and no shares of Common Stock are issuable upon the conversion of
outstanding convertible securities. Except for the transactions contemplated
hereby and except as set forth in the SEC Reports (as defined below), the
Company has not granted any option (except for stock options granted under the
Company’s stock option plans), warrants, rights (including conversion or
preemptive rights, except for stock purchases under the Company’s employee stock
purchase plan), or similar rights to any person or entity to purchase or acquire
any rights with respect to any shares of capital stock of the Company. The
Common Stock is currently listed on the Nasdaq Capital Market and the Company
knows of no reason or set of facts which is likely to result in the termination
of listing of the Common Stock on the Nasdaq Capital Market or the inability of
such stock to continue to be listed on the Nasdaq Capital Market. The Company
shall, so long as any of the Notes are outstanding, take all action necessary to
reserve and keep available out of its authorized and unissued capital stock,
solely for the purpose of effecting the conversion of any then-outstanding
Notes, the number of shares of Common Stock issuable upon conversion of any
then-outstanding Notes. The Company shall, so long as any of the Warrants are
outstanding, take all action necessary to reserve and keep available out of its
authorized and unissued capital stock, solely for the purpose of effecting the
exercise of any then-outstanding Warrants, the number of shares of Common Stock
issuable upon exercise of any then-outstanding Warrants.

 

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2.4 No Conflicts. The execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents to which it is a party, the
issuance of the Securities and the consummation by it of the transactions
contemplated hereby and thereby do not and will not: (a) conflict with or
violate any provision of the Purchaser’s Applicable Note, the Purchaser’s
Applicable Warrant, the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, (b) conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any options,
contracts, agreements, liens, security interests, or other encumbrances
(“Liens”) upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (c) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (b) and
(c), such as would not have or reasonably be expected to result in a Material
Adverse Effect.

 

2.5 Acknowledgment Regarding the Sale. The Company acknowledges and agrees that
each Purchaser is acting solely in the capacity of an arm’s length third party
with respect to this Agreement and the transactions contemplated hereby. The
Company also acknowledges that it is not relying on any advice or representation
of the Purchasers in connection with entering into this Agreement or the
transactions contemplated hereunder other than the representations made by the
Purchasers in this Agreement. The Company further acknowledges each Purchaser is
not acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby, and any advice given by any Purchaser or any of its respective
representatives or agents in connection with this Agreement is merely incidental
to the Sale. None of the Company, any of its Affiliates or any person acting on
its or their behalf has conducted any general solicitation (as that term is used
in Rule 502(c) of Regulation D) or general advertising with respect to any of
the Securities, or made any offers or sales of any security or solicited any
offers to buy any security under any circumstances that would require
registration of the Securities under the Securities Act.

 

2.6 SEC Reports; Financial Statements.  The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), including pursuant to Section 13(a) or 15(d) of
the Exchange Act, for the two years preceding the date of this Agreement (the
foregoing materials, including the exhibits thereto and documents incorporated
by reference therein, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension.  As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act, as applicable, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.  The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Securities Exchange Commission (the “SEC”) with respect
thereto as in effect at the time of filing.  Such financial statements have been
prepared in accordance with generally accepted accounting principles in the
United States applied on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such financial statements or
the notes thereto and except that unaudited financial statements may not contain
all footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. As of the date of this Agreement, there
are no outstanding or unresolved comments received from the staff of the SEC
with respect to the SEC Reports, and to the Company’s knowledge, none of the SEC
Reports is the subject of any ongoing SEC review or investigation.

 

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2.7 Subsidiaries.  All of the direct and indirect subsidiaries of the Company
are set forth in the SEC Reports.  The capital stock or other equity interests
of each Subsidiary that are owned by the Company are owned by the Company free
and clear of any Liens, and all of the issued and outstanding shares of capital
stock of each Subsidiary of the Company that are owned by the Company are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.  

 

2.8 Filings, Consents and Approvals.  Except for: (a) a waiver pursuant to that
certain Loan and Security Agreement, dated as of November 23, 2016, by and among
the Company, certain subsidiaries of the Company, the several banks and other
financial institutions or entities from time to time parties thereto as Lender,
and Hercules Capital, Inc., in its capacity as administrative agent and
collateral agent for itself and the Lender, as amended (the “Hercules Loan
Agreement”) (which waiver will be obtained on or prior to the Closing), and (b)
the filing with the SEC of one or more registration statements as may be
required from time to time under the Registration Rights Agreement, the Company
is not required to obtain any consent, waiver, authorization or order of, give
any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than the notice and/or application(s) to each
applicable Trading Market for the issuance and the listing of the Note Shares
and the Warrant Shares for trading thereon in the time and manner required
thereby (collectively, the “Required Approvals”). For purposes of this
Agreement, “Person” shall mean any individual, corporation (including any
non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization, entity, domestic or foreign multinational, federal,
state, provincial, municipal or local government (or any political subdivision
thereof) or any domestic or foreign governmental, regulatory or administrative
authority or any department, commission, board, agency, court, tribunal,
judicial body or instrumentality thereof, or any other body exercising, or
entitled to exercise, any administrative, executive, judicial, legislative,
police, regulatory or taxing authority or power of any nature (including any
arbitral body). For purposes of this Agreement, “Trading Market” shall mean any
market or exchange of The NASDAQ Stock Market LLC or the New York Stock
Exchange.

 

2.9 Material Changes; Undisclosed Events, Liabilities or Developments. Since the
date of the latest audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed prior to the
date of this Agreement: (a) there has been no event, occurrence or development
that has had or that would reasonably be expected to result in a Material
Adverse Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (i) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice, and (ii) liabilities
not required to be reflected in the Company’s financial statements pursuant to
GAAP or disclosed in filings made with the SEC, (c) the Company has not altered
its method of accounting, (d) the Company has not declared or made any dividend
or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock, and (e) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option plans.
Except for the issuance of the Securities contemplated by this Agreement, no
event, liability, fact, circumstance, occurrence or development has occurred or
exists or is reasonably expected to occur or exist with respect to the Company
or its Subsidiaries or their respective businesses, properties, operations,
assets or financial condition, that would be required to be disclosed by the
Company under applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed prior to the date that this
representation is made.

 

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2.10 Litigation.  Except as disclosed in the SEC Reports, there is no action,
suit, inquiry, notice of violation, proceeding or investigation pending or, to
the knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (a)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents, the Note Shares or the Warrant Shares, (b)
adversely affects or imposes any liabilities on any of the Purchasers or any of
their respective Affiliates with respect the Applicable Note or Applicable
Warrant, or (c) would, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect.  Except as disclosed in the
SEC Reports, none of the Company, any Subsidiary, or any director or officer
thereof, is or has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim of breach of
fiduciary duty. To the knowledge of the Company, there is no pending or
contemplated investigation by the SEC involving the Company or any current or
former director or officer of the Company.  The SEC has not issued any stop
order or other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or the Securities
Act.

 

2.11 Compliance. Except as disclosed in the SEC Reports, neither the Company nor
any Subsidiary: (a) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received any notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived), (b) is in violation of any judgment, decree or order of any court,
arbitrator or other governmental authority, or (c) is or has been in violation
of any statute, rule, ordinance or regulation of any governmental authority,
including without limitation all foreign, federal, state and local laws relating
to taxes, environmental protection, anti-corruption, anti-money laundering, SEC
reporting, occupational health and safety, product quality and safety and
employment and labor matters (collectively, “Laws”), except in each case as
would not have, or reasonably be expected to result in, a Material Adverse
Effect. The Company holds all material licenses, franchises, permits,
certificates, approvals and authorizations from each governmental body, or
required by Laws or any governmental body to be obtained, in each case necessary
for the lawful conduct of its business and operations as currently conducted
(collectively, “Permits”). The Company is in compliance in all material respects
with the terms of all Permits. To the Company’s knowledge, it has not received
written notice since January 2017 to the effect that a governmental body (i)
claimed or alleged that the Company was not in compliance with all Laws
applicable to the Company, any of its properties or other assets or any of its
business or operations other than as previously disclosed to the Purchasers in
writing, or (ii) was considering the amendment, termination, revocation or
cancellation of any Permit. The consummation of the transactions contemplated
hereby, in and of itself, will not cause the revocation or cancellation of any
Permit.

 

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2.12 Certain Fees. No brokerage or finder’s fees or commissions are or will be
payable by the Company or any Subsidiaries to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by the Transaction Documents.

 

2.13 Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.

 

2.14 Disclosure. All of the disclosure furnished by or on behalf of the Company
to the Purchasers regarding the Company and its Subsidiaries, their respective
businesses and the transactions contemplated hereby, is true and correct in all
material respects and does not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. The press releases disseminated by the Company during the twelve
months preceding the date of this Agreement, taken as a whole, do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made and when
made, not misleading. The Company acknowledges and agrees that the Purchasers
make no, nor have made any, representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in
Section 3.

 

2.15 No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3, none of the Company, any
of its Affiliates, or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause the Sale to be integrated
with prior offerings by the Company for purposes of (a) the Securities Act,
which would require the registration of any such securities under the Securities
Act, or (b) any applicable stockholder approval provisions of any Trading Market
on which any of the securities of the Company are listed or designated.

 

2.16 Regulation M Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (a) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the issuance or resale of any of the
Securities, the Note Shares or the Warrant Shares, (b) sold, bid for, purchased
or paid any compensation for soliciting purchases of, any of the Securities, the
Note Shares or the Warrant Shares, or (c) paid or agreed to pay to any Person
any compensation for soliciting another to purchase any other securities of the
Company.

 

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2.17 Taxes. The Company and the Subsidiaries have filed all federal, state,
local and foreign tax returns that have been required to be filed and paid all
taxes shown thereon through the date of this Agreement, to the extent that such
taxes have become due and are not being contested in good faith, except where
the failure to do so would not reasonably be expected to have a Material Adverse
Effect. Except as disclosed in the SEC Reports, no tax deficiency has been
determined adversely to the Company or any Subsidiary which has had, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. The Company has no knowledge of any federal, state or other
governmental tax deficiency, penalty or assessment which has been or might be
asserted or threatened against it which would reasonably be expected to have a
Material Adverse Effect.

 

2.18 Intellectual Property. The Company and the Subsidiaries own or possess
adequate enforceable rights to use all patents, patent applications, trademarks
(both registered and unregistered), service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) (collectively, the
“Intellectual Property”), necessary for the conduct of their respective
businesses as conducted as of the date of this Agreement, except to the extent
that the failure to own or possess adequate rights to use such Intellectual
Property would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; the Company and the Subsidiaries have not
received any written notice of any claim of infringement or conflict which
asserted Intellectual Property rights of others, which infringement or conflict,
if the subject of an unfavorable decision, would reasonably be expected to
result in a Material Adverse Effect; there are no pending, or to the Company’s
knowledge, threatened judicial proceedings or interference proceedings against
the Company or its Subsidiaries challenging the Company’s or any of its
Subsidiary’s rights in or to or the validity of the scope of any of the
Company’s or any Subsidiary’s patents, patent applications or proprietary
information, except for such right or claim that would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect; to
the Company’s knowledge no other entity or individual has any right or claim in
any of the Company’s or any of its Subsidiary’s patents, patent applications or
any patent to be issued therefrom by virtue of any contract, license or other
agreement entered into between such entity or individual and the Company or any
Subsidiary or by any non-contractual obligation, other than by written licenses
granted by the Company or any Subsidiary, except for such right or claim that
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect; the Company and the Subsidiaries have not received
any written notice of any claim challenging the rights of the Company or its
Subsidiaries in or to any Intellectual Property owned, licensed or optioned by
the Company or any Subsidiary which claim, if the subject of an unfavorable
decision, would reasonably be expected to result in a Material Adverse Effect.

 

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2.19 Disclosure Controls. The Company maintains systems of internal accounting
controls designed to provide reasonable assurance that (a) transactions are
executed in accordance with management’s general or specific authorizations;
(b) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability;
(c) access to assets is permitted only in accordance with management’s general
or specific authorization; and (d) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company is not aware of any
material weaknesses in its internal control over financial reporting. Since the
date of the latest audited financial statements of the Company included within
the SEC Reports, there has been no change in the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 and 15d-15) for the Company and designed such
disclosure controls and procedures to ensure that material information relating
to the Company and the Subsidiaries is made known to the certifying officers by
others within those entities, particularly during the period in which the
Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the
case may be, is being prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s controls and procedures as of a date within
90 days prior to the filing date of the Annual Report on Form 10-K for the
fiscal year most recently ended (such date, the “Evaluation Date”). The Company
presented in its Annual Report on Form 10-K for the fiscal year most recently
ended the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the most
recent Evaluation Date. Since the most recent Evaluation Date, there have been
no significant changes in the Company’s internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Securities Act) or, to the
Company’s knowledge, in other factors that would significantly adversely affect
the Company’s internal controls. To the knowledge of the Company, the Company’s
“internal controls over financial reporting” and “disclosure controls and
procedures” are effective.

 

2.20 No “Bad Actor” Disqualifying Events. No “Bad Actor” disqualifying event
described in Rule 506(d)(1)(i) to (viii) of the Securities Act (a
“Disqualification Event”) is applicable to the Company, except for a
Disqualification Event as to which Rule 506(d)(2)(ii–iv) or (d)(3), is
applicable; provided that, for purposes of this representation and warranty, the
Company relied exclusively on completed and executed questionnaires delivered to
the Company by its directors and executive officers and beneficial owners of
twenty percent (20%) or more of the Company’s outstanding voting equity
securities.

 

2.21 Environmental Laws. The Company (i) is in compliance with any and all
Environmental Laws (as hereinafter defined), (ii) has received all permits,
licenses or other approvals required of it under applicable Environmental Laws
to conduct its business and (iii) is in compliance with all terms and conditions
of any such permit, license or approval except where, in each of the foregoing
clauses (i), (ii) and (iii), the failure to so comply would reasonably be
expected to result in a Material Adverse Effect. The term “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

 

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2.22 Foreign Corrupt Practices Act.  None of the Company, the Subsidiaries, or,
to the knowledge of the Company, any agent or other person acting in the course
of its actions on behalf of the Company or the Subsidiaries, has, directly or
indirectly, (i) used any corporate funds, or will use any proceeds from the sale
of the Securities, for unlawful contributions, gifts, entertainment or other
unlawful expenses related to foreign or domestic political activity, (ii) made
any unlawful influence payment to foreign or domestic government officials or to
any foreign or domestic political parties or campaigns from corporate funds, or
(iii) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended, and the rules and regulations thereunder
which was or is applicable to the Company or any of the Subsidiaries.

 

2.23 Compliance with Anti-Money Laundering Laws. The operations of the Company
are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements and all other applicable U.S. and
non-U.S. anti-money laundering laws and regulations, including, but not limited
to, those of the Currency and Foreign Transactions Reporting Act of 1970, as
amended, the USA Patriot Act of 2001 and the applicable money laundering
statutes of all applicable jurisdictions, the rules and regulations thereunder
and any related or similar rules, regulations or guidelines, issued,
administered or enforced by any governmental agency (collectively, the
“Anti-Money Laundering Laws”), the Company has in place policies and procedures
reasonably designed to ensure that its and its Subsidiaries’, if any, operations
will continue to be conducted in compliance with all applicable Money Laundering
Laws and no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or the
Subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to
the knowledge of the Company, threatened.

 

2.24 Sarbanes-Oxley Act. The Company is in compliance in all material respects
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as
amended, that are effective as of the date hereof, and any and all applicable
rules and regulations promulgated by the SEC thereunder that are effective as of
the date hereof.

 

2.25 Application of Takeover Protections. The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, interested stockholder, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation, Bylaws or other
organizational documents or the laws of the jurisdiction of its formation which
is or could become applicable to any Purchaser as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company’s
issuance of the Securities and any Purchaser’s ownership of the Securities.

 

2.26 Insurance. The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as management
of the Company believes to be prudent and customary in the business in which the
Company is engaged. The Company has not been refused any insurance coverage
sought or applied for, the refusal of which would reasonably be expected to have
a Material Adverse Effect. The Company has no reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not reasonably be expected to have
a Material Adverse Effect.

 

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2.27 Title. The Company has marketable title to all personal property owned by
it which is material to the business of the Company, in each case free and clear
of all Liens except for Liens which do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company. Any real property and facilities held
under material lease by the Company are held by it under valid and enforceable
leases with such exceptions as are not material and do not materially interfere
with the use made and proposed to be made of such property and buildings by the
Company.

 

2.28 Third Party Indebtedness. Other than the Hercules Loan Agreement and
indebtedness incurred in the ordinary course of business, the Company does not
have any indebtedness for borrowed money that is owed to a third party.

 

Section 3. Representations and Warranties of the Purchasers. Each Purchaser
represents and warrants to the Company, severally and not jointly, as of the
date of this Agreement and as of the Closing Date, that:

 

3.1 No Public Sale or Distribution. Such Purchaser is acquiring the Applicable
Note and the Applicable Warrant, and, upon conversion of such Applicable Note,
will acquire the Note Shares, and, upon exercise of such Applicable Warrant,
will acquire the Warrant Shares, in the ordinary course of business for its own
account and not with a view toward, or for resale in connection with, the public
sale or distribution thereof. Such Purchaser does not presently have any
agreement or understanding, directly or indirectly, with any person to
distribute, or transfer any interest or grant participation rights in the
Securities, the Note Shares or the Warrant Shares.

 

3.2 Accredited Investor and Affiliate Status. Such Purchaser is an “accredited
investor” as that term is defined in Rule 501 of Regulation D under the
Securities Act. Such Purchaser is not, and has not been, for a period of at
least three months prior to the date of this Agreement (a) an officer or
director of the Company, (b) an “affiliate” of the Company (as defined in Rule
144) (an “Affiliate”), or (c) a “beneficial owner” of more than 10% of the
common stock of the Company (as defined for purposes of Rule 13d-3 of the
Exchange Act).

 

3.3 Reliance on Exemptions. Such Purchaser understands that the Sale is being
made in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Purchaser’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of such Purchaser set forth herein in order to determine the availability of
such exemptions and the eligibility of such Purchaser to complete the Sale and
to acquire the Applicable Note and the Applicable Warrant.

 

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3.4 Information. Such Purchaser has been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the Sale which have been requested by such Purchaser. Such Purchaser has been
afforded the opportunity to ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by such Purchaser or its
representatives shall modify, amend or affect such Purchaser’s right to rely on
the Company’s representations and warranties contained herein. Such Purchaser
acknowledges that all of the documents filed by the Company with the SEC under
Sections 13(a), 14(a) or 15(d) of the Exchange Act that have been posted on the
SEC’s EDGAR site are available to such Purchaser.

 

3.5 Risk. Such Purchaser understands that its investment in the Securities
involves a high degree of risk. Such Purchaser is able to bear the risk of an
investment in the Securities including, without limitation, the risk of total
loss of its investment. Such Purchaser has sought such accounting, legal and tax
advice as it has considered necessary to make an informed investment decision
with respect to the Sale. Such Purchaser is not relying on any advice or
representation of the Company in connection with entering into this Agreement or
the Registration Rights Agreement or the transactions contemplated hereunder or
thereunder (other than the representations made by the Company in this
Agreement) and has not received from the Company any assurance or guarantee as
to the merits (whether legal, regulatory, tax, financial or otherwise) of
entering into this Agreement or the Registration Rights Agreement or the
performance of such Purchaser’s obligations hereunder or thereunder.

 

3.6 No Governmental Review. Such Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement in connection with the Sale
or the fairness or suitability of the investment in the Securities.

 

3.7 Organization; Authorization. If such Purchaser is an entity, such Purchaser
is duly organized, validly existing and in good standing under the laws of
jurisdiction set forth opposite its name on Schedule A hereto and has the
requisite organizational power and authority to enter into and perform its
obligations under this Agreement and the Registration Rights Agreement.

 

3.8 Validity; Enforcement. This Agreement and the Registration Rights Agreement
have been duly and validly authorized, executed and delivered on behalf of such
Purchaser and constitute the legal, valid and binding obligations of such
Purchaser enforceable against such Purchaser in accordance with their terms. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement by such Purchaser and the consummation by such Purchaser of the
transactions contemplated hereby and thereby will not result in a violation of
the organizational documents of such Purchaser.

 

3.9 Prior Investment Experience. Such Purchaser acknowledges that it has prior
investment experience, including investment in securities of the type being
sold, including the Securities, and has read all of the documents furnished or
made available by the Company to it and is able to evaluate the merits and risks
of such an investment on its behalf, and that it recognizes the highly
speculative nature of this investment.

 

3.10 Tax Consequences. Such Purchaser acknowledges that the Company has made no
representation regarding the potential or actual tax consequences for such
Purchaser that will result from entering into this Agreement and from
consummation of the Sale. Such Purchaser acknowledges that it bears complete
responsibility for obtaining adequate tax advice for such Purchaser itself
regarding this Agreement and the Sale.

 

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3.11 No Registration, Review or Approval; Restricted Securities. Such Purchaser
acknowledges, understands and agrees that the Securities are being sold
hereunder pursuant to an offer exemption under Section 4(a)(2) of the Securities
Act and/or the safe harbor provided under Regulation S promulgated thereunder.
Such Purchaser understands that the Securities, the Note Shares and the Warrant
Shares constitute “restricted securities” within the meaning of Rule 144 under
the Securities Act and may not be sold, pledged or otherwise disposed of unless
they are subsequently registered under the Securities Act and applicable state
securities laws or unless an exemption from registration thereunder is
available.

 

3.12 Jurisdiction. Such Purchaser made its investment decision to purchase the
Securities at its offices located at the address set forth opposite such
Purchaser’s name on Schedule A hereto. If such Purchaser is an individual, such
Purchaser resides in the jurisdiction listed in the address set forth opposite
such Purchaser’s name on Schedule A hereto. If such Purchaser is an entity, such
Purchaser’s principal place of business is located in the jurisdiction listed in
the address set forth opposite such Purchaser’s name on Schedule A hereto.

 

3.13 Exculpation Among Purchasers. Such Purchaser acknowledges that it is not
relying upon any Person, other than the Company and its officers and directors,
in making its investment or decision to invest in the Company. Such Purchaser
agrees that neither such Purchaser nor its controlling Persons, officers,
directors, partners, agents or employee shall be liable to any other Purchaser
for any action heretofore taken or omitted to be taken by any of them in
connection with the purchase of the Securities, the Note Shares and the Warrant
Shares.

 

3.14 No Disqualifying Events. Neither (a) such Purchaser; nor (b) any of such
Purchaser’s directors, executive officers, other officers that may serve as a
director or officer of any company in which it invests, general partners or
managing members, is subject to any of Disqualification Events, except for
Disqualification Events covered by Rule 506(d)(2)(ii); or (iii) or (d)(3) under
the Securities Act and disclosed reasonably in advance of the Closing in writing
in reasonable detail to the Company.

 

3.15 No Short Sales. Such Purchaser has not engaged in any “short sales” (as
defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock
or instructed any third parties to engage in any short sales of the Common Stock
on such Purchaser’s behalf prior to the Closing Date. Such Purchaser covenants
and agrees that it will not be in a net short position with respect to the
shares of Common Stock. For purposes of this Section 3.15, a “net short
position” means a sale of Common Stock by a Purchaser that is marked as a short
sale and that is made at a time when there is no equivalent offsetting long
position in Common Stock held by such Purchaser.

 

Section 4. Covenants of the Company.

 

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4.1 Covenants of the Company between Signing and Closing. From the date of this
Agreement until the Closing Date, the Company shall not, without the prior
written consent of the Purchasers purchasing at least a majority of the
aggregate principal amount of the Notes, as set forth on Schedule A hereto: (a)
increase, reduce or cancel any authorized or issued Common Stock of the Company
or issue, allot, purchase or redeem any Common Stock or other securities of the
Company, undertake any recapitalization or similar transaction or do any act
which has the effect of diluting or reducing the current and prospective
shareholding of the current stockholders of the Company on a fully diluted basis
in the Company; or amend, modify or waive any provision of any document related
to any authorized or issued Common Stock of the Company; issue, redeem,
repurchase any securities (including equity and debt securities) of the Company,
or cause or permit the Company to undertake any recapitalization or similar
transaction; or consolidate, sub-divide, convert, reclassify or re-designate any
of the share capital of the Company; provided, however, that the foregoing shall
not apply to (i) the issuance of shares of Common Stock Shares or options to
purchase shares of Common Stock, or the issuance of shares of Common Stock upon
exercise of options, pursuant to any stock option, stock bonus or other stock
plan or arrangement described in the SEC Reports; (ii) the issuance of shares of
Common Stock pursuant to the conversion or exchange of convertible or
exchangeable securities or the exercise of warrants outstanding on the date
hereof and described in the SEC Reports; (iii) the issuance and sale of shares
of Common Stock pursuant to that certain At Market Issuance Sales Agreement,
dated November 3, 2014, by and between the Company and MLV & Co. LLC; (iv) the
issuance of shares of Common Stock upon the achievement of certain milestones
pursuant to that certain Share Purchase Agreement, dated April 27, 2017, by and
among the Company, TNK Therapeutics, Inc., Virttu Biologics Limited, the
shareholders of Virttu Biologics Limited and Dayspring Ventures Limited, as
representative of the shareholders of Virttu Biologics Limited, as may be
amended or restated from time to time; (v) the issuance of shares of Common
Stock upon the achievement of certain milestones pursuant to that certain Stock
Purchase Agreement, dated November 8, 2016, by and among the Company, Scilex
Pharmaceuticals Inc., the stockholders of Scilex Pharmaceuticals Inc. party
thereto and SPI Shareholders Representative, LLC, as representative of the
stockholders of Scilex Pharmaceuticals Inc. party thereto, as may be amended or
restated from time to time; (vi) the issuance of shares of Common Stock pursuant
to that certain Stock Purchase Agreement, dated as of August 7, 2015, by and
among TNK Therapeutics, Inc., BDL Products, Inc., the stockholders of BDL
Products, Inc., Richard Junghans, M.D., Ph.D. as the Stockholders’
Representative and the Company, as amended; (vii) acquisitions, cancellations or
repurchases of Common Stock by the Company pursuant to employee or consultant
agreements that permit the Company to repurchase such shares; or (viii) the
issuance and sale of shares of Common Stock pursuant to that certain At Market
Issuance Sales Agreement, dated November 9, 2017, by and between the Company and
B. Riley FBR, Inc., as may be amended or restated from time to time; or (b)
change the dividend policy, propose or approve any distribution of profits by
way of interim or final dividend, capitalization of reserve or otherwise by the
Company.

 

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4.2 Negative Pledge Covenants of the Company. The Company covenants and agrees
that, so long as the aggregate principal amount of all outstanding Notes is at
least $25,000,000, it will not create or permit any Lien, other than Permitted
Liens, on any of the Company’s assets to secure (a) any of the Company’s
indebtedness or obligations, or (b) the indebtedness of any other person, unless
the Company contemporaneously creates or permits such Lien to equally and
ratably secure the Company’s obligations under the Transaction Documents  or the
Company provides such other security for the Notes as is duly approved by the
Purchasers holding a majority of the aggregate principal amount of the
then-outstanding Notes. For purposes of this Agreement, “Permitted Liens” means
(i) Liens granted or incurred under the Hercules Loan Agreement, (ii) Liens for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings;
provided, that the Company maintains adequate reserves therefor in accordance
with GAAP (to the extent required thereby); (iii) Liens securing claims or
demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords
and other like Persons arising in the ordinary course of the Company’s business;
(iv) Liens arising from judgments, decrees or attachments which do not
constitute an “Event of Default” under the Notes; (v) deposits to secure the
performance of obligations (including by way deposits to secure letters of
credit issued to secure the same) under commercial supply and/or manufacturing
agreements; (vi) pledges or deposits under worker’s compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds, in each case, to the extent made
in the ordinary course of business; (vii) Liens on equipment or software or
other intellectual property constituting purchase money Liens and Liens in
connection with capital leases; (viii) leasehold interests in leases or
subleases and licenses and sublicenses granted in the ordinary course of
business; (ix) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of custom duties that are promptly paid on or
before the date they become due; (x) Liens securing the payment of financed
insurance premiums that are promptly paid on or before the date they become due
and incurred in the ordinary course of business; (xi) statutory and common law
rights of set-off and other similar rights as to deposits of cash and securities
in favor of banks, other depository institutions and brokerage firms; (xii)
easements, zoning restrictions, rights-of-way and similar encumbrances on real
property imposed by law or arising in the ordinary course of business; (xiii)
Liens on cash securing reimbursement obligations in connection with letters of
credit and cash management services (including credit cards, debit cards and
other similar instruments); (xiv) security deposits in connection with real
property leases; (xv) Liens of landlords arising by statute or under any lease
entered into in the ordinary course of business; (xvi) Liens relating to
intercompany borrowings between or among a person and its subsidiaries; (xvii)
sales, transfers, licenses, sublicenses, leases, subleases or other dispositions
of assets and, in connection therewith, customary rights and restrictions
contained in agreements relating to such transactions pending the completion
thereof or during the term thereof, and any option or other agreement to sell,
transfer, license, sublicense, lease, sublease or dispose of an asset; (xix)
Liens securing indebtedness that does not require the prior written consent of
the Requisite Purchasers (as defined in the Notes) under Section 16(a) of the
Notes; and (xx) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (i) through (x) above; provided, that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced (as may have been reduced by any payment thereon) does not increase.

 

4.3 Use of Proceeds. The Company shall use the proceeds from the sale of the
Securities hereunder (a) first, for the repayment of all amounts owed under the
Hercules Loan Agreement, and (b) second, for working capital and general
corporate purposes.

 

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Section 5. Conditions Precedent to Obligations of the Company. The obligation of
the Company to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of each of the following conditions; provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Purchasers with
prior written notice thereof:

 

5.1 Delivery of Purchase Price. Each of the Purchasers shall have delivered to
the Company the Applicable Purchase Price;

 

5.2 Delivery of Tax Forms. Each Purchaser that (a) is not a “United States
person” within the meaning of Section 7701(a)(30) of the U.S. Internal Revenue
Code of 1986, as amended, and (b) is entitled to an exemption from or reduction
of U.S. withholding tax with respect to payments made under such Purchaser’s
Applicable Note shall have provided to the Company such tax forms (e.g., IRS
Form W-8BEN-E, IRS Form W-8IMY or IRS Form W-8ECI) and other properly completed
and executed documentation as will permit such payments to be made without
withholding or at a reduced rate of withholding;

 

5.3 No Prohibition. No order of any court, arbitrator or governmental or
regulatory authority shall be in effect which purports to enjoin or restrain any
of the transactions contemplated by this Agreement;

 

5.4 Representations. The representations and warranties of the Purchasers
contained in Section 3 shall be true and correct in all material respects (other
than representations and warranties which are already qualified as to
materiality, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date, as though made on and as of such date,
except for such representations and warranties that speak as of a specific date,
which shall be true and correct as of such specified date; and

 

5.5 Nasdaq Approval. The Company shall have received from The Nasdaq Stock
Market LLC (“Nasdaq”) written confirmation that Nasdaq has completed its review
of the Listing of Additional Shares Notification Form submitted by the Company
to Nasdaq in connection with the proposed issuance of the Securities pursuant to
this Agreement.

 

Section 6. Conditions Precedent to Obligations of the Purchasers. The obligation
of the Purchasers to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of each of the following conditions; provided
that these conditions are for each Purchaser’s sole benefit and may be waived by
such Purchaser, on behalf of itself, at any time in its sole discretion by
providing the Company with prior written notice thereof:

 

6.1 Delivery. The Company shall have delivered or caused to be delivered to the
Purchasers the items set forth in Section 1.3(a);

 

6.2 No Prohibition. No order of any court, arbitrator, or governmental or
regulatory authority shall be in effect which purports to enjoin or restrain any
of the transactions contemplated by this Agreement;

 

6.3 Representations. The representations and warranties of the Company contained
in Section 2 shall be true and correct in all material respects (other than
representations and warranties which are already qualified as to materiality,
which shall be true and correct in all respects) as of the date when made and as
of the Closing Date, as though made on and as of such date, except for such
representations and warranties that speak as of a specific date, which shall be
true and correct as of such specified date;

 

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6.4 Waiver. The Company shall have received a waiver, in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
pursuant to the Hercules Loan Agreement. If the Company has not obtained the
waiver required under this Section 6.4 on or before December 31, 2017, the
Purchasers shall be entitled to terminate this Agreement and the transactions
contemplated hereby by serving a written notice to the Company without assuming
any liability under this Agreement, notwithstanding anything to the contrary in
this Agreement or any of the Transaction Documents;

 

6.5 Due Diligence. The Purchasers shall have completed, to their satisfaction,
all legal, financial and business due diligence of the Company and the results
thereof shall be satisfactory to the Purchasers.

 

6.6 Trading. From the date of this Agreement to the relevant Closing Date,
trading in the Company’s Common Stock shall not have been suspended by the SEC
or any Trading Market and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg L.P. shall not have been suspended
or limited, or minimum prices shall not have been established on securities
whose trades are reported by such service, or on any trading market, nor shall a
banking moratorium have been declared either by the United States or California
authorities nor shall there have occurred any material outbreak or escalation of
hostilities or other national or international calamity of such magnitude in its
effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of the Purchasers purchasing a majority of
the aggregate principal amount of the Notes, as set forth on Schedule A hereto,
makes it impracticable or inadvisable to purchase the Securities at the Closing.

 

Section 7. Listing of Common Stock. The Company hereby agrees to use its best
efforts to maintain the listing or quotation (as the case may be) of the Common
Stock on the Trading Market on which it is currently listed or designated for
quotation (as the case may be). The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
then include in such application all of the Note Shares and the Warrant Shares,
and will use its best efforts to take such other action as is necessary to cause
all of the Note Shares and the Warrant Shares to be listed or quoted on such
other Trading Market as promptly as possible.  The Company will then use its
best efforts to take all action necessary to continue the listing and trading of
its Common Stock on a Trading Market and will comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules of
the Trading Market.  The Company shall pay all fees and expenses in connection
with satisfying its obligations under this Section 7.

 

Section 8. Furnishing of Information.  As long as a Purchaser owns any
Securities, Note Shares or Warrant Shares, the Company covenants to use its best
efforts to timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date of this Agreement pursuant to the Exchange Act.  As long as a
Purchaser owns any Securities, Note Shares or Warrant Shares, if the Company is
not required to file reports pursuant to the Exchange Act, the Company will use
its best efforts to prepare and furnish to such Purchaser and make publicly
available in accordance with Rule 144(c) such information as is required for
such Purchaser to sell the Note Shares or the Warrant Shares under Rule 144. The
Company further covenants that it will use its best efforts to take such further
action as a Purchaser may reasonably request, all to the extent required from
time to time to enable such Purchaser to sell the Note Shares or the Warrant
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144.

 

19 

 

 

Section 9. Indemnification.  In addition to any other indemnity provided in the
Transaction Documents, the Company will indemnify and hold each Purchaser and
its directors, officers, stockholders, partners, employees, advisers,
affiliates  and agents (each, a “Purchaser Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (collectively, “Losses”)
that any such Purchaser Party may suffer or incur as a result of or relating to
(a) any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document, and (b)
any action instituted against a Purchaser Party in any capacity, or any of them
or their respective affiliates, by any individual who is not an affiliate of
such Purchaser Party, with respect to any of the transactions contemplated by
this Agreement.  In addition to the indemnity contained herein, the Company will
reimburse each Purchaser Party for its reasonable legal and other expenses
(including the cost of any investigation, preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred.

 

Section 10. Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement
shall be construed under the laws of the State of California, without regard to
principles of conflicts of law or choice of law that would permit or require the
application of the laws of another jurisdiction. The Company and each of the
Purchasers hereby agree that all actions or proceedings arising directly or
indirectly from or in connection with this Agreement shall be litigated only in
the Superior Court of the State of California or the United States District
Court for the Southern District of California located in San Diego County,
California. The Company and each of the Purchasers consent to the exclusive
jurisdiction and venue of the foregoing courts and consents that any process or
notice of motion or other application to either of said courts or a judge
thereof may be served inside or outside the State of California or the Southern
District of California by generally recognized overnight courier or certified or
registered mail, return receipt requested, directed to such party at its or his
address set forth below (and service so made shall be deemed “personal service”)
or by personal service or in such other manner as may be permissible under the
rules of said courts. THE COMPANY AND EACH OF THE PURCHASERS HEREBY WAIVE ANY
RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION PURSUANT TO THIS
AGREEMENT.

 

Section 11. Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a .pdf or other form of
electronic signature shall be considered due execution and shall be binding upon
the signatory thereto with the same force and effect as if the signature were an
original, not a .pdf or other form of electronic signature.

 

20 

 

 

Section 12. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

Section 13. Fees and Expenses. Except as otherwise provided in this Agreement,
all expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses;
provided, however, that in the event the Closing does not occur solely due to
the failure by the Company to obtain: (a) the written confirmation from Nasdaq
as contemplated by Section 5.5, or (b) the waiver under the Hercules Loan
Agreement as contemplated by Section 6.4, then the Company shall reimburse the
Purchasers for their actual, reasonable and documented expenses incurred in
connection with the transactions contemplated by this Agreement in an amount not
to exceed an aggregate of $30,000.

 

Section 14. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

Section 15. Entire Agreement; Amendments. This Agreement supersedes all other
prior oral or written agreements between the Purchasers, the Company, their
Affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the Notes, the Warrants and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, none of the Company or any of the
Purchasers makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be amended, waived
or modified other than by an instrument in writing signed by the Company and:
(a) prior to the Closing, the Purchasers purchasing at least a majority of the
aggregate principal amount of the Notes, as set forth on Schedule A hereto, or
(b) after the Closing, the Purchasers holding at least a majority of the
aggregate principal amount of the then-outstanding Notes. Any such amendment,
waiver or modification effected in accordance with this Section 15 shall be
binding upon all Purchasers and each transferee of the Securities (or the Note
Shares or Warrant Shares), each future holder of all such securities and the
Company.

 

Section 16. Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (a) upon receipt, when
delivered personally; (b) upon receipt, when sent by e-mail (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (c) one calendar day (excluding
Saturdays, Sundays, and national banking holidays in the United States) after
deposit with an overnight courier service, in each case properly addressed to
the party to receive the same.

 

21 

 

 

The addresses and e-mail addresses for such communications shall be:

 

  If to the Company:       Sorrento Therapeutics Inc.   4955 Directors Place  
San Diego, California 92121   E-mail: hji@sorrentotherapeutics.com   Attn: Henry
Ji, Ph.D.       With a copy (which shall not constitute notice) to:       Paul
Hastings LLP   4747 Executive Drive, 12th Floor   San Diego, CA 92121   E-mail:
jeffhartlin@paulhastings.com   Attn: Jeffrey Hartlin, Esq.

 

If to a Purchaser: To the address set forth opposite such Purchaser’s name on
Schedule A hereto;

 

or to such other address and/or e-mail address and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.

 

Section 17. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Securities.

 

Section 18. No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

 

Section 19. Survival of Representations. The representations, warranties and
covenants of the Company and the Purchasers contained in this Agreement shall
survive the Closing and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of any of the Purchasers or the
Company. The Company shall indemnify and hold harmless each of the Purchasers
for any and all losses suffered by such Purchaser as a result of, in connection
with, or relating to, any breach by the Company of any representation, warranty
and/or covenant of the Company in this Agreement or in any certificate, document
or other writing delivered by the Company to such Purchaser pursuant to this
Agreement.

 

Section 20. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

Section 21. Language; Currency. This Agreement has been prepared in the English
language and the English language shall control its interpretation. In addition,
all notices required or permitted to be given hereunder, and all written,
electronic, oral or other communications between the parties regarding this
Agreement, shall be in the English language. All references to “$” contained in
this Agreement shall refer to United States Dollars unless otherwise stated.

 

[Signature Page Follows]

 

22 

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

COMPANY:

 

SORRENTO THERAPEUTICS, INC.

 

 

 

By: /s/ Henry Ji, Ph.D.   Name:   Henry Ji, Ph.D.   Title:     Chairman of the
Board, President & Chief Executive Officer

 

[Signature Page to Securities Purchase Agreement]

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

PURCHASER:

 

 

__________________________________

Printed Name OF Purchaser

 

 

By:   Name:     Title:      

  

[Signature Page to Securities Purchase Agreement]

 

 

Schedule A

 

Schedule of Purchasers

 

Name of Purchaser Jurisdiction of
Formation (for Entities) Principal Amount
of Note
Purchased Number of
Warrant
Shares Magnum Opus2 International Holdings Limited British Virgin Islands
$10,000,000  2,424,242 Famous Sino Limited British Virgin Islands $10,000,000
 2,424,242 Top Path Asia Limited British Virgin Islands $10,000,000  2,424,242
Hongguo International Holdings Limited British Virgin Islands $10,000,000
 2,424,242 China In Shine Investment Limited British Virgin Islands $10,000,000
 2,424,242 TOTAL $50,000,000 12,121,210

 

Schedule A