Exhibit 10.32

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (as the same may from time
to time be amended, modified, supplemented or restated, this “Agreement”) dated
as of March 31, 2014 (the “Effective Date”) among OXFORD FINANCE LLC, a Delaware
limited liability company with an office located at 133 North Fairfax Street,
Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity,
“Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a
party hereto from time to time including Oxford in its capacity as a Lender and
SILICON VALLEY BANK, a California corporation with an office located at 3003
Tasman Drive, Santa Clara, CA 95054 (“Bank” or “SVB”) (each a “Lender” and
collectively, the “Lenders”), and SORRENTO THERAPEUTICS, INC., a Delaware
corporation (“Parent”), IGDRASOL, INC., a Delaware corporation (“IgDraSol”), and
SHERRINGTON PHARMACEUTICALS, INC., a Delaware corporation (“Sherrington”), each
with offices located at 6042 Cornerstone Court, Suite B, San Diego, CA 92121,
CONCORTIS BIOSYSTEMS, CORP., a Delaware corporation (“Concortis”), with offices
located at 11760 Sorrento Valley Road, Suite N, San Diego, CA 92121 and ARK
ANIMAL THERAPEUTICS, INC., a Delaware corporation, with offices located at 6042
Cornerstone Court, Suite B, San Diego, CA 92121 (individually and collectively,
jointly and severally, “Borrower”), amends and restates in its entirety that
certain Loan and Security Agreement dated as of September 27, 2013 by and among
Collateral Agent, Oxford, in its capacity as a Lender, Silicon Valley Bank, as a
Lender, Parent, IgDraSol, Sherrington and Concortis (the “Original Agreement”)
and provides the terms on which the Lenders shall lend to Borrower and Borrower
shall repay the Lenders. The parties agree as follows:

 

1.        ACCOUNTING AND OTHER TERMS

1.1        Accounting terms not defined in this Agreement shall be construed in
accordance with GAAP. Calculations and determinations must be made in accordance
with GAAP. Capitalized terms not otherwise defined in this Agreement shall have
the meanings set forth in Section 13. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning provided by the
Code to the extent such terms are defined therein. All references to “Dollars”
or “$” are United States Dollars, unless otherwise noted.

 

2.        LOANS AND TERMS OF PAYMENT

2.1        Promise to Pay.  Borrower hereby unconditionally promises to pay each
Lender, the outstanding principal amount of all Term Loans advanced to Borrower
by such Lender and accrued and unpaid interest thereon and any other amounts due
hereunder as and when due in accordance with this Agreement.

2.2        Term Loans.

(a)        Availability.

(i)        Subject to the terms and conditions of the Original Agreement, on
September 27, 2013, Oxford loaned to Borrower a term loan in an amount equal to
Three Million Five Hundred Thousand Dollars ($3,500,000.00) (“the Oxford
Original Term Loan”) and SVB loaned to Borrower a term loan in an amount equal
to One Million Five Hundred Thousand Dollars ($1,500,000.00) (the “SVB Original
Term Loan”).

(ii)         Subject to the terms and conditions of this Agreement, Lenders
agree, severally and not jointly, to lend to Borrower on the Effective Date, or
as soon thereafter as practical, term loans as follows:

(1)        SVB shall make a term loan to Borrower in an amount equal to One
Million Five Hundred Thousand Dollars ($1,500,000.00) (the “SVB Pay Off Term
Loan”), the proceeds of which will be used to repay all Obligations owing from
Borrower to SVB in respect of the SVB Original Term Loan;

(2)        SVB shall make a term loan to Borrower in the amount equal to Three
Million Five Hundred Thousand Dollars ($3,500,000.00) (the “SVB New Money Term
Loan” and together with the SVB Pay Off Term Loan, the “SVB Term Loan”); and

 

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(iii)        Oxford shall make a term loan to Borrower in an amount equal to
Four Million Dollars ($4,000,000.00) (the “Oxford New Money Term Loan” and
together with the Oxford Original Term Loan, collectively, the “Oxford Term
Loan”; the Oxford Term Loan, together with the SVB Term Loan, each a “Term Loan”
and collectively, the “Term Loans”). When repaid, the Term Loans may not be
re-borrowed.

(b)        Repayment.  Borrower shall make monthly payments of interest only
commencing on the first (1st) Payment Date following the Funding Date of the
Term Loan (for the avoidance of doubt, such amount shall include the amount of
the Oxford Original Term Loan outstanding on the Effective Date), and continuing
on the Payment Date of each successive month thereafter through and including
the Payment Date immediately preceding the Amortization Date. Borrower agrees to
pay, on the Funding Date of the Term Loan, any initial partial monthly interest
payment otherwise due for the period between the Funding Date of the Term Loan
and the first Payment Date thereof. Commencing on the Amortization Date, and
continuing on the Payment Date of each month thereafter, Borrower shall make
consecutive equal monthly payments of principal and interest, in arrears, to
each Lender, as calculated by Collateral Agent (which calculations shall be
deemed correct absent manifest error) based upon: (1) the amount of such
Lender’s Term Loan, (2) the effective rate of interest, as determined in
Section 2.3(a), and (3) a repayment schedule equal to thirty-six (36) months, if
the Amortization Date is November 1, 2014, or thirty (30) months, if the
Amortization Date is May 1, 2015. All unpaid principal and accrued and unpaid
interest with respect to the Term Loan is due and payable in full on the
Maturity Date. The Term Loan may only be prepaid in accordance with Sections
2.2(c) and 2.2(d).

(c)        Mandatory Prepayments.  If the Term Loans are accelerated following
the occurrence of an Event of Default, Borrower shall immediately pay to
Lenders, payable to each Lender in accordance with its respective Pro Rata
Share, an amount equal to the sum of: (i) all outstanding principal of the Term
Loans plus accrued and unpaid interest thereon through the prepayment date,
(ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other
Obligations that are due and payable, including Lenders’ Expenses and interest
at the Default Rate with respect to any past due amounts. Notwithstanding (but
without duplication with) the foregoing, on the Maturity Date, if the Final
Payment had not previously been paid in full in connection with the prepayment
of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment
to each Lender in accordance with its respective Pro Rata Share, the Final
Payment in respect of the Term Loan(s).

(d)        Permitted Prepayment of Term Loans.  Borrower shall have the option
to prepay all, but not less than all, of the Term Loans advanced by the Lenders
under this Agreement, provided Borrower (i) provides written notice to
Collateral Agent of its election to prepay the Term Loans at least seven
(7) days prior to such prepayment, and (ii) pays to the Lenders on the date of
such prepayment, payable to each Lender in accordance with its respective Pro
Rata Share, an amount equal to the sum of (A) all outstanding principal of the
Term Loans plus accrued and unpaid interest thereon through the prepayment date,
(B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations
that are due and payable, including Lenders’ Expenses, if any, and interest at
the Default Rate with respect to any past due amounts. The Lenders hereby agree
to waive (i) the unaccrued portion of the final payment, and (ii) any prepayment
fees, with respect to the Oxford Original Term Loan and the SVB Original Term
Loan.

2.3        Payment of Interest on the Credit Extensions.

(a)        Interest Rate.  Subject to Section 2.3(b), the principal amount
outstanding under the Term Loans shall accrue interest at a fixed per annum rate
(which rate shall be fixed for the duration of the applicable Term Loan) equal
to the Basic Rate, determined by Collateral Agent on the Funding Date of the
applicable Term Loan, which interest shall be payable monthly in arrears in
accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term
Loan commencing on, and including, the Funding Date of such Term Loan, and shall
accrue on the principal amount outstanding under such Term Loan through and
including the day on which such Term Loan is paid in full.

(b)        Default Rate.  Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall accrue interest at a fixed
per annum rate equal to the rate that is otherwise applicable thereto plus five
percentage points (5.00%) (the “Default Rate”). Payment or acceptance of the
increased interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Collateral
Agent.

 

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(c)        360-Day Year.  Interest shall be computed on the basis of a three
hundred sixty (360) day year consisting of twelve (12) months of thirty
(30) days.

(d)        Debit of Accounts.  Collateral Agent and each Lender may debit (or
ACH) any deposit accounts, maintained by Borrower or any of its Subsidiaries,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes the Lenders under the Loan Documents when due.
Any such debits (or ACH activity) shall not constitute a set-off. Without
limiting the foregoing, Collateral Agent and each Lender shall use commercially
reasonable efforts to notify Borrower of any amounts (other than principal and
interest payments) debited from Borrower’s deposit accounts with respect to this
Agreement.

(e)        Payments.  Except as otherwise expressly provided herein, all
payments by Borrower under the Loan Documents shall be made to the respective
Lender to which such payments are owed, at such Lender’s office in immediately
available funds on the date specified herein. Unless otherwise provided,
interest is payable monthly on the Payment Date of each month. Payments of
principal and/or interest received after 12:00 noon Eastern time are considered
received at the opening of business on the next Business Day. When a payment is
due on a day that is not a Business Day, the payment is due the next Business
Day and additional fees or interest, as applicable, shall continue to accrue
until paid. All payments to be made by Borrower hereunder or under any other
Loan Document, including payments of principal and interest, and all fees,
expenses, indemnities and reimbursements, shall be made without set-off,
recoupment or counterclaim, in lawful money of the United States and in
immediately available funds.

2.4        Secured Promissory Notes.  The Term Loans shall be evidenced by a
Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each
a “Secured Promissory Note”), and shall be repayable as set forth in this
Agreement. Borrower irrevocably authorizes each Lender to make or cause to be
made, on or about the Funding Date of any Term Loan or at the time of receipt of
any payment of principal on such Lender’s Secured Promissory Note, an
appropriate notation on such Lender’s Secured Promissory Note Record reflecting
the making of such Term Loan or (as the case may be) the receipt of such
payment. The outstanding amount of each Term Loan set forth on such Lender’s
Secured Promissory Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record, or
any error in so recording, any such amount on such Lender’s Secured Promissory
Note Record shall not limit or otherwise affect the obligations of Borrower
under any Secured Promissory Note or any other Loan Document to make payments of
principal of or interest on any Secured Promissory Note when due. Upon receipt
of an affidavit of an officer of a Lender as to the loss, theft, destruction, or
mutilation of its Secured Promissory Note, Borrower shall issue, in lieu
thereof, a replacement Secured Promissory Note in the same principal amount
thereof and of like tenor.

2.5        Fees.  Borrower shall pay to Collateral Agent and/or to each Lender,
as applicable:

(a)        Facility Fee.  A fully earned, non-refundable facility fee of Seventy
Five Thousand Dollars ($75,000.00) to be shared between the Lenders pursuant to
their respective Commitment Percentages payable on the Effective Date;

(b)        Final Payment.  The Final Payment, when due hereunder, to be shared
between the Lenders in accordance with their respective Pro Rata Shares;

(c)        Prepayment Fee.  The Prepayment Fee, when due hereunder, if at all,
to be shared between the Lenders in accordance with their respective Pro Rata
Shares; and

(d)        Lenders’ Expenses.  All Lenders’ Expenses (including reasonable
attorneys’ fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.

(e)        Accrued Final Payment.  The accrued portion of the Final Payment
under the Original Agreement in an amount equal to Twenty Four Thousand Nine
Hundred and 80/100 Dollars ($24,900.80) payable to Oxford and Eleven Thousand
Six Hundred Sixty Six and 29/100 Dollars ($11,666.29) payable to SVB on the

 

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Effective Date. For the avoidance of doubt, prepayment fees under the Original
Agreement are hereby waived by Lenders.

2.6        Withholding.  Payments received by the Lenders from Borrower
hereunder will be made free and clear of and without deduction for any and all
present or future taxes, levies, imposts, duties, deductions, withholdings,
assessments, fees or other charges imposed by any governmental authority
(including any interest, additions to tax or penalties applicable thereto).
Specifically, however, if at any time any Governmental Authority, applicable
law, regulation or international agreement requires Borrower to make any
withholding or deduction from any such payment or other sum payable hereunder to
the Lenders, Borrower hereby covenants and agrees that the amount due from
Borrower with respect to such payment or other sum payable hereunder will be
increased to the extent necessary to ensure that, after the making of such
required withholding or deduction, each Lender receives a net sum equal to the
sum which it would have received had no withholding or deduction been required
and Borrower shall pay the full amount withheld or deducted to the relevant
Governmental Authority. Borrower will, upon request, furnish the Lenders with
proof reasonably satisfactory to the Lenders indicating that Borrower has made
such withholding payment; provided, however, that Borrower need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Borrower. The agreements and
obligations of Borrower contained in this Section 2.6 shall survive the
termination of this Agreement.

3.        CONDITIONS OF LOANS

   3.1        Conditions Precedent to Initial Credit Extension.  Each Lender’s
obligation to make a Term Loan is subject to the condition precedent that
Collateral Agent and each Lender shall consent to or shall have received, in
form and substance satisfactory to Collateral Agent and each Lender, such
documents, and completion of such other matters, as Collateral Agent and each
Lender may reasonably deem necessary or appropriate, including, without
limitation:

(a)        original Loan Documents, each duly executed by Borrower and each
Subsidiary, as applicable;

(b)        duly executed original Control Agreements with respect to any
Collateral Accounts maintained by Borrower or any of its Subsidiaries;

(c)        duly executed original Secured Promissory Notes in favor of each
Lender according to its Term Loan Commitment Percentage;

(d)        except with respect to Sorrento HK, the certificate(s) for the
Shares, together with Assignment(s) Separate from Certificate, duly executed in
blank;

(e)        the Operating Documents and good standing certificates of Borrower
and its Subsidiaries certified by the Secretary of State (or equivalent agency)
of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation
and each jurisdiction in which Borrower and each Subsidiary is qualified to
conduct business, each as of a date no earlier than thirty (30) days prior to
the Effective Date;

(f)        a completed Perfection Certificate for Borrower and each of its
Subsidiaries;

(g)        the Annual Projections, for the current calendar year (receipt of
which Collateral Agent hereby acknowledges);

(h)        duly executed original officer’s certificate for Borrower and each
Subsidiary that is a party to the Loan Documents, in a form acceptable to
Collateral Agent and the Lenders;

(i)        certified copies, dated as of date no earlier than thirty (30) days
prior to the Effective Date, of financing statement searches, as Collateral
Agent shall request, accompanied by written evidence (including

 

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any UCC termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;

(j)        a landlord’s consent executed in favor of Collateral Agent in respect
of all of Borrower’s and each Subsidiaries’ leased locations if either (i) the
assets at such location are valued in excess of Two Hundred Thousand Dollars
($200,000.00) in the aggregate or (ii) Borrower’s Books are maintained at any
such location;

(k)        evidence satisfactory to Collateral Agent and the Lenders that the
insurance policies required by Section 6.5 hereof are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements in favor of Collateral Agent, for the ratable
benefit of the Lenders;

(l)        a subordination agreement, duly executed by each holder of
Subordinated Debt; and

(m)        payment of the fees and Lenders’ Expenses then due as specified in
Section 2.5 hereof.

3.2        Conditions Precedent to all Credit Extensions.  The obligation of
each Lender to make each Credit Extension, including the initial Credit
Extension, is subject to the following conditions precedent:

(a)        receipt by (i) the Lenders of an executed Disbursement Letter in the
form of Exhibit B-1 attached hereto; and (ii) SVB of an executed Loan
Payment/Advance Request Form in the form of Exhibit B-2 attached hereto;

(b)        the representations and warranties in Section 5 hereof shall be true,
accurate and complete in all material respects on the date of the Disbursement
Letter (and the Loan Payment/Advance Request Form) and on the Funding Date of
each Credit Extension; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date,
and no Event of Default shall have occurred and be continuing or result from the
Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in Section 5
hereof are true, accurate and complete in all material respects; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;

(c)        in such Lender’s sole discretion, there has not been any Material
Adverse Change or any material adverse deviation by Borrower from the Annual
Projections of Borrower presented to and accepted by Collateral Agent and each
Lender;

(d)        to the extent not delivered at the Effective Date, duly executed
original Secured Promissory Notes and Warrants, in number, form and content
acceptable to each Lender, and in favor of each Lender according to its
Commitment Percentage, with respect to each Credit Extension made by such Lender
after the Effective Date; and

(e)        payment of the fees and Lenders’ Expenses then due as specified in
Section 2.5 hereof.

3.3        Covenant to Deliver.  Borrower agrees to deliver to Collateral Agent
and the Lenders each item required to be delivered to Collateral Agent under
this Agreement as a condition precedent to any Credit Extension. Borrower
expressly agrees that a Credit Extension made prior to the receipt by Collateral
Agent or any Lender of any such item shall not constitute a waiver by Collateral
Agent or any Lender of Borrower’s obligation to deliver such item, and any such
Credit Extension in the absence of a required item shall be made in each
Lender’s sole discretion.

3.4        Procedures for Borrowing.  Subject to the prior satisfaction of all
other applicable conditions to the making of a Term Loan set forth in this
Agreement, to obtain a Term Loan, Borrower shall notify the Lenders

 

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(which notice shall be irrevocable) by electronic mail, facsimile, or telephone
by 12:00 noon Eastern time three (3) Business Days prior to the date the Term
Loan is to be made. Together with any such electronic, facsimile or telephonic
notification, Borrower shall deliver to the Lenders by electronic mail or
facsimile a completed Disbursement Letter (and the Loan Payment/Advance Request
Form, with respect to SVB) executed by a Responsible Officer or his or her
designee. The Lenders may rely on any telephone notice given by a person whom a
Lender reasonably believes is a Responsible Officer or designee. On the Funding
Date, each Lender shall credit and/or transfer (as applicable) to the Designated
Deposit Account, an amount equal to its Term Loan Commitment.

 

4.        CREATION OF SECURITY INTEREST

4.1        Grant of Security Interest.   Borrower hereby grants Collateral
Agent, for the ratable benefit of the Lenders, to secure the payment and
performance in full of all of the Obligations, a continuing security interest
in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof. Borrower represents, warrants,
and covenants that the security interest granted herein is and shall at all
times continue to be a first priority perfected security interest in the
Collateral, subject only to Permitted Liens that are permitted by the terms of
this Agreement to have priority to Collateral Agent’s Lien. If Borrower shall
acquire a commercial tort claim (as defined in the Code), Borrower, shall
promptly notify Collateral Agent in a writing signed by Borrower, as the case
may be, of the general details thereof (and further details as may be required
by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of
the Lenders, in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance reasonably satisfactory to Collateral Agent.

Borrower acknowledges that it previously has entered, and/or may in the future
enter, into Bank Services Agreements with Bank. Regardless of the terms of any
Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank
thereunder shall be deemed to be Obligations hereunder and that it is the intent
of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to
Permitted Liens that may have superior priority to Bank’s Lien in this
Agreement).

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Upon payment in full in cash of the Obligations (other
than inchoate indemnity obligations) and at such time as the Lenders’ obligation
to make Credit Extensions has terminated, Collateral Agent shall and each
Lender, at the sole cost and expense of Borrower, release its Liens in the
Collateral and all rights therein shall revert to Borrower. In the event (x) all
Obligations (other than inchoate indemnity obligations), except for Bank
Services, are satisfied in full, and (y) this Agreement is terminated,
Collateral Agent and each Lender shall terminate the security interest granted
herein upon Borrower providing cash collateral acceptable to Bank in its good
faith business judgment consistent with Bank’s then current practice for Bank
Services, if any. In the event such Bank Services consist of outstanding Letters
of Credit, Borrower shall provide to Bank cash collateral in an amount equal to
(x) if such Letters of Credit are denominated in Dollars, then one hundred five
percent (105%); and (y) if such Letters of Credit are denominated in a Foreign
Currency, then one hundred ten percent (110%), of the Dollar Equivalent of the
face amount of all such Letters of Credit plus all interest, fees, and costs due
or to become due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to such Letters of
Credit.

4.2        Authorization to File Financing Statements.  Borrower hereby
authorizes Collateral Agent to file financing statements or take any other
action required to perfect Collateral Agent’s security interests in the
Collateral, without notice to Borrower, with all appropriate jurisdictions to
perfect or protect Collateral Agent’s interest or rights under the Loan
Documents, including a notice that any disposition of the Collateral, except to
the extent permitted by the terms of this Agreement, by Borrower, or any other
Person, shall be deemed to violate the rights of Collateral Agent under the
Code.

4.3        Pledge of Collateral.  Borrower hereby pledges, assigns and grants to
Collateral Agent, for the ratable benefit of the Lenders, a security interest in
all the Shares, together with all proceeds and substitutions thereof, all cash,
stock and other moneys and property paid thereon, all rights to subscribe for
securities declared or granted in connection therewith, and all other cash and
noncash proceeds of the foregoing, as security for the performance of the
Obligations. On the Effective Date, or, to the extent not certificated as of the
Effective Date,

 

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within ten (10) days of the certification of any Shares, the certificate or
certificates for the Shares will be delivered to Collateral Agent, accompanied
by an instrument of assignment duly executed in blank by Borrower. To the extent
required by the terms and conditions governing the Shares, Borrower shall cause
the books of each entity whose Shares are part of the Collateral and any
transfer agent to reflect the pledge of the Shares. Upon the occurrence and
during the continuance of an Event of Default hereunder, Collateral Agent may
effect the transfer of any securities included in the Collateral (including but
not limited to the Shares) into the name of Collateral Agent and cause new (as
applicable) certificates representing such securities to be issued in the name
of Collateral Agent or its transferee. Borrower will execute and deliver such
documents, and take or cause to be taken such actions, as Collateral Agent may
reasonably request to perfect or continue the perfection of Collateral Agent’s
security interest in the Shares. Unless an Event of Default shall have occurred
and be continuing, Borrower shall be entitled to exercise any voting rights with
respect to the Shares and to give consents, waivers and ratifications in respect
thereof, provided that no vote shall be cast or consent, waiver or ratification
given or action taken which would be inconsistent with any of the terms of this
Agreement or which would constitute or create any violation of any of such
terms. All such rights to vote and give consents, waivers and ratifications
shall terminate upon the occurrence and continuance of an Event of Default.

 

5.        REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Collateral Agent and the Lenders as follows:

5.1        Due Organization, Authorization: Power and Authority.  Borrower and
each of its Subsidiaries is duly existing and in good standing as a Registered
Organization in its jurisdictions of organization or formation and Borrower and
each of its Subsidiaries is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its businesses or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Change. In
connection with this Agreement, Borrower and each of its Subsidiaries has
delivered to Collateral Agent a completed perfection certificate, dated as of
the Effective Date, signed by an officer of Borrower or such Subsidiary (each as
updated from time to time, as permitted hereunder, a “Perfection Certificate”
and collectively, the “Perfection Certificates”). Borrower represents and
warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is
that which is indicated on its respective Perfection Certificate and on the
signature page of each Loan Document to which it is a party; (b) Borrower and
each of its Subsidiaries is an organization of the type and is organized in the
jurisdiction set forth on its respective Perfection Certificate; (c) each
Perfection Certificate accurately sets forth each of Borrower’s and its
Subsidiaries’ organizational identification number or accurately states that
Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately
sets forth Borrower’s and each of its Subsidiaries’ place of business, or, if
more than one, its chief executive office as well as Borrower’s and each of its
Subsidiaries’ mailing address (if different than its chief executive office);
(e) Borrower and each of its Subsidiaries (and each of its respective
predecessors) have not, in the past five (5) years, changed its jurisdiction of
organization, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is
accurate and complete (it being understood and agreed that Borrower and each of
its Subsidiaries may from time to time update certain information in the
Perfection Certificates (including the information set forth in clause
(d) above) after the Effective Date to the extent permitted by one or more
specific provisions in this Agreement); such updated Perfection Certificates
subject to the review and approval of Collateral Agent. If Borrower or any of
its Subsidiaries is not now a Registered Organization but later becomes one,
Borrower shall notify Collateral Agent of such occurrence and provide Collateral
Agent with such Person’s organizational identification number within five
(5) Business Days of receiving such organizational identification number.

The execution, delivery and performance by Borrower and each of its Subsidiaries
of the Loan Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational
documents, including its respective Operating Documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law applicable thereto, (iii) contravene, conflict or violate any applicable
order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or such Subsidiary, or any of their
property or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being obtained pursuant
to Section 6.1(b), or (v) constitute an event of default under any material
agreement by

 

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which Borrower or any of such Subsidiaries, or their respective properties, is
bound. Neither Borrower nor any of its Subsidiaries is in default under any
agreement to which it is a party or by which it or any of its assets is bound in
which such default could reasonably be expected to have a Material Adverse
Change.

5.2        Collateral.

(a)        Borrower and each its Subsidiaries have good title to, have rights
in, and the power to transfer each item of the Collateral upon which it purports
to grant a Lien under the Loan Documents, free and clear of any and all Liens
except Permitted Liens, and neither Borrower nor any of its Subsidiaries have
any Deposit Accounts, Securities Accounts, Commodity Accounts or other
investment accounts other than the Collateral Accounts or the other investment
accounts, if any, described in the Perfection Certificates delivered to
Collateral Agent in connection herewith with respect of which Borrower or such
Subsidiary has given Collateral Agent notice and taken such actions as are
necessary to give Collateral Agent a perfected security interest therein. The
Accounts are bona fide, existing obligations of the Account Debtors.

(b)        On the Effective Date, and except as disclosed on the Perfection
Certificate (i) the Collateral is not in the possession of any third party
bailee (such as a warehouse), and (ii) no such third party bailee possesses
components of the Collateral in excess of One Hundred Thousand Dollars
($100,000.00). None of the components of the Collateral shall be maintained at
locations other than as disclosed in the Perfection Certificates on the
Effective Date or as permitted pursuant to Section 6.11 (other than movable
items of personal property including laptop computers and telephonic devices
used and moved in the ordinary course of business, having an aggregate book
value not exceeding One Hundred Thousand Dollars ($100,000.00)).

(c)        All Inventory is in all material respects of good and marketable
quality, free from material defects.

(d)        Borrower and each of its Subsidiaries is the sole owner of the
Intellectual Property each respectively purports to own, free and clear of all
Liens other than Permitted Liens. Except as noted on the Perfection
Certificates, neither Borrower nor any of its Subsidiaries is a party to, nor is
bound by, any material license or other material agreement with respect to which
Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise
restricts Borrower or its Subsidiaries from granting a security interest in
Borrower’s or such Subsidiaries’ interest in such material license or material
agreement or any other property, or (ii) for which a default under or
termination of could interfere with Collateral Agent’s or any Lender’s right to
sell any Collateral. Borrower shall provide written notice to Collateral Agent
and each Lender within ten (10) days of Borrower or any of its Subsidiaries
entering into or becoming bound by any license or agreement with respect to
which Borrower or any Subsidiary is the licensee (other than over-the-counter
software that is commercially available to the public).

5.3        Litigation.  Except as disclosed (i) on the Perfection Certificates,
or (ii) in accordance with Section 6.9 hereof, there are no actions, suits,
investigations, or proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of its
Subsidiaries involving more than Two Hundred Fifty Thousand Dollars
($250,000.00).

5.4        No Material Deterioration in Financial Condition; Financial
Statements.  All consolidated financial statements for Borrower and its
Subsidiaries, delivered to Collateral Agent fairly present, in conformity with
GAAP, in all material respects the consolidated financial condition of Borrower
and its Subsidiaries, and the consolidated results of operations of Borrower and
its Subsidiaries. There has not been any material deterioration in the
consolidated financial condition of Borrower and its Subsidiaries since the date
of the most recent financial statements submitted to any Lender.

5.5        Solvency.  Borrower is Solvent, and each of its Subsidiaries, on a
consolidated basis, is Solvent.

5.6        Regulatory Compliance.  Neither Borrower nor any of its Subsidiaries
is an “investment company” or a company “controlled” by an “investment company”
under the Investment Company Act of 1940, as amended. Neither Borrower nor any
of its Subsidiaries is engaged as one of its important activities in extending
credit for margin stock (under Regulations X, T and U of the Federal Reserve
Board of Governors). Borrower and

 

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each of its Subsidiaries has complied in all material respects with the Federal
Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a
“holding company” or an “affiliate” of a “holding company” or a “subsidiary
company” of a “holding company” as each term is defined and used in the Public
Utility Holding Company Act of 2005. Neither Borrower nor any of its
Subsidiaries has violated any laws, ordinances or rules, the violation of which
could reasonably be expected to have a Material Adverse Change. Neither
Borrower’s nor any of its Subsidiaries’ properties or assets has been used by
Borrower or such Subsidiary or, to Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than in material compliance with applicable laws. Borrower and each of its
Subsidiaries has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all Governmental
Authorities that are necessary to continue their respective businesses as
currently conducted.

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting
in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or
conspiring to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of
Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of
their Affiliates or agents, acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (x) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (y) deals in, or otherwise
engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law.

5.7        Investments.  Neither Borrower nor any of its Subsidiaries owns any
stock, shares, partnership interests or other equity securities except for
Permitted Investments.

5.8        Tax Returns and Payments; Pension Contributions.  Borrower and each
of its Subsidiaries has timely filed, or timely filed for extensions, all
required tax returns and reports, and Borrower and each of its Subsidiaries, has
timely paid all foreign, federal, state, and local taxes, assessments, deposits
and contributions owed by Borrower and such Subsidiaries, in all jurisdictions
in which Borrower or any such Subsidiary is subject to taxes, including the
United States, unless such taxes are being contested in accordance with the
following sentence. Borrower and each of its Subsidiaries, may defer payment of
any contested taxes, provided that Borrower or such Subsidiary, (a) in good
faith contests its obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (b) notifies Collateral Agent
in writing of the commencement of, and any material development in, the
proceedings, and (c) posts bonds or takes any other steps required to prevent
the Governmental Authority levying such contested taxes from obtaining a Lien
upon any of the Collateral that is other than a “Permitted Lien.” Neither
Borrower nor any of its Subsidiaries is aware of any claims or adjustments
proposed for any of Borrower’s or such Subsidiaries’, prior tax years which
could result in additional taxes becoming due and payable by Borrower or its
Subsidiaries. Borrower and each of its Subsidiaries have paid all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and neither Borrower nor any of its
Subsidiaries have, withdrawn from participation in, and have not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower or its Subsidiaries, including any liability
to the Pension Benefit Guaranty Corporation or its successors or any other
Governmental Authority.

5.9        Use of Proceeds.  Borrower shall use the proceeds of the Credit
Extensions solely as working capital and to fund its general business
requirements in accordance with the provisions of this Agreement, and not for
personal, family, household or agricultural purposes.

5.10        Shares.  Borrower has full power and authority to create a first
lien on the Shares and no disability or contractual obligation exists that would
prohibit Borrower from pledging the Shares pursuant to this Agreement. To
Borrower’s knowledge, there are no subscriptions, warrants, rights of first
refusal or other restrictions on transfer relative to, or options exercisable
with respect to the Shares. The Shares have been and will be duly authorized and
validly issued, and are fully paid and non-assessable. To Borrower’s knowledge,
the Shares are not the subject of any present or threatened suit, action,
arbitration, administrative or other proceeding, and Borrower knows of no
reasonable grounds for the institution of any such proceedings.

 

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5.11        Full Disclosure.  No written representation, warranty or other
statement of Borrower or any of its Subsidiaries in any certificate or written
statement given to Collateral Agent or any Lender, as of the date such
representation, warranty, or other statement was made, taken together with all
such written certificates and written statements given to Collateral Agent or
any Lender, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized that the projections and
forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).

5.12        Definition of “Knowledge.”  For purposes of the Loan Documents,
whenever a representation or warranty is made to Borrower’s knowledge or
awareness, to the “best of” Borrower’s knowledge, or with a similar
qualification, knowledge or awareness means the actual knowledge, after
reasonable investigation, of the Responsible Officers.

6.            AFFIRMATIVE COVENANTS

 Borrower shall, and shall cause each of its Subsidiaries to, do all of the
following:

6.1        Government Compliance.

(a)        Maintain its and all its Subsidiaries’ legal existence and good
standing in their respective jurisdictions of organization and maintain
qualification in each jurisdiction in which the failure to so qualify could
reasonably be expected to have a Material Adverse Change. Comply with all laws,
ordinances and regulations to which Borrower or any of its Subsidiaries is
subject, the noncompliance with which could reasonably be expected to have a
Material Adverse Change.

(b)        Obtain and keep in full force and effect, all of the material
Governmental Approvals necessary for the performance by Borrower and its
Subsidiaries of their respective businesses and obligations under the Loan
Documents and the grant of a security interest to Collateral Agent for the
ratable benefit of the Lenders, in all of the Collateral. Borrower shall
promptly provide copies to Collateral Agent of any material Governmental
Approvals obtained by Borrower or any of its Subsidiaries.

6.2        Financial Statements, Reports, Certificates.

(a)         Deliver to each Lender:

(i)        as soon as available, but no later than thirty (30) days after the
last day of each quarter, a company prepared consolidated and consolidating
balance sheet, income statement and cash flow statement covering the
consolidated operations of Borrower and its Subsidiaries for such month
certified by a Responsible Officer and in a form reasonably acceptable to
Collateral Agent;

(ii)        as soon as available, but no later than one hundred eighty
(180) days after the last day of Borrower’s fiscal year or within five (5) days
of filing with the SEC, audited consolidated financial statements prepared under
GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm
acceptable to Collateral Agent in its reasonable discretion;

(iii)        as soon as available (but in no event more than seven (7) days)
after approval thereof by Borrower’s Board of Directors, but no later than sixty
(60) days after the last day of each of Borrower’s fiscal years, Borrower’s
annual financial projections for the entire current fiscal year as approved by
Borrower’s Board of Directors, which such annual financial projections shall be
set forth in a month-by-month format (such annual financial projections as
originally delivered to Collateral Agent and the Lenders on or prior to the
Effective Date are referred to herein as the “Annual Projections”; provided
that, any revisions of the Annual Projections approved by Borrower’s Board of
Directors shall be delivered to Collateral Agent and the Lenders no later than
seven (7) days after such approval);

 

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(iv)        within five (5) days of delivery, copies of all statements, reports
and notices made available to Borrower’s security holders or holders of
Subordinated Debt;

(v)        within five (5) days of filing, all reports on Form 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission,

(vi)        prompt notice of any amendments of or other changes to the Operating
Documents of Borrower or any of its Subsidiaries, together with any copies
reflecting such amendments or changes with respect thereto;

(vii)        prompt notice of any event that could reasonably be expected to
materially and adversely affect the value of the Intellectual Property;

(viii)        as soon as available, but no later than thirty (30) days after the
last day of each month, copies of the month-end account statements for each
Collateral Account maintained by Borrower or its Subsidiaries (other than
Sorrento HK), which statements may be provided to Collateral Agent and each
Lender by Borrower or directly from the applicable institution(s); and

(ix)        other information as reasonably requested by Collateral Agent or any
Lender.

Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
internet at Borrower’s website address.

(b)        Concurrently with the delivery of the financial statements specified
in Section 6.2(a)(i) above but no later than thirty (30) days after the last day
of each quarter, deliver to each Lender, a duly completed Compliance Certificate
signed by a Responsible Officer.

(c)        Keep proper books of record and account in accordance with GAAP in
all material respects, in which full, true and correct entries shall be made of
all dealings and transactions in relation to its business and activities.
Borrower shall, and shall cause each of its Subsidiaries to, allow, at the sole
reasonable cost of Borrower, Collateral Agent or any Lender, during regular
business hours upon reasonable prior notice (provided that no notice shall be
required when an Event of Default has occurred and is continuing), to visit and
inspect any of its properties, to examine and make abstracts or copies from any
of its books and records, and to conduct a collateral audit and analysis of its
operations and the Collateral. Such audits shall be conducted no more often than
once every year unless (and more frequently if) an Event of Default has occurred
and is continuing.

6.3        Inventory; Returns.  Keep all Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower,
or any of its Subsidiaries, and their respective Account Debtors shall follow
Borrower’s, or such Subsidiary’s, customary practices as they exist at the
Effective Date. Borrower must promptly notify Collateral Agent and the Lenders
of all returns, recoveries, disputes and claims that involve more than One
Hundred Thousand Dollars ($100,000.00) individually or in the aggregate in any
calendar year.

6.4        Taxes; Pensions.  Timely file and require each of its Subsidiaries to
timely file, all required tax returns and reports and timely pay, and require
each of its Subsidiaries to timely file, all foreign, federal, state, and local
taxes, assessments, deposits and contributions owed by Borrower or its
Subsidiaries, except for deferred payment of any taxes contested pursuant to the
terms of Section 5.8 hereof, and shall deliver to Lenders, on demand,
appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with the terms of such plans.

6.5        Insurance.  Keep Borrower’s and its Subsidiaries’ business and the
Collateral insured for risks and in amounts standard for companies in Borrower’s
and its Subsidiaries’ industry and location and as Collateral Agent may
reasonably request. Insurance policies shall be in a form, with companies, and
in amounts that are reasonably satisfactory to Collateral Agent and Lenders. All
property policies shall have a lender’s loss payable

 

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endorsement showing Collateral Agent as lender loss payee and waive subrogation
against Collateral Agent, and all liability policies shall show, or have
endorsements showing, Collateral Agent, as additional insured. The Collateral
Agent shall be named as lender loss payee and/or additional insured with respect
to any such insurance providing coverage in respect of any Collateral, and each
provider of any such insurance shall agree, by endorsement upon the policy or
policies issued by it or by independent instruments furnished to the Collateral
Agent, that it will give the Collateral Agent twenty (20) days prior written
notice before any such policy or policies shall be materially altered or
canceled, and ten (10) days prior written notice for non-payment of premium. At
Collateral Agent’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Collateral Agent’s option, be payable to Collateral Agent, for the ratable
benefit of the Lenders, on account of the Obligations. Notwithstanding the
foregoing, (a) so long as no Event of Default has occurred and is continuing,
Borrower shall have the option of applying the proceeds of any casualty policy
up to Two Hundred Fifty Thousand Dollars ($250,000.00) with respect to any loss,
but not exceeding Five Hundred Thousand Dollars ($500,000.00), in the aggregate
for all losses under all casualty policies in any one year, toward the
replacement or repair of destroyed or damaged property; provided that any such
replaced or repaired property (i) shall be of equal or like value as the
replaced or repaired Collateral and (ii) shall be deemed Collateral in which
Collateral Agent has been granted a first priority security interest, and
(b) after the occurrence and during the continuance of an Event of Default, all
proceeds payable under such casualty policy shall, at the option of Collateral
Agent, be payable to Collateral Agent, for the ratable benefit of the Lenders,
on account of the Obligations. If Borrower or any of its Subsidiaries fails to
obtain insurance as required under this Section 6.5 or to pay any amount or
furnish any required proof of payment to third persons, Collateral Agent and/or
any Lender may make, at Borrower’s expense, all or part of such payment or
obtain such insurance policies required in this Section 6.5, and take any action
under the policies Collateral Agent or such Lender deems prudent.

6.6        Operating Accounts.

(a)        Maintain all of Borrower’s and its domestic Subsidiaries’ primary
Collateral Accounts with Bank or its Affiliates in accounts which are subject to
a Control Agreement in favor of Collateral Agent, which accounts shall represent
at least fifty-one percent (51.00%) of the dollar value of Borrower’s and such
Subsidiaries’ accounts at all financial institutions.

(b)        Borrower shall provide Collateral Agent five (5) days’ prior written
notice before Borrower or any of its Subsidiaries establishes any Collateral
Account at or with any Person other than Bank or its Affiliates. In addition,
for each Collateral Account that Borrower or any of its Subsidiaries, at any
time maintains, Borrower or such Subsidiary shall cause the applicable bank or
financial institution at or with which such Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Collateral Agent’s Lien in such
Collateral Account in accordance with the terms hereunder prior to the
establishment of such Collateral Account, which Control Agreement may not be
terminated without prior written consent of Collateral Agent. The provisions of
the previous sentence shall not apply to (i) deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower’s, or any of its Subsidiaries’, employees and
identified to Collateral Agent by Borrower as such in the Perfection
Certificates; and (ii) foreign account maintained by Borrower and its
Subsidiaries (which accounts shall not, in the aggregate, exceed One Hundred
Thousand Dollars ($100,000.00) at any time).

(c)        Neither Borrower nor any of its Subsidiaries shall maintain any
Collateral Accounts except Collateral Accounts maintained in accordance with
Sections 6.6(a) and (b).

6.7        Protection of Intellectual Property Rights.  Borrower and each of its
Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend
and maintain the validity and enforceability of its Intellectual Property that
is material to Borrower’s business; (b) promptly advise Collateral Agent in
writing of material infringement by a third party of its Intellectual Property;
and (c) not allow any Intellectual Property material to Borrower’s business to
be abandoned, forfeited or dedicated to the public without Collateral Agent’s
prior written consent.

6.8        Litigation Cooperation.  Commencing on the Effective Date and
continuing through the termination of this Agreement, make available to
Collateral Agent and the Lenders, without expense to Collateral Agent or the
Lenders, Borrower and each of Borrower’s officers, employees and agents and
Borrower’s Books, to

 

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the extent that Collateral Agent or any Lender may reasonably deem them
necessary to prosecute or defend any third-party suit or proceeding instituted
by or against Collateral Agent or any Lender with respect to any Collateral or
relating to Borrower.

6.9        Notices of Litigation and Default.  Borrower will give prompt written
notice to Collateral Agent and the Lenders of any litigation or governmental
proceedings pending or threatened (in writing) against Borrower or any of its
Subsidiaries, which could reasonably be expected to result in damages or costs
to Borrower or any of its Subsidiaries of Two Hundred Fifty Thousand Dollars
($250,000.00) or more or which could reasonably be expected to have a Material
Adverse Change. Without limiting or contradicting any other more specific
provision of this Agreement, promptly (and in any event within three
(3) Business Days) upon Borrower becoming aware of the existence of any Event of
Default or event which, with the giving of notice or passage of time, or both,
would constitute an Event of Default, Borrower shall give written notice to
Collateral Agent and the Lenders of such occurrence, which such notice shall
include a reasonably detailed description of such Event of Default or event
which, with the giving of notice or passage of time, or both, would constitute
an Event of Default.

6.10        Intentionally Omitted.

6.11        Landlord Waivers; Bailee Waivers.  In the event that Borrower or any
of its Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with, or deliver any portion of the Collateral to, a bailee, in each
case pursuant to Section 7.2, then Borrower or such Subsidiary will provide
written notice thereof to Collateral Agent and, in the event that the Collateral
at any new location is valued in excess of Two Hundred Thousand ($200,000.00) in
the aggregate, such bailee or landlord, as applicable, must execute and deliver
a bailee waiver or landlord waiver, as applicable, in form and substance
reasonably satisfactory to Collateral Agent prior to the addition of any new
offices or business locations, or any such storage with or delivery to any such
bailee, as the case may be.

6.12        Creation/Acquisition of Subsidiaries.  In the event Borrower, or any
of its Subsidiaries creates or acquires any Subsidiary, Borrower shall provide
prior written notice to Collateral Agent and each Lender of the creation or
acquisition of such new Subsidiary and take all such action as may be reasonably
required by Collateral Agent or any Lender to cause each such Subsidiary to
become a co-Borrower hereunder or to guarantee the Obligations of Borrower under
the Loan Documents and, in each case, grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant
and pledge to Collateral Agent, for the ratable benefit of the Lenders, a
perfected security interest in the Shares. The parties acknowledge and agree
that, as of the Effective Date, Sorrento HK is neither a co-Borrower nor a
Guarantor under this Agreement.

6.13        Further Assurances.

(a)        Execute any further instruments and take further action as Collateral
Agent or any Lender reasonably requests to perfect or continue Collateral
Agent’s Lien in the Collateral or to effect the purposes of this Agreement.

(b)        Deliver to Collateral Agent and Lenders, within five (5) days after
the same are sent or received, copies of all material correspondence, reports,
documents and other filings with any Governmental Authority that could
reasonably be expected to have a material adverse effect on any of the
Governmental Approvals material to Borrower’s business or otherwise could
reasonably be expected to have a Material Adverse Change.

 

7.             NEGATIVE COVENANTS

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of
the following without the prior written consent of the Required Lenders:

7.1        Dispositions.  Convey, sell, lease, transfer, assign, or otherwise
dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for Transfers
(a) of Inventory in the ordinary course of business; (b) of worn out or obsolete
Equipment; (c) in

 

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connection with Permitted Liens, Permitted Investments and Permitted Licenses;
and (d) in addition to those specifically enumerated above, expenditures
reflected in the Annual Projections, as such Annual Projections may be amended
from time to time pursuant to the terms of Section 6.2 hereof.

7.2        Changes in Business, Management, Ownership, or Business
Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses engaged in by Borrower as of the Effective
Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any
Key Person shall cease to be actively engaged in the management of Borrower
unless written notice thereof is provided to Collateral Agent within seven
(7) Business Days of such change, or (ii) enter into any transaction or series
of related transactions in which the stockholders of Borrower who were not
stockholders immediately prior to the first such transaction own more than forty
nine percent (49%) of the voting stock of Borrower immediately after giving
effect to such transaction or related series of such transactions (other than by
the sale of Borrower’s equity securities in a public offering, a private
placement of public equity or to venture capital investors so long as Borrower
identifies to Collateral Agent the venture capital investors prior to the
closing of the transaction). Borrower shall not, without at least fifteen
(15) days’ prior written notice to Collateral Agent: (A) add any new offices or
business locations, including warehouses (unless such new offices or business
locations contain less than One Hundred Thousand Dollars ($100,000.00) in assets
or property of Borrower or any of its Subsidiaries); (B) change its jurisdiction
of organization, (C) change its organizational structure or type, (D) change its
legal name, or (E) change any organizational number (if any) assigned by its
jurisdiction of organization.

7.3        Mergers or Acquisitions.  Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary (provided such surviving Subsidiary is a
“co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s
Obligations hereunder) or with (or into) Borrower provided Borrower is the
surviving legal entity, and as long as no Event of Default is occurring prior
thereto or arises as a result therefrom. Without limiting the foregoing,
Borrower shall not, without Collateral Agent’s prior written consent, enter into
any binding contractual arrangement with any Person to attempt to facilitate a
merger or acquisition of Borrower, unless (i) no Event of Default exists when
such agreement is entered into by Borrower, (ii) such agreement does not give
such Person the right to claim any fees, payments or damages from Borrower in
excess of Two Hundred Fifty Thousand Dollars ($250,000.00), and (iii) Borrower
notifies Collateral Agent in advance of entering into such an agreement.

7.4        Indebtedness.  Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

7.5        Encumbrance.  Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein (except for Permitted Liens that are permitted by the
terms of this Agreement to have priority over Collateral Agent’s Lien), or enter
into any agreement, document, instrument or other arrangement (except with or in
favor of Collateral Agent, for the ratable benefit of the Lenders) with any
Person which directly or indirectly prohibits or has the effect of prohibiting
Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower’s or
such Subsidiary’s Intellectual Property, except as is otherwise permitted in
Section 7.1 hereof and the definition of “Permitted Liens” herein.

7.6        Maintenance of Collateral Accounts.  Maintain any Collateral Account
except pursuant to the terms of Section 6.6 hereof.

7.7        Distributions; Investments.  (a) Pay any dividends (other than
dividends payable solely in capital stock) or make any distribution or payment
in respect of or redeem, retire or purchase any capital stock (other than
(i) repurchases pursuant to the terms of employee stock purchase plans, employee
restricted stock agreements, stockholder rights plans, director or consultant
stock option plans, or similar plans, provided such repurchases do not exceed
One Hundred Thousand Dollars ($100,000.00) in the aggregate per fiscal year);
and (ii) cash payments for repurchases of common stock of Parent for cash in
lieu of shares for certain sellers of IGDRASOL, Inc. with respect to
post-closing milestones relating to the acquisition of IGDRASOL, Inc., not to
exceed 20,000 common stock

 

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shares of Parent; or (b) directly or indirectly make any Investment other than
Permitted Investments, or permit any of its Subsidiaries to do so.

7.8        Transactions with Affiliates.  Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower or any
of its Subsidiaries, except for (a) transactions that are in the ordinary course
of Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that
are no less favorable to Borrower or such Subsidiary than would be obtained in
an arm’s length transaction with a non-affiliated Person, and (b) Subordinated
Debt or equity investments by Borrower’s investors in Borrower or its
Subsidiaries.

7.9        Subordinated Debt.  (a) Make or permit any payment on any
Subordinated Debt, except under the terms of the subordination, intercreditor,
or other similar agreement to which such Subordinated Debt is subject, or
(b) amend any provision in any document relating to the Subordinated Debt which
would increase the amount thereof or adversely affect the subordination thereof
to Obligations owed to the Lenders.

7.10        Compliance.  Become an “investment company” or a company controlled
by an “investment company”, under the Investment Company Act of 1940, as
amended, or undertake as one of its important activities extending credit to
purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System), or use the proceeds of any Credit
Extension for that purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could reasonably be expected to
have a Material Adverse Change, or permit any of its Subsidiaries to do so;
withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower
or any of its Subsidiaries, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other Governmental Authority.

7.11        Compliance with Anti-Terrorism Laws.  Collateral Agent hereby
notifies Borrower and each of its Subsidiaries that pursuant to the requirements
of Anti-Terrorism Laws, and Collateral Agent’s policies and practices,
Collateral Agent is required to obtain, verify and record certain information
and documentation that identifies Borrower and each of its Subsidiaries and
their principals, which information includes the name and address of Borrower
and each of its Subsidiaries and their principals and such other information
that will allow Collateral Agent to identify such party in accordance with
Anti-Terrorism Laws. Neither Borrower nor any of its Subsidiaries shall, nor
shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or
indirectly, knowingly enter into any documents, instruments, agreements or
contracts with any Person listed on the OFAC Lists. Borrower and each of its
Subsidiaries shall immediately notify Collateral Agent if Borrower or such
Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of
Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo
contendere to, (c) is indicted on, or (d) is arraigned and held over on charges
involving money laundering or predicate crimes to money laundering. Neither
Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its
Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any
business or engage in any transaction or dealing with any Blocked Person,
including, without limitation, the making or receiving of any contribution of
funds, goods or services to or for the benefit of any Blocked Person, (ii) deal
in, or otherwise engage in any transaction relating to, any property or
interests in property blocked pursuant to Executive Order No. 13224 or any
similar executive order or other Anti-Terrorism Law, or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in Executive Order No. 13224 or other Anti-Terrorism Law.

7.12        Sorrento HK Assets.  Permit the aggregate value of assets held by
Sorrento HK to exceed One Hundred Thousand Dollars ($100,000.00) at any time.

 

8.             EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

 

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8.1        Payment Default.  Borrower fails to (a) make any payment of principal
or interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day grace period shall not apply to payments
due on the Maturity Date or the date of acceleration pursuant to Section 9.1
(a) hereof). During the cure period, the failure to cure the payment default is
not an Event of Default (but no Credit Extension will be made during the cure
period);

8.2        Covenant Default.

(a)        Borrower or any of its Subsidiaries fails or neglects to perform any
obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4
(Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of
Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.12
(Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower
violates any covenant in Section 7; or

(b)        Borrower, or any of its Subsidiaries, fails or neglects to perform,
keep, or observe any other term, provision, condition, covenant or agreement
contained in this Agreement or any Loan Documents, and as to any default (other
than those specified in this Section 8) under such other term, provision,
condition, covenant or agreement that can be cured, has failed to cure the
default within ten (10) days after the occurrence thereof; provided, however,
that if the default cannot by its nature be cured within the ten (10) day period
or cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an Event of
Default (but no Credit Extensions shall be made during such cure period). Grace
periods provided under this Section shall not apply, among other things, to
financial covenants, if any, or any other covenants set forth in subsection
(a) above;

8.3        Material Adverse Change.  A Material Adverse Change occurs;

8.4        Attachment; Levy; Restraint on Business.

(a)        (i) The service of process seeking to attach, by trustee or similar
process, any funds of Borrower or any of its Subsidiaries or of any entity under
control of Borrower or its Subsidiaries on deposit with any Lender or any
Lender’s Affiliate or any bank or other institution at which Borrower or any of
its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy,
or assessment is filed against Borrower or any of its Subsidiaries or their
respective assets by any government agency, and the same under subclauses
(i) and (ii) hereof are not, within ten (10) days after the occurrence thereof,
discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any ten (10) day
cure period; and

(b)        (i) any material portion of Borrower’s or any of its Subsidiaries’
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or
any of its Subsidiaries from conducting any part of its business;

8.5        Insolvency.  (a) Borrower or any of its Subsidiaries is or becomes
Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency
Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of
its Subsidiaries and not dismissed or stayed within forty-five (45) days (but no
Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent
and/or until any Insolvency Proceeding is dismissed);

8.6        Other Agreements.  There is a default in any agreement to which
Borrower or any of its Subsidiaries is a party with a third party or parties
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00) or that could reasonably be
expected to have a Material Adverse Change;

8.7        Judgments.  One or more judgments, orders, or decrees for the payment
of money in an amount, individually or in the aggregate, of at least Two Hundred
Fifty Thousand Dollars ($250,000.00) (not covered by independent third-party
insurance as to which liability has been accepted by such insurance carrier)
shall be rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied, unvacated, or unstayed for a

 

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period of ten (10) days after the entry thereof (provided that no Credit
Extensions will be made prior to the satisfaction, vacation, or stay of such
judgment, order or decree);

8.8        Misrepresentations.  Borrower or any of its Subsidiaries or any
Person acting for Borrower or any of its Subsidiaries makes any representation,
warranty, or other statement now or later in this Agreement, any Loan Document
or in any writing delivered to Collateral Agent and/or Lenders or to induce
Collateral Agent and/or the Lenders to enter this Agreement or any Loan
Document, and such representation, warranty, or other statement is incorrect in
any material respect when made;

8.9        Subordinated Debt.  A default or breach occurs under any agreement
between Borrower or any of its Subsidiaries and any creditor of Borrower or any
of its Subsidiaries that signed a subordination, intercreditor, or other similar
agreement with Collateral Agent or the Lenders, or any creditor that has signed
such an agreement with Collateral Agent or the Lenders breaches any terms of
such agreement;

8.10        Guaranty.  (a) Any Guaranty terminates or ceases for any reason to
be in full force and effect; (b) any Guarantor does not perform any obligation
or covenant under any Guaranty; (c) any circumstance described in Sections 8.3,
8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the death,
liquidation, winding up, or termination of existence of any Guarantor; or (e) a
Material Adverse Change with respect to any Guarantor;

8.11        Governmental Approvals.  Any Governmental Approval shall have been
revoked, rescinded, suspended, modified in an adverse manner, or not renewed in
the ordinary course for a full term and such revocation, rescission, suspension,
modification or non-renewal has resulted in or could reasonably be expected to
result in a Material Adverse Change; or

8.12        Lien Priority.  Any Lien created hereunder or by any other Loan
Document shall at any time fail to constitute a valid and perfected Lien on any
of the Collateral purported to be secured thereby, subject to no prior or equal
Lien, other than Permitted Liens which are permitted to have priority in
accordance with the terms of this Agreement.

 

9.        RIGHTS AND REMEDIES

9.1        Rights and Remedies.

(a)        Upon the occurrence and during the continuance of an Event of
Default, Collateral Agent may, and at the written direction of Required Lenders
shall, without notice or demand, do any or all of the following: (i) deliver
notice of the Event of Default to Borrower, (ii) by notice to Borrower declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations shall be immediately due and
payable without any action by Collateral Agent or the Lenders) or (iii) by
notice to Borrower suspend or terminate the obligations, if any, of the Lenders
to advance money or extend credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Collateral Agent and/or the
Lenders (but if an Event of Default described in Section 8.5 occurs all
obligations, if any, of the Lenders to advance money or extend credit for
Borrower’s benefit under this Agreement or under any other agreement between
Borrower and Collateral Agent and/or the Lenders shall be immediately terminated
without any action by Collateral Agent or the Lenders).

(b)        Without limiting the rights of Collateral Agent and the Lenders set
forth in Section 9.1(a) above, upon the occurrence and during the continuance of
an Event of Default, Collateral Agent shall have the right, without notice or
demand, to do any or all of the following:

(i)        foreclose upon and/or sell or otherwise liquidate, the Collateral;

(ii)        apply to the Obligations any (a) balances and deposits of Borrower
that Collateral Agent or any Lender holds or controls, or (b) any amount held or
controlled by Collateral Agent or any Lender owing to or for the credit or the
account of Borrower; and/or

 

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(iii)        commence and prosecute an Insolvency Proceeding or consent to
Borrower commencing any Insolvency Proceeding.

(c)        Without limiting the rights of Collateral Agent and the Lenders set
forth in Sections 9.1(a) and (b) above, upon the occurrence and during the
continuance of an Event of Default, Collateral Agent shall have the right,
without notice or demand, to do any or all of the following:

(i)        settle or adjust disputes and claims directly with Account Debtors
for amounts on terms and in any order that Collateral Agent considers advisable,
notify any Person owing Borrower money of Collateral Agent’s security interest
in such funds, and verify the amount of such account;

(ii)        make any payments and do any acts it considers necessary or
reasonable to protect the Collateral and/or its security interest in the
Collateral. Borrower shall assemble the Collateral if Collateral Agent requests
and make it available in a location as Collateral Agent reasonably designates.
Collateral Agent may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Collateral Agent a
license to enter and occupy any of its premises, without charge, to exercise any
of Collateral Agent’s rights or remedies;

(iii)        ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, and/or advertise for sale, the Collateral. Collateral Agent is hereby
granted a non-exclusive, royalty-free license or other right to use, without
charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights,
mask works, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any similar property as it pertains to
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Collateral Agent’s exercise of its rights
under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under
all licenses and all franchise agreements inure to Collateral Agent, for the
benefit of the Lenders;

(iv)        place a “hold” on any account maintained with Collateral Agent or
the Lenders and/or deliver a notice of exclusive control, any entitlement order,
or other directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;

(v)        demand and receive possession of Borrower’s Books;

(vi)        appoint a receiver to seize, manage and realize any of the
Collateral, and such receiver shall have any right and authority as any
competent court will grant or authorize in accordance with any applicable law,
including any power or authority to manage the business of Borrower or any of
its Subsidiaries; and

(vii)        subject to clauses 9.1(a) and (b), exercise all rights and remedies
available to Collateral Agent and each Lender under the Loan Documents or at law
or equity, including all remedies provided under the Code (including disposal of
the Collateral pursuant to the terms thereof);

(viii)        for any Letters of Credit, demand that Borrower (i) deposit cash
with Bank in an amount equal to (x) if such Letters of Credit are denominated in
Dollars, then one hundred five percent (105%); and (y) if such Letters of Credit
are denominated in a Foreign Currency, then one hundred ten percent (110%), of
the Dollar Equivalent of the aggregate face amount of all Letters of Credit
remaining undrawn (plus all interest, fees, and costs due or to become due in
connection therewith (as estimated by Bank in its good faith business
judgment)), to secure all of the Obligations relating to such Letters of Credit,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit; and

(ix)        terminate any FX Contracts.

 

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Notwithstanding any provision of this Section 9.1 to the contrary, upon the
occurrence of any Event of Default, Collateral Agent shall have the right to
exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent Circumstance.
As used in the immediately preceding sentence, “Exigent Circumstance” means any
event or circumstance that, in the reasonable judgment of Collateral Agent,
imminently threatens the ability of Collateral Agent to realize upon all or any
material portion of the Collateral, such as, without limitation, fraudulent
removal, concealment, or abscondment thereof, destruction or material waste
thereof, or failure of Borrower or any of its Subsidiaries after reasonable
demand to maintain or reinstate adequate casualty insurance coverage, or which,
in the judgment of Collateral Agent, could reasonably be expected to result in a
material diminution in value of the Collateral.

9.2        Power of Attorney.  Borrower hereby irrevocably appoints Collateral
Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during
the continuance of an Event of Default, to: (a) endorse Borrower’s or any of its
Subsidiaries’ name on any checks or other forms of payment or security; (b) sign
Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for
any Account or drafts against Account Debtors; (c) settle and adjust disputes
and claims about the Accounts directly with Account Debtors, for amounts and on
terms Collateral Agent determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Collateral Agent or a third party as the Code or any applicable law permits.
Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign
Borrower’s or any of its Subsidiaries’ name on any documents necessary to
perfect or continue the perfection of Collateral Agent’s security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations (other than inchoate indemnity obligations) have been satisfied in
full and Collateral Agent and the Lenders are under no further obligation to
make Credit Extensions hereunder. Collateral Agent’s foregoing appointment as
Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral
Agent’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid
and performed and Collateral Agent’s and the Lenders’ obligation to provide
Credit Extensions terminates.

9.3        Protective Payments.  If Borrower or any of its Subsidiaries fail to
obtain the insurance called for by Section 6.5 or fails to pay any premium
thereon or fails to pay any other amount which Borrower or any of its
Subsidiaries is obligated to pay under this Agreement or any other Loan
Document, Collateral Agent may obtain such insurance or make such payment, and
all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately
due and payable, bearing interest at the Default Rate, and secured by the
Collateral. Collateral Agent will make reasonable efforts to provide Borrower
with notice of Collateral Agent obtaining such insurance or making such payment
at the time it is obtained or paid or within a reasonable time thereafter. No
such payments by Collateral Agent are deemed an agreement to make similar
payments in the future or Collateral Agent’s waiver of any Event of Default.

9.4        Application of Payments and Proceeds.  Notwithstanding anything to
the contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Collateral Agent from or on behalf of Borrower or any of its
Subsidiaries of all or any part of the Obligations, and, as between Borrower on
the one hand and Collateral Agent and Lenders on the other, Collateral Agent
shall have the continuing and exclusive right to apply and to reapply any and
all payments received against the Obligations in such manner as Collateral Agent
may deem advisable notwithstanding any previous application by Collateral Agent,
and (b) the proceeds of any sale of, or other realization upon all or any part
of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to
accrued and unpaid interest on the Obligations (including any interest which,
but for the provisions of the United States Bankruptcy Code, would have accrued
on such amounts); third, to the principal amount of the Obligations outstanding;
and fourth, to any other indebtedness or obligations of Borrower owing to
Collateral Agent or any Lender under the Loan Documents. Any balance remaining
shall be delivered to Borrower or to whoever may be lawfully entitled to receive
such balance or as a court of competent jurisdiction may direct. In carrying out
the foregoing, (x) amounts received shall be applied in the numerical order
provided until exhausted prior to the application to the next succeeding
category, and (y) each of the Persons entitled to receive a payment in any
particular category shall receive an amount equal to its pro rata share of
amounts available to be applied pursuant thereto for such category. Any
reference in this Agreement to an allocation between or sharing by the

 

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Lenders of any right, interest or obligation “ratably,” “proportionally” or in
similar terms shall refer to Pro Rata Share unless expressly provided otherwise.
Collateral Agent, or if applicable, each Lender, shall promptly remit to the
other Lenders such sums as may be necessary to ensure the ratable repayment of
each Lender’s portion of any Term Loan and the ratable distribution of interest,
fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing,
a Lender receiving a scheduled payment shall not be responsible for determining
whether the other Lenders also received their scheduled payment on such date;
provided, however, if it is later determined that a Lender received more than
its ratable share of scheduled payments made on any date or dates, then such
Lender shall remit to Collateral Agent or other Lenders such sums as may be
necessary to ensure the ratable payment of such scheduled payments, as
instructed by Collateral Agent. If any payment or distribution of any kind or
character, whether in cash, properties or securities, shall be received by a
Lender in excess of its ratable share, then the portion of such payment or
distribution in excess of such Lender’s ratable share shall be received by such
Lender in trust for and shall be promptly paid over to the other Lender for
application to the payments of amounts due on the other Lenders’ claims. To the
extent any payment for the account of Borrower is required to be returned as a
voidable transfer or otherwise, the Lenders shall contribute to one another as
is necessary to ensure that such return of payment is on a pro rata basis. If
any Lender shall obtain possession of any Collateral, it shall hold such
Collateral for itself and as agent and bailee for Collateral Agent and other
Lenders for purposes of perfecting Collateral Agent’s security interest therein.

9.5        Liability for Collateral.  So long as Collateral Agent and the
Lenders comply with reasonable banking practices regarding the safekeeping of
the Collateral in the possession or under the control of Collateral Agent and
the Lenders, Collateral Agent and the Lenders shall not be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or (d) any act or
default of any carrier, warehouseman, bailee, or other Person. Borrower bears
all risk of loss, damage or destruction of the Collateral.

9.6        No Waiver; Remedies Cumulative.  Failure by Collateral Agent or any
Lender, at any time or times, to require strict performance by Borrower of any
provision of this Agreement or any other Loan Document shall not waive, affect,
or diminish any right of Collateral Agent or any Lender thereafter to demand
strict performance and compliance herewith or therewith. No waiver hereunder
shall be effective unless signed by Collateral Agent and the Required Lenders
and then is only effective for the specific instance and purpose for which it is
given. The rights and remedies of Collateral Agent and the Lenders under this
Agreement and the other Loan Documents are cumulative. Collateral Agent and the
Lenders have all rights and remedies provided under the Code, any applicable
law, by law, or in equity. The exercise by Collateral Agent or any Lender of one
right or remedy is not an election, and Collateral Agent’s or any Lender’s
waiver of any Event of Default is not a continuing waiver. Collateral Agent’s or
any Lender’s delay in exercising any remedy is not a waiver, election, or
acquiescence.

9.7        Demand Waiver.  Borrower waives, to the fullest extent permitted by
law, demand, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Collateral Agent or any Lender on which Borrower or any
Subsidiary is liable.

 

10.          NOTICES

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three
(3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by electronic mail (if an email address is specified
herein) or facsimile transmission; (c) one (1) Business Day after deposit with a
reputable overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Any of Collateral Agent, Lender or Borrower may change its mailing
address or facsimile number by giving the other party written notice thereof in
accordance with the terms of this Section 10.

 

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If to Borrower:     

SORRENTO THERAPEUTICS, INC.

6042 Cornerstone Court, Suite B

San Diego, CA 92121

Attn: Chief Financial Officer

Fax: (858) 210-3759

Email: rvincent@sorrentotherapeutics.com

with a copy (which shall not constitute notice) to:     

Cooley LLP

3175 Hanover Street

Palo Alto, CA 94304-1130

Attn: Glen Sato

Fax: (650) 849-7400

Email: gsato@cooley.com

If to Collateral Agent:     

OXFORD FINANCE LLC

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: Legal Department

Fax: (703) 519-5225

Email: LegalDepartment@oxfordfinance.com

with a copy to     

SILICON VALLEY BANK

4370 La Jolla Village Drive, Suite 1050

San Diego CA 92122

Attn: Mike White

Fax: (858) 622-1424

Email: mwhite@svb.com

with a copy (which shall not constitute notice) to:     

DLA Piper LLP (US)

4365 Executive Drive, Suite 1100

San Diego, California 92121-2133

Attn: Troy Zander

Fax: (858) 638-5086

Email: troy.zander@dlapiper.com

 

11.

CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower, Collateral Agent and each Lender each submit to the
exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Collateral Agent or any Lender from bringing suit or taking
other legal action in any other jurisdiction to realize on the Collateral or any
other security for the Obligations, or to enforce a judgment or other court
order in favor of Collateral Agent or any Lender. Borrower expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and Borrower hereby waives any objection that it may have based upon
lack of personal jurisdiction, improper venue, or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in,
or subsequently provided by Borrower in accordance with, Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier to
occur of Borrower’s actual receipt thereof or three (3) days after deposit in
the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT
AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT,

 

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BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR
EACH PARTY TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER
WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial
by jury is not enforceable, the parties hereto agree that any and all disputes
or controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if they
cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court. The reference proceedings shall be conducted
pursuant to and in accordance with the provisions of California Code of Civil
Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
power, among others, to grant provisional relief, including without limitation,
entering temporary restraining orders, issuing preliminary and permanent
injunctions and appointing receivers. All such proceedings shall be closed to
the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and orders applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this
paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies. The
private judge shall also determine all issues relating to the applicability,
interpretation, and enforceability of this paragraph.

 

11.

GENERAL PROVISIONS

11.1        Successors and Assigns.  This Agreement binds and is for the benefit
of the successors and permitted assigns of each party. Borrower may not
transfer, pledge or assign this Agreement or any rights or obligations under it
without Collateral Agent’s and each Lender’s prior written consent (which may be
granted or withheld in Collateral Agent’s and each Lender’s discretion, subject
to Section 11.6). The Lenders have the right, without the consent of or notice
to Borrower, to sell, transfer, assign, pledge, negotiate, or grant
participation in (any such sale, transfer, assignment, negotiation, or grant of
a participation, a “Lender Transfer”) all or any part of, or any interest in,
the Lenders’ obligations, rights, and benefits under this Agreement and the
other Loan Documents; provided, however, that any such Lender Transfer (other
than a transfer, pledge, sale or assignment to an Eligible Assignee) of its
obligations, rights, and benefits under this Agreement and the other Loan
Documents shall require the prior written consent of the Required Lenders (such
approved assignee, an “Approved Lender”). Borrower and Collateral Agent shall be
entitled to continue to deal solely and directly with such Lender in connection
with the interests so assigned until Collateral Agent shall have received and
accepted an effective assignment agreement in form satisfactory to Collateral
Agent executed, delivered and fully completed by the applicable parties thereto,
and shall have received such other information regarding such Eligible Assignee
or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding
anything to the contrary contained herein, so long as no Event of Default has
occurred and is continuing, no Lender Transfer (other than a Lender Transfer
(i) in respect of the Warrants or (ii) in connection with (x) assignments by a
Lender due to a forced divestiture at the request of any regulatory agency; or
(y) upon the occurrence of a default, event of default or similar occurrence
with respect to a Lender’s own financing or securitization transactions) shall
be permitted, without Borrower’s consent, to any Person which is an Affiliate or
Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund,
each as determined by Collateral Agent.

11.2        Indemnification.  Borrower agrees to indemnify, defend and hold
Collateral Agent and the Lenders and their respective directors, officers,
employees, agents, attorneys, or any other Person affiliated with or
representing Collateral Agent or the Lenders (each, an “Indemnified Person”)
harmless against: (a) all obligations,

 

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demands, claims, and liabilities (collectively, “Claims”) asserted by any other
party in connection with; related to; following; or arising from, out of or
under, the transactions contemplated by the Loan Documents; and (b) all losses
or Lenders’ Expenses incurred, or paid by Indemnified Person in connection with;
related to; following; or arising from, out of or under, the transactions
contemplated by the Loan Documents between Collateral Agent, and/or the Lenders
and Borrower (including reasonable attorneys’ fees and expenses), except for
Claims and/or losses directly caused by such Indemnified Person’s gross
negligence or willful misconduct. Borrower hereby further indemnifies, defends
and holds each Indemnified Person harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever
(including the fees and disbursements of counsel for such Indemnified Person) in
connection with any investigative, response, remedial, administrative or
judicial matter or proceeding, whether or not such Indemnified Person shall be
designated a party thereto and including any such proceeding initiated by or on
behalf of Borrower, and the reasonable expenses of investigation by engineers,
environmental consultants and similar technical personnel and any commission,
fee or compensation claimed by any broker (other than any broker retained by
Collateral Agent or Lenders) asserting any right to payment for the transactions
contemplated hereby which may be imposed on, incurred by or asserted against
such Indemnified Person as a result of or in connection with the transactions
contemplated hereby and the use or intended use of the proceeds of the loan
proceeds except for liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements directly
caused by such Indemnified Person’s gross negligence or willful misconduct.

11.3        Time of Essence.  Time is of the essence for the performance of all
Obligations in this Agreement.

11.4        Severability of Provisions.  Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

11.5        Correction of Loan Documents.  Collateral Agent and the Lenders may
correct patent errors and fill in any blanks in this Agreement and the other
Loan Documents consistent with the agreement of the parties, so long as
Collateral Agent provides Borrower with written notice of such correction and
allows Borrower at least ten (10) days to object to such correction. In the
event of such objection, such correction shall not be made except by an
amendment signed by both Collateral Agent and Borrower.

11.6        Amendments in Writing; Integration.  (a) No amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, no approval or consent thereunder, or any consent to any departure by
Borrower or any of its Subsidiaries therefrom, shall in any event be effective
unless the same shall be in writing and signed by Borrower, Collateral Agent and
the Required Lenders provided that:

(i)        no such amendment, waiver or other modification that would have the
effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment
Percentage shall be effective as to such Lender without such Lender’s written
consent;

(ii)        no such amendment, waiver or modification that would affect the
rights and duties of Collateral Agent shall be effective without Collateral
Agent’s written consent or signature;

(iii)        no such amendment, waiver or other modification shall, unless
signed by all the Lenders directly affected thereby, (A) reduce the principal
of, rate of interest on or any fees with respect to any Term Loan or forgive any
principal, interest (other than default interest) or fees (other than late
charges) with respect to any Term Loan (B) postpone the date fixed for, or
waive, any payment of principal of any Term Loan or of interest on any Term Loan
(other than default interest) or any fees provided for hereunder (other than
late charges or for any termination of any commitment); (C) change the
definition of the term “Required Lenders” or the percentage of Lenders which
shall be required for the Lenders to take any action hereunder; (D) release all
or substantially all of any material portion of the Collateral, authorize
Borrower to sell or otherwise dispose of all or substantially all or any
material portion of the Collateral or release any Guarantor of all or any
portion of the Obligations or its guaranty obligations with respect thereto,
except, in each case with respect to this clause (D), as otherwise may be
expressly permitted under this Agreement or the other Loan Documents (including
in connection with any disposition permitted hereunder); (E) amend, waive or
otherwise modify this Section 11.6 or the definitions of the terms used in this
Section 11.6 insofar as the definitions affect the substance of this
Section 11.6; (F) consent

 

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to the assignment, delegation or other transfer by Borrower of any of its rights
and obligations under any Loan Document or release Borrower of its payment
obligations under any Loan Document, except, in each case with respect to this
clause (F), pursuant to a merger or consolidation permitted pursuant to this
Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the
definitions of Pro Rata Share, Term Loan Commitment, Commitment Percentage or
that provide for the Lenders to receive their Pro Rata Shares of any fees,
payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens
granted in favor of Collateral Agent securing the Obligations; or (I) amend any
of the provisions of Section 11.10. It is hereby understood and agreed that all
Lenders shall be deemed directly affected by an amendment, waiver or other
modification of the type described in the preceding clauses (C), (D), (E), (F),
(G) and (H) of the preceding sentence;

(iv)        the provisions of the foregoing clauses (i), (ii) and (iii) are
subject to the provisions of any interlender or agency agreement among the
Lenders and Collateral Agent pursuant to which any Lender may agree to give its
consent in connection with any amendment, waiver or modification of the Loan
Documents only in the event of the unanimous agreement of all Lenders.

(b)        Other than as expressly provided for in Section 11.6(a)(i)-(iii),
Collateral Agent may, if requested by the Required Lenders, from time to
time designate covenants in this Agreement less restrictive by notification to a
representative of Borrower.

(c)        This Agreement and the Loan Documents represent the entire agreement
about this subject matter and supersede prior negotiations or agreements. All
prior agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.

11.7        Counterparts.  This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, is an original, and all taken together, constitute
one Agreement.

11.8        Survival.  All covenants, representations and warranties made in
this Agreement continue in full force and effect until this Agreement has
terminated pursuant to its terms and all Obligations (other than inchoate
indemnity obligations and any other obligations which, by their terms, are to
survive the termination of this Agreement) have been satisfied. Without limiting
the foregoing, except as otherwise provided in Section 4.1, the grant of
security interest by Borrower in Section 4.1 shall survive until the termination
of all Bank Services Agreements. The obligation of Borrower in Section 11.2 to
indemnify each Lender and Collateral Agent, as well as the confidentiality
provisions in Section 11.9 below, shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

11.9        Confidentiality.  In handling any confidential information of
Borrower, the Lenders and Collateral Agent shall exercise the same degree of
care that it exercises for their own proprietary information, but disclosure of
information may be made: (a) subject to the terms and conditions of this
Agreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or
in connection with a Lender’s own financing or securitization transactions and
upon the occurrence of a default, event of default or similar occurrence with
respect to such financing or securitization transaction; (b) to prospective
transferees (other than those identified in (a) above) or purchasers of any
interest in the Credit Extensions (provided, however, the Lenders and Collateral
Agent shall, except upon the occurrence and during the continuance of an Event
of Default, obtain such prospective transferee’s or purchaser’s agreement to the
terms of this provision or to similar confidentiality terms); (c) as required by
law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s
regulators or as otherwise required in connection with an examination or audit;
(e) as Collateral Agent reasonably considers appropriate in exercising remedies
under the Loan Documents; and (f) to third party service providers of the
Lenders and/or Collateral Agent so long as such service providers have executed
a confidentiality agreement with the Lenders and Collateral Agent with terms no
less restrictive than those contained herein. Confidential information does not
include information that either: (i) is in the public domain or in the Lenders’
and/or Collateral Agent’s possession when disclosed to the Lenders and/or
Collateral Agent, or becomes part of the public domain after disclosure to the
Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or
Collateral Agent by a third party, if the Lenders and/or Collateral Agent does
not know that the third party is prohibited from disclosing the information.
Collateral Agent and the Lenders may use confidential information for any
purpose, including, without limitation, for the

 

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development of client databases, reporting purposes, and market analysis, in
each case so long as Collateral Agent does not disclose Borrower’s identity or
the identity of any person associated with Borrower unless otherwise expressly
permitted by this Agreement. The provisions of the immediately preceding
sentence shall survive the termination of this Agreement. The agreements
provided under this Section 11.9 supersede all prior agreements, understanding,
representations, warranties, and negotiations between the parties about the
subject matter of this Section 11.9.

11.10        Right of Set Off.  Borrower hereby grants to Collateral Agent and
to each Lender, a lien, security interest and right of set off as security for
all Obligations to Collateral Agent and each Lender hereunder, whether now
existing or hereafter arising upon and against all deposits, credits, collateral
and property, now or hereafter in the possession, custody, safekeeping or
control of Collateral Agent or the Lenders or any entity under the control of
Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in
transit to any of them. At any time after the occurrence and during the
continuance of an Event of Default, without demand or notice, Collateral Agent
or the Lenders may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH
RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO
EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER
PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

11.11        Silicon Valley Bank as Agent.  Collateral Agent hereby appoints
Silicon Valley Bank (“SVB”) as its agent (and SVB hereby accepts such
appointment) for the purpose of perfecting Collateral Agent’s Liens in assets
which, in accordance with Article 8 or Article 9, as applicable, of the Code can
be perfected by possession or control, including without limitation, all deposit
accounts maintained at SVB.

11.12        Cooperation of Borrower.  If necessary, Borrower agrees to
(i) execute any documents (including new Secured Promissory Notes) reasonably
required to effectuate and acknowledge each assignment of a Term Loan Commitment
or Loan to an assignee in accordance with Section 11.1, (provided such
assignment is in accordance with section 11.1), (ii) make Borrower’s management
available to meet with Collateral Agent and prospective participants and
assignees of Term Loan Commitments or Credit Extensions (which meetings shall be
conducted no more often than twice every twelve months unless an Event of
Default has occurred and is continuing), and (iii) assist Collateral Agent or
the Lenders in the preparation of information relating to the financial affairs
of Borrower as any prospective participant or assignee of a Term Loan Commitment
or Term Loan reasonably may request in accordance with section 11.1 and subject
to Section 11.9. Subject to the provisions of Sections 11.1 and 11.9, Borrower
authorizes each Lender to disclose to any prospective participant or assignee of
a Term Loan Commitment, any and all information in such Lender’s possession
concerning Borrower and its financial affairs which has been delivered to such
Lender by or on behalf of Borrower pursuant to this Agreement, or which has been
delivered to such Lender by or on behalf of Borrower in connection with such
Lender’s credit evaluation of Borrower prior to entering into this Agreement.

11.13        Borrower Liability.  Either Borrower may, acting singly, request
Credit Extensions hereunder. Each Borrower hereby appoints the other as agent
for the other for all purposes hereunder, including with respect to requesting
Credit Extensions hereunder. Each Borrower hereunder shall be jointly and
severally obligated to repay all Credit Extensions made hereunder, regardless of
which Borrower actually receives said Credit Extension, as if each Borrower
hereunder directly received all Credit Extensions. Each Borrower waives (a) any
suretyship defenses available to it under the Code or any other applicable law,
including, without limitation, the benefit of California Civil Code Section 2815
permitting revocation as to future transactions and the benefit of California
Civil Code Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850,
and 2899 and 3433, and (b) any right to require Collateral Agent or any Lender
to: (i) proceed against any Borrower or any other person; (ii) proceed against
or exhaust any security; or (iii) pursue any other remedy. Collateral Agent and
or any Lender may exercise or not exercise any right or remedy it has against
any Borrower or any security it holds (including the right to foreclose by
judicial or non-judicial sale) without affecting any Borrower’s liability.
Notwithstanding any other provision of this Agreement or other related document,
each Borrower irrevocably waives all rights that it may have at law or in equity
(including, without limitation, any law subrogating Borrower to the rights of
Collateral Agent and the Lenders under this Agreement) to seek contribution,
indemnification or any other form of reimbursement from any other Borrower, or
any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for

 

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any payment made by Borrower with respect to the Obligations in connection with
this Agreement or otherwise and all rights that it might have to benefit from,
or to participate in, any security for the Obligations as a result of any
payment made by Borrower with respect to the Obligations in connection with this
Agreement or otherwise. Any agreement providing for indemnification,
reimbursement or any other arrangement prohibited under this Section shall be
null and void. If any payment is made to a Borrower in contravention of this
Section, such Borrower shall hold such payment in trust for Collateral Agent and
the Lenders and such payment shall be promptly delivered to Collateral Agent for
application to the Obligations, whether matured or unmatured.

11.14        Effect of Amendment and Restatement.  Except as otherwise set forth
herein, this Agreement is intended to and does completely amend and restate,
without novation, the Original Agreement. All security interests granted under
the Original Agreement are hereby confirmed and ratified and shall continue to
secure all Obligations under this Agreement.

 

12.

DEFINITIONS

12.1        Definitions.  As used in this Agreement, the following terms have
the following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

“Agreement” is defined in the preamble hereof.

“Amortization Date” is, November 1, 2014; provided that, if Borrower achieves
the Equity Event prior to September 30, 2014, the Amortization Date shall be
May 1, 2015.

“Annual Projections” is defined in Section 6.2(a).

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the
laws administered by OFAC.

“Approved Fund” is any (i) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.

“Approved Lender” is defined in Section 11.1.

“Bank Services” are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).

 

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“Bank” is defined in the preamble hereof.

“Basic Rate” is, with respect to a Term Loan, the per annum rate of interest
(based on a year of three hundred sixty (360) days) equal to the greater of
(i) seven and ninety-five hundredths percent (7.95%) and (ii) the sum of (a) the
three (3) months U.S. LIBOR rate reported in the Wall Street Journal three
(3) Business Days prior to the Funding Date of such Term Loan, plus (b) seven
and seventy-two hundredths percent (7.72%).

“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order
No. 13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

“Borrower” is defined in the preamble hereof.

“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records
including ledgers, federal, and state tax returns, records regarding Borrower’s
or its Subsidiaries’ assets or liabilities, the Collateral, business operations
or financial condition, and all computer programs or storage or any equipment
containing such information.

“Business Day” is any day that is not a Saturday, Sunday or a day on which
Collateral Agent is closed.

“Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., and (c) certificates of deposit
maturing no more than one (1) year after issue provided that the account in
which any such certificate of deposit is maintained is subject to a Control
Agreement in favor of Collateral Agent. For the avoidance of doubt, the direct
purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities,
or purchasing participations in, or entering into any type of swap or other
derivative transaction, or otherwise holding or engaging in any ownership
interest in any type of Auction Rate Security by Borrower or any of its
Subsidiaries shall be conclusively determined by the Lenders as an ineligible
Cash Equivalent, and any such transaction shall expressly violate each other
provision of this Agreement governing Permitted Investments. Notwithstanding the
foregoing, Cash Equivalents does not include and Borrower, and each of its
Subsidiaries, are prohibited from purchasing, purchasing participations in,
entering into any type of swap or other equivalent derivative transaction, or
otherwise holding or engaging in any ownership interest in any type of debt
instrument, including, without limitation, any corporate or municipal bonds with
a long-term nominal maturity for which the interest rate is reset through a
dutch auction and more commonly referred to as an auction rate security (each,
an “Auction Rate Security”).

“Claims” are defined in Section 11.2.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of California; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
provided further, that in the event that, by reason of mandatory provisions of
law, any or all of the attachment, perfection, or priority of, or remedies with
respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform
Commercial Code in effect in a jurisdiction other than the State of California,
the term “Code” shall mean the Uniform Commercial Code as enacted and in effect
in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes
of definitions relating to such provisions.

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

 

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“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account, or any other bank account maintained by Borrower or any Subsidiary at
any time.

“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders.

“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to
time.

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

“Communication” is defined in Section 10.

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit C.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower or any of its Subsidiaries maintains a Deposit
Account or the securities intermediary or commodity intermediary at which
Borrower or any of its Subsidiaries maintains a Securities Account or a
Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant
to which Collateral Agent obtains control (within the meaning of the Code) for
the benefit of the Lenders over such Deposit Account, Securities Account, or
Commodity Account.

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

“Credit Extension” is any Term Loan or any other extension of credit by
Collateral Agent or Lenders for Borrower’s benefit.

“Default Rate” is defined in Section 2.3(b).

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Deposit Account” is Borrower’s deposit account, account number
xxxxxxx599, maintained with Bank.

“Disbursement Letter” is that certain form attached hereto as Exhibit B-1.

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

 

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“Dollars,” “dollars” and “$” each mean lawful money of the United States.

“Effective Date” is defined in the preamble of this Agreement.

“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund and (iv) any commercial bank, savings and loan association or
savings bank or any other entity which is an “accredited investor” (as defined
in Regulation D under the Securities Act of 1933, as amended) and which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies and commercial finance companies, in
each case, which either (A) has a rating of BBB or higher from Standard & Poor’s
Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc.
at the date that it becomes a Lender or (B) has total assets in excess of Five
Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through
(iv), which, through its applicable lending office, is capable of lending to
Borrower without the imposition of any withholding or similar taxes; provided
that notwithstanding the foregoing, “Eligible Assignee” shall not include,
unless an Event of Default has occurred and is continuing, (i) Borrower or any
of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower
or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding
the foregoing, (x) in connection with assignments by a Lender due to a forced
divestiture at the request of any regulatory agency, the restrictions set forth
herein shall not apply and Eligible Assignee shall mean any Person or party and
(y) in connection with a Lender’s own financing or securitization transactions,
the restrictions set forth herein shall not apply and Eligible Assignee shall
mean any Person or party providing such financing or formed to undertake such
securitization transaction and any transferee of such Person or party upon the
occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction; provided that no such sale,
transfer, pledge or assignment under this clause (y) shall release such Lender
from any of its obligations hereunder or substitute any such Person or party for
such Lender as a party hereto until Collateral Agent shall have received and
accepted an effective assignment agreement from such Person or party in form
satisfactory to Collateral Agent executed, delivered and fully completed by the
applicable parties thereto, and shall have received such other information
regarding such Eligible Assignee as Collateral Agent reasonably shall require.

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

“Equity Event” is the receipt by Borrower on or after the Effective Date of
unrestricted net cash proceeds of not less than Thirty Million Dollars
($30,000,000.00) from (i) the issuance and sale by Borrower of its equity
securities (or the issuance of convertible promissory notes provided the same
are not repayable in cash, but may only be converted into equity securities,
provided that notwithstanding the foregoing, in the event any convertible notes
issued after the Effective Date convert prior to the September 30, 2014 Equity
Event due date, the proceeds from such convertible notes shall count as cash
proceeds in measuring the foregoing Thirty Million Dollars ($30,000,000) minimum
cash proceeds towards the Equity Event) and/or (ii) a one-time, non-refundable
“up front” payment in connection with a joint venture, collaboration or other
partnering transaction.

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and
its regulations.

“Event of Default” is defined in Section 8.

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the earliest
to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or
(c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to
the original principal amount of such Term Loan multiplied by the Final Payment
Percentage, payable to Lenders in accordance with their respective Pro Rata
Shares.

“Final Payment Percentage” is six and one quarter percent (6.25%).

“Foreign Currency” means lawful money of a country other than the United States.

 

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“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the
laws of the United States or any territory thereof.

“Funding Date” is any date on which a Credit Extension is made to or on account
of Borrower which shall be a Business Day.

“FX Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession in the
United States, which are applicable to the circumstances as of the date of
determination.

“General Intangibles” are all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.

“Guaranty” is any guarantee of all or any part of the Obligations, as the same
may from time to time be amended, restated, modified or otherwise supplemented.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.

“Indemnified Person” is defined in Section 11.2.

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Insolvent” means not Solvent.

“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title
and interest in and to the following:

 

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(a)        its Copyrights, Trademarks and Patents;

(b)        any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;

(c)        any and all source code;

(d)        any and all design rights which may be available to Borrower;

(e)        any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and

(f)         all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents.

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of any Person’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance, payment
or capital contribution to any Person.

[”Key Person” is (A) each of Parent’s (i) President and Chief Executive Officer,
who is Henry Ji as of the Effective Date and (ii) Chief Financial Officer, who
is Richard Vincent as of the Effective Date and (B) IgDraSol’s (i) Chief Science
Officer, who is Vuong Trieu as of the Effective Date and (ii) Chief Commercial
Officer, who is George Uy as of the Effective Date.]

“Lender” is any one of the Lenders.

“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee
that becomes a party to this Agreement pursuant to Section 11.1.

“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses, as well as appraisal fees,
fees incurred on account of lien searches, inspection fees, and filing fees) for
preparing, amending, negotiating, administering, defending and enforcing the
Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent
and/or the Lenders in connection with the Loan Documents.

“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest, or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

“Loan Documents” are, collectively, this Agreement, the Warrants, the Perfection
Certificates, each Compliance Certificate, each Disbursement Letter, each Loan
Payment/Advance Request Form and any Bank Services Agreement, the Post Closing
Letter, any subordination agreements, any note, or notes or guaranties executed
by Borrower or any other Person, and any other present or future agreement
entered into by Borrower, any Guarantor or any other Person for the benefit of
the Lenders and Collateral Agent in connection with this Agreement; all as
amended, restated, or otherwise modified.

“Loan Payment/Advance Request Form” is that certain form attached hereto as
Exhibit B-2.

 

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“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Collateral Agent’s Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations or
condition (financial or otherwise) of Borrower or any Subsidiary; or (c) a
material impairment of the prospect of repayment of any portion of the
Obligations.

“Maturity Date” is, for each Term Loan, the date which is (x) thirty-five
(35) months after the Amortization Date, if the Amortization Date is November 1,
2014; or (y) twenty-nine (29) months after the Amortization Date, if the
Amortization Date is May 1, 2015.

“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment,
and other amounts Borrower owes the Lenders now or later, in connection with,
related to, following, or arising from, out of or under, this Agreement or, the
other Loan Documents (other than the Warrants), or otherwise, including, without
limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin (whether or not allowed)
and debts, liabilities, or obligations of Borrower assigned to the Lenders
and/or Collateral Agent, and the performance of Borrower’s duties under the Loan
Documents (other than the Warrants).

“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

“Oxford New Money Term Loan” is defined in Section 2.2(a)(iii).

“Oxford Original Term Loan” is defined in Section 2.2(a)(i).

“Oxford Term Loan” is defined in Section 2.2(a)(iii).

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

“Payment Date” is the first (1st) calendar day of each calendar month,
commencing on May 1, 2014.

“Perfection Certificate” and “Perfection Certificates” is defined in
Section 5.1.

“Permitted Indebtedness” is:

(a)         Borrower’s Indebtedness to the Lenders and Collateral Agent under
this Agreement and the other Loan Documents;

(b)         Indebtedness existing on the Effective Date and disclosed on the
Perfection Certificate(s);

(c)         Subordinated Debt;

(d)         unsecured Indebtedness to trade creditors incurred in the ordinary
course of business;

 

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(e)         Indebtedness consisting of capitalized lease obligations and
purchase money Indebtedness, in each case incurred by Borrower or any of its
Subsidiaries to finance the acquisition, repair, improvement or construction of
fixed or capital assets of such person, provided that (i) the aggregate
outstanding principal amount of all such Indebtedness does not exceed Two
Hundred Fifty Thousand Dollars ($250,000.00) at any time and (ii) the principal
amount of such Indebtedness does not exceed the lower of the cost or fair market
value of the property so acquired or built or of such repairs or improvements
financed with such Indebtedness (each measured at the time of such acquisition,
repair, improvement or construction is made);

(f)         Indebtedness incurred as a result of endorsing negotiable
instruments received in the ordinary course of Borrower’s business;

(g)         extensions, refinancings, modifications, amendments and restatements
of any items of Permitted Indebtedness (a) through (e) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose materially more burdensome terms upon Borrower, or its Subsidiary, as
the case may be;

(h)         Indebtedness for any Bank Services, and

(i)         other Indebtedness not enumerated above not to exceed Ten Thousand
Dollars ($10,000.00) at any time.

“Permitted Investments” are:

(a)         Investments disclosed on the Perfection Certificate(s) and existing
on the Effective Date;

(b)        (i) Investments consisting of cash and Cash Equivalents, and (ii) any
other Investments permitted by Borrower’s investment policy, as amended from
time to time, provided that such investment policy (and any such amendment
thereto) has been approved in writing by Collateral Agent (and Collateral Agent
acknowledges the investment policy delivered on or prior to the Effective Date
is hereby approved);

(c)         Investments consisting of the endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
Borrower;

(d)         Investments consisting of deposit accounts in which Collateral Agent
has a perfected security interest;

(e)         Investments in connection with Transfers permitted by Section 7.1;

(f)         Investments (i) by Borrower in Sorrento HK not to exceed One Hundred
Thousand Dollars ($100,000.00) in the aggregate in any fiscal year; (ii) by
Borrower or any secured Guarantor in any other Borrower or secured Guarantor;
(iii) by any Subsidiary in Borrower or secured Guarantor; and (iv) by Borrower
in any new Subsidiaries created after the Effective Date not to exceed One
Hundred Thousand Dollars ($100,000.00) in the aggregate in any fiscal year;

(g)         Investments consisting of (i) travel advances and employee
relocation loans and other employee loans and advances in the ordinary course of
business, and (ii) loans to employees, officers or directors relating to the
purchase of equity securities of Borrower or its Subsidiaries pursuant to
employee stock purchase plans or agreements approved by Borrower’s Board of
Directors; not to exceed One Hundred Thousand Dollars ($100,000.00) in the
aggregate for (i) and (ii) in any fiscal year;

(h)         Investments (including debt obligations) received in connection with
the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business;

 

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(i)         Investments consisting of notes receivable of, or prepaid royalties
and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (i) shall not
apply to Investments of Borrower in any Subsidiary;

(j)         non-cash Investments in joint ventures or strategic alliances in the
ordinary course of Borrower’s business consisting of the non-exclusive licensing
of technology, the development of technology or the providing of technical
support; and

(k)         other Investments not enumerated above not to exceed Ten Thousand
Dollars ($10,000.00) at any time.

“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public, and (B) non-exclusive and exclusive
licenses for the use of the Intellectual Property of Borrower or any of its
Subsidiaries entered into in the ordinary course of business, provided, that,
with respect to each such license described in clause (B), (i) no Event of
Default has occurred or is continuing at the time of such license; (ii) the
license constitutes an arms-length transaction, the terms of which, on their
face, do not provide for a sale or assignment of any Intellectual Property and
do not restrict the ability of Borrower or any of its Subsidiaries, as
applicable, to pledge, grant a security interest in or lien on, or assign or
otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive
license, (x) Borrower delivers ten (10) days’ prior written notice and a brief
summary of the terms of the proposed license to Collateral Agent and the Lenders
and delivers to Collateral Agent and the Lenders copies of the final executed
licensing documents in connection with the exclusive license promptly upon
consummation thereof, and (y) any such license could not result in a legal
transfer of title of the licensed property but may be exclusive in respects
other than territory and may be exclusive as to territory only as to discrete
geographical areas outside of the United States; and (iv) all upfront payments,
royalties, milestone payments or other proceeds arising from the licensing
agreement that are payable to Borrower or any of its Subsidiaries are paid to a
Deposit Account that is governed by a Control Agreement.

“Permitted Liens” are:

(a)         Liens existing on the Effective Date and disclosed on the Perfection
Certificates or arising under this Agreement and the other Loan Documents;

(b)         Liens for taxes, fees, assessments or other government charges or
levies, either (i) not due and payable or (ii) being contested in good faith and
for which Borrower maintains adequate reserves on its Books, provided that no
notice of any such Lien has been filed or recorded under the Internal Revenue
Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

(c)         liens securing Indebtedness permitted under clause (e) of the
definition of “Permitted Indebtedness,” provided that (i) such liens exist prior
to the acquisition of, or attach substantially simultaneous with, or within
twenty (20) days after the, acquisition, lease, repair, improvement or
construction of, such property financed or leased by such Indebtedness and
(ii) such liens do not extend to any property of Borrower other than the
property (and proceeds thereof) acquired, leased or built, or the improvements
or repairs, financed by such Indebtedness;

(d)         Liens of carriers, warehousemen, suppliers, or other Persons that
are possessory in nature arising in the ordinary course of business so long as
such Liens attach only to Inventory, securing liabilities in the aggregate
amount not to exceed Twenty Five Thousand Dollars ($25,000.00), and which are
not delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

(e)         Liens to secure payment of workers’ compensation, employment
insurance, old-age pensions, social security and other like obligations incurred
in the ordinary course of business (other than Liens imposed by ERISA);

 

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(f)         Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement Lien must be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness may not increase;

(g)         leases or subleases of real property granted in the ordinary course
of Borrower’s business (or, if referring to another Person, in the ordinary
course of such Person’s business), and leases, subleases, non-exclusive licenses
or sublicenses of personal property (other than Intellectual Property) granted
in the ordinary course of Borrower’s business (or, if referring to another
Person, in the ordinary course of such Person’s business), if the leases,
subleases, licenses and sublicenses do not prohibit granting Collateral Agent or
any Lender a security interest therein;

(h)         banker’s liens, rights of setoff and Liens in favor of financial
institutions incurred in the ordinary course of business arising in connection
with Borrower’s deposit accounts or securities accounts held at such
institutions solely to secure payment of fees and similar costs and expenses and
provided such accounts are maintained in compliance with Section 6.6(b) hereof;

(i)         Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.4 or 8.7; and

(j)         Liens consisting of Permitted Licenses.

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

“Post Closing Letter” is that certain Post Closing Letter dated as of the
Effective Date by and between Collateral Agent and Borrower.

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior
to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration
or otherwise, an additional fee payable to the Lenders in amount equal to:

(i)         for a prepayment made on or after the Funding Date of such Term Loan
through and including the first anniversary of the Funding Date of such Term
Loan, three percent (3.00%) of the principal amount of such Term Loan prepaid;

(ii)         for a prepayment made after the date which is after the first
anniversary of the Funding Date of such Term Loan through and including the
second anniversary of the Funding Date of such Term Loan, two percent (2.00%) of
the principal amount of the Term Loans prepaid; and

(iii)         for a prepayment made after the date which is after the second
anniversary of the Funding Date of such Term Loan and prior to the Maturity
Date, one percent (1.00%) of the principal amount of the Term Loans prepaid.

“Pro Rata Share” is, as of any date of determination, with respect to each
Lender, a percentage (expressed as a decimal, rounded to the ninth decimal
place) determined by dividing the outstanding principal amount of Term Loans
held by such Lender by the aggregate outstanding principal amount of all Term
Loans.

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

“Required Lenders” means (i) for so long as all of the Persons that are Lenders
on the Effective Date (each an “Original Lender”) have not assigned or
transferred any of their interests in their Term Loan, Lenders holding one
hundred percent (100%) of the aggregate outstanding principal balance of the
Term Loan, or (ii) at any time from and after any Original Lender has assigned
or transferred any interest in its Term Loan, Lenders holding

 

35

--------------------------------------------------------------------------------

at least sixty six percent (66%) of the aggregate outstanding principal balance
of the Term Loan and, in respect of this clause (ii), (A) each Original Lender
that has not assigned or transferred any portion of its Term Loan, (B) each
assignee or transferee of an Original Lender’s interest in the Term Loan, but
only to the extent that such assignee or transferee is an Affiliate or Approved
Fund of such Original Lender, and (C) any Person providing financing to any
Person described in clauses (A) and (B) above; provided, however, that this
clause (C) shall only apply upon the occurrence of a default, event of default
or similar occurrence with respect to such financing.

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

“Responsible Officer” is any of the President, Chief Executive Officer, or Chief
Financial Officer of Borrower acting alone.

“Secured Promissory Note” is defined in Section 2.4.

“Secured Promissory Note Record” is a record maintained by each Lender with
respect to the outstanding Obligations owed by Borrower to Lender and credits
made thereto.

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

“Shares” is one hundred percent (100%) of the issued and outstanding capital
stock, membership units or other securities owned or held of record by Borrower
or Borrower’s Subsidiary, in any Subsidiary; provided that, (x) in the event
Borrower demonstrates to Collateral Agent’s reasonable satisfaction that a
pledge of more than sixty five percent (65%) of the Shares of such Subsidiary
which is a Foreign Subsidiary, creates a present and existing adverse tax
consequence to Borrower under the U.S. Internal Revenue Code, and (y) in any
case, with respect to Sorrento HK, “Shares” shall mean sixty-five percent
(65%) of the issued and outstanding capital stock, membership units or other
securities owned or held of record by Borrower or its Subsidiary in such Foreign
Subsidiary.

“Solvent” is, with respect to any Person: the fair salable value of such
Person’s consolidated assets (including goodwill minus disposition costs)
exceeds the fair value of such Person’s liabilities; such Person is not left
with unreasonably small capital after the transactions in this Agreement; and
such Person is able to pay its debts (including trade debts) as they mature.

“Sorrento HK” is Sorrento Therapeutics, Inc. Hong Kong Limited, an entity
organized under the laws of Hong Kong and a wholly-owned Subsidiary of Parent.

“Subordinated Debt” is indebtedness incurred by Borrower or any of its
Subsidiaries from time to time subordinated to all Indebtedness of Borrower
and/or its Subsidiaries to the Lenders (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Collateral Agent and the Lenders entered into between Collateral Agent,
Borrower, and/or any of its Subsidiaries, and the other creditor), on terms
acceptable to Collateral Agent and the Lenders.

“Subsidiary” is, with respect to any Person, any Person of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled, directly or indirectly,
by such Person or through one or more intermediaries.

“SVB Original Term Loan” is defined in Section 2.2(a)(i).

“SVB New Money Term Loan” is defined in Section 2.2(a)(ii)(2).

“SVB Pay Off Term Loan” is defined in Section 2.2(a)(ii)(1).

 

36

--------------------------------------------------------------------------------

“SVB Term Loan” is defined in Section 2.2(a)(ii)(2).

“Term Loan” is defined in Section 2.2(a) hereof.

“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make
a Term Loan, up to the principal amount shown on Schedule 1.1. “Term Loan
Commitments” means the aggregate amount of such commitments of all Lenders.

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

“Transfer” is defined in Section 7.1.

“Warrants” are those certain Warrants to Purchase Stock dated as of the
Effective Date, or any date thereafter, issued by Borrower in favor of each
Lender or such Lender’s Affiliates.

[Balance of Page Intentionally Left Blank]

 

37

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

BORROWER:

 

SORRENTO THERAPEUTICS, INC.

  

CONCORTIS BIOSYSTEMS, CORP.

By /s/ Richard Vincent                                              

  

By /s/ Richard Vincent                                              

Name: Richard Vincent

  

Name: Richard Vincent

Title: CFO    

  

Title: CFO

SHERRINGTON PHARMACEUTICALS, INC.

  

ARK ANIMAL THERAPEUTICS, INC.

By /s/ Richard Vincent                                              

  

By /s/ Richard Vincent                                              

Name: Richard Vincent

  

Name: Richard Vincent

Title: CFO

  

Title: CFO

IGDRASOL, INC.

  

By /s/ Richard Vincent                                              

  

Name: Richard Vincent

  

Title: CFO

   COLLATERAL AGENT AND LENDER:   

OXFORD FINANCE LLC

  

By /s/ Hans Houser                                                  

  

Name: Hans Houser

  

Title: Chief Credit Officer, SVP

   LENDER:   

SILICON VALLEY BANK

  

By /s/ Anthony Flores                                               

  

Name: Anthony Flores

  

Title: Vice President

  

[Signature Page to Amended and Restated Loan and Security Agreement]

--------------------------------------------------------------------------------

SCHEDULE 1.1

Lenders and Commitments

Term Loans

Lender    Term Loan Commitment    Commitment Percentage OXFORD FINANCE LLC   
$7,500,000.00    60.00% SILICON VALLEY BANK    $5,000,000.00    40.00% TOTAL   

$12,500,000.00

  

100.00%

--------------------------------------------------------------------------------

EXHIBIT A

Description of Collateral

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include (i) any
Intellectual Property; provided, however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property. If a judicial authority
(including a U.S. Bankruptcy Court) would hold that a security interest in the
underlying Intellectual Property is necessary to have a security interest in
such Accounts and such property that are proceeds of Intellectual Property, then
the Collateral shall automatically, and effective as of the Effective Date,
include the Intellectual Property to the extent necessary to permit perfection
of Collateral Agent’s security interest in such Accounts and such other property
of Borrower that are proceeds of the Intellectual Property; and (ii) more than
65% of the total combined voting power of all classes of stock entitled to vote
the shares of capital stock (the “Shares”) of (x) Sorrento HK; and (y) any
Foreign Subsidiary, if Borrower demonstrates to Collateral Agent’s reasonable
satisfaction that a pledge of more than sixty five percent (65%) of the Shares
of such Subsidiary creates a present and existing adverse tax consequence to
Borrower under the U.S. Internal Revenue Code.

Pursuant to the terms of a certain negative pledge arrangement with Collateral
Agent and the Lenders, Borrower has agreed not to encumber any of its
Intellectual Property.

--------------------------------------------------------------------------------

EXHIBIT B-1

Form of Disbursement Letter

[see attached]

--------------------------------------------------------------------------------

DISBURSEMENT LETTER

March 31, 2014

The undersigned, being the duly elected and acting Chief Financial Officer of
SORRENTO THERAPEUTICS, INC., a Delaware corporation with offices located at 6042
Cornerstone Court, Suite B, San Diego, CA 92121 (for itself and on behalf of all
borrowers, “Borrower”), does hereby certify to OXFORD FINANCE LLC (“Oxford” and
“Lender”), as collateral agent (the “Collateral Agent”) in connection with that
certain Amended and Restated Loan and Security Agreement dated as of March 31,
2014, by and among Borrower, Collateral Agent and the Lenders from time to time
party thereto (the “Loan Agreement”; with other capitalized terms used below
having the meanings ascribed thereto in the Loan Agreement) that:

1.        The representations and warranties made by Borrower in Section 5 of
the Loan Agreement and in the other Loan Documents are true and correct in all
material respects as of the date hereof.

2.        No event or condition has occurred that would constitute an Event of
Default under the Loan Agreement or any other Loan Document.

3.        Borrower is in compliance with the covenants and requirements
contained in Sections 4, 6 and 7 of the Loan Agreement.

4.        All conditions referred to in Section 3 of the Loan Agreement to the
making of the Loan to be made on or about the date hereof have been satisfied or
waived by Collateral Agent.

5.        No Material Adverse Change has occurred.

6.        The undersigned is a Responsible Officer.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

7.        The proceeds of the Term Loans shall be disbursed as follows:

 

Disbursement from Oxford:

  

Loan Amount

     $4,000,000.00   

Less:

  

--Facility Fee

     ($40,000.00)   

--Accrued portion of Final Payment

     ($24,900.80)   

[--Interim Interest

     ($                  )]   

--Lender’s Legal Fees

     ($                )*   

Net Proceeds due from Oxford:

     $                               

Disbursement from SVB:

  

Loan Amount

     $5,000,000.00   

Less:

  

--Facility Fee

     ($35,000.00)   

--Bank pay off amount

     ($1,500,000.00)   

--Accrued portion of Final Payment

     ($11,666.29)   

[--Interim Interest

     ($                  )]   

Net Proceeds due from SVB:

     $                               

TOTAL TERM LOAN NET PROCEEDS FROM LENDERS

     $                               

8.        The Term Loan shall amortize in accordance with the Amortization Table
attached hereto.

9.        The aggregate net proceeds of the Term Loans shall be transferred to
the Designated Deposit Account as follows:

 

Account Name:   SORRENTO THERAPEUTICS, INC. Bank Name:   SILICON VALLEY BANK
Bank Address:  

3003 Tasman Drive

Santa Clara, California 95054

Account Number:   3300796599 ABA Number:   121140399

[Balance of Page Intentionally Left Blank]

 

 

* Legal fees and costs are through the Effective Date. Post-closing legal fees
and costs, payable after the Effective Date, to be invoiced and paid
post-closing.

--------------------------------------------------------------------------------

Dated as of the date first set forth above.

BORROWER:

 

SORRENTO THERAPEUTICS, INC.

    

CONCORTIS BIOSYSTEMS, CORP.

By                                                                       
          

    

By                                                                       
          

Name:                                                                      
     

    

Name:                                                                      
     

Title:                                                                      
       

    

Title:                                                                      
       

SHERRINGTON PHARMACEUTICALS, INC.

    

ARK ANIMAL THERAPEUTICS, INC.

By                                                                       
          

    

By                                                                       
          

Name:                                                                      
     

    

Name:                                                                      
     

Title:                                                                      
       

    

Title:                                                                      
       

IGDRASOL, INC.

    

By                                                                       
          

    

Name:                                                                      
     

    

Title:                                                                      
       

     COLLATERAL AGENT AND LENDER:     

OXFORD FINANCE LLC

    

By                                                                      
           

    

Name:                                                                      
     

    

Title:                                                                      
       

     LENDER:     

SILICON VALLEY BANK

    

By                                                                       
          

    

Name:                                                                      
     

    

Title:                                                                      
       

    

[Signature Page to Disbursement Letter]

--------------------------------------------------------------------------------

AMORTIZATION TABLE

(Term Loan)

[see attached]

--------------------------------------------------------------------------------

EXHIBIT B-2

Loan Payment/Advance Request Form

DEADLINE FOR SAME DAY PROCESSING IS NOON PACIFIC TIME*

Fax To:                                          
                                         
                                                 Date:
                                                 

 

LOAN PAYMENT:

SORRENTO THERAPEUTICS, INC., on behalf of each Borrower

 

From Account #                                                             To
Account #                                         
                                                    

                                     (Deposit Account
#)                                         
                                   (Loan Account #)

Principal $                                         
                            and/or Interest
$                                         
                                                

 

Authorized Signature:                                       
                                 Phone
Number:                                                                     

Print Name/Title:                                                        

 

 

LOAN ADVANCE:

 

Complete Outgoing Wire Request section below if all or a portion of the funds
from this loan advance are for an outgoing wire.

 

From Account #                                                             To
Account #                                         
                                                            

                                         (Loan Account
#)                                         
                                   (Deposit Account #)

 

Amount of Advance $                                           

 

All Borrower’s representations and warranties in the Amended and Restated Loan
and Security Agreement are true, correct and complete in all material respects
on the date of the request for an advance; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date:

 

Authorized Signature:                                       
                                 Phone
Number:                                        
                                    

Print Name/Title:                                                         

 

 

OUTGOING WIRE REQUEST:

Complete only if all or a portion of funds from the loan advance above is to be
wired.

Deadline for same day processing is noon, Pacific Time

 

Beneficiary Name:                                          
                                             Amount of Wire:
$                                                                         

Beneficiary Bank:                                          
                                              Account Number:
                                                                          

City and State:                                          
                                                   

 

Beneficiary Bank Transit (ABA) #:                                          
           Beneficiary Bank Code (Swift, Sort, Chip, etc.):
                               

                                                                  
                                                        (For International Wire
Only)

Intermediary Bank:                                          
                                    Transit (ABA) #:
                                         
                                        

For Further Credit to:                                          
                                         
                                         
                                                             

 

Special Instruction:                                          
                                         
                                         
                                                                

By signing below, I (we) acknowledge and agree that my (our) funds transfer
request shall be processed in accordance with and subject to the terms and
conditions set forth in the agreements(s) covering funds transfer service(s),
which agreements(s) were previously received and executed by me (us).

 

Authorized Signature:                                                        2nd
Signature (if required):                                          
                       

Print Name/Title:                                          
                     Print Name/Title:                                          
                                     

 Telephone #:                                         
                            Telephone #:                                        
                                               

 

--------------------------------------------------------------------------------

EXHIBIT C

Compliance Certificate

 

TO:

    

OXFORD FINANCE LLC, as Collateral Agent and Lender

SILICON VALLEY BANK, as Lender

FROM:

    

SORRENTO THERAPEUTICS, INC., for itself and on behalf of each Borrower

The undersigned authorized officer (“Officer”) of SORRENTO THERAPEUTICS, INC.,
for itself and on behalf of each Borrower, hereby certifies that in accordance
with the terms and conditions of the Amended and Restated Loan and Security
Agreement by and among Borrower, Collateral Agent, and the Lenders from time to
time party thereto (the “Loan Agreement;” capitalized terms used but not
otherwise defined herein shall have the meanings given them in the Loan
Agreement),

(a)        Borrower is in complete compliance for the period ending
                     with all required covenants except as noted below;

(b)        There are no Events of Default, except as noted below;

(c)        Except as noted below, all representations and warranties of Borrower
stated in the Loan Documents are true and correct in all material respects on
this date and for the period described in (a), above; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date.

(d)        Borrower, and each of Borrower’s Subsidiaries, has timely filed, or
filed for extensions, all required tax returns and reports, Borrower, and each
of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and
local taxes, assessments, deposits and contributions owed by Borrower, or
Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8
of the Loan Agreement;

(e)        No Liens have been levied or claims made against Borrower or any of
its Subsidiaries relating to unpaid employee payroll or benefits of which
Borrower has not previously provided written notification to Collateral Agent
and the Lenders in accordance with the Loan Agreement.

Attached are the required documents, if any, supporting our certification(s).
The Officer, on behalf of Borrower, further certifies that the attached
financial statements are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes and except, in
the case of unaudited financial statements, for the absence of footnotes and
subject to year-end audit adjustments as to the interim financial statements.

Please indicate compliance status since the last Compliance Certificate by
circling Yes, No, or N/A under “Complies” column.

 

       Reporting Covenant    Requirement    Actual    Complies        

1)

     Financial statements    Quarterly within 30 days      

Yes

  

No

  

N/A

2)

     Annual (CPA Audited) statements    Within 180 days after FYE (or 5 days of
filing with SEC)      

Yes

  

No

  

N/A

3)

    

Annual Financial

Projections/Budget (prepared on a monthly basis)

   Annually (within 7 days of Board approval; no later than 60 days of FYE), and
when revised      

Yes

  

No

  

N/A

--------------------------------------------------------------------------------

4)

     A/R & A/P agings    If applicable      

Yes

  

No

  

N/A

5)

     8-K, 10-K and 10-Q Filings    If applicable, within 5 days of filing      

Yes

  

No

  

N/A

6)

     Compliance Certificate    Quarterly within 30 days      

Yes

  

No

  

N/A

7)

     IP Report    When required      

Yes

  

No

  

N/A

8)

     Total amount of Borrower’s cash and cash equivalents at the last day of the
measurement period      

$            

  

Yes

  

No

  

N/A

9)

     Total amount of Borrower’s Subsidiaries’ cash and cash equivalents at the
last day of the measurement period      

$            

  

Yes

  

No

  

N/A

    Deposit and Securities Accounts

    (Please list all accounts; attach separate sheet if additional space needed)

 

     Institution Name    Account Number    New Account?   
Account Control Agreement in place?

1)

         Yes    No    Yes    No

2)

         Yes    No    Yes    No

3)

         Yes    No    Yes    No

4)

         Yes    No    Yes    No

    Financial Covenants

                                 None

    Other Matters

 

1)

    

Have there been any changes in Key Persons since the last Compliance
Certificate?

   Yes    No

2)

    

Have there been any transfers/sales/disposals/retirement of Collateral or IP
prohibited by the Loan Agreement?

   Yes    No

3)

    

Have there been any new or pending claims or causes of action against Borrower
that involve more than One Hundred Thousand Dollars ($100,000.00)?

   Yes    No

4)

    

Have there been any amendments of or other changes to the Operating Documents of
Borrower or any of its Subsidiaries? If yes, provide copies of any such
amendments or changes with this Compliance Certificate.

   Yes    No

--------------------------------------------------------------------------------

Exceptions

Please explain any exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions.” Attach separate sheet if additional
space needed.)

SORRENTO THERAPEUTICS, INC.,

for itself and on behalf of each Borrower

 

By                                                         

Name:                                                   

Title:                                                     

Date:                                                     

 

   LENDER USE ONLY      Received by:                                        
           Date:                          Verified
by:                                                     
Date:                          Compliance Status:
              Yes                  No

--------------------------------------------------------------------------------

EXHIBIT D

Form of Secured Promissory Note

[see attached]

--------------------------------------------------------------------------------

[AMENDED AND RESTATED] SECURED PROMISSORY NOTE

(Term Loan)

$[                             ]

Dated: March 31, 2014

FOR VALUE RECEIVED, the undersigned, SORRENTO THERAPEUTICS, INC., a Delaware
corporation, IGDRASOL, INC., a Delaware corporation, and SHERRINGTON
PHARMACEUTICALS, INC., each with offices located at 6042 Cornerstone Court,
Suite B, San Diego, CA 92121, CONCORTIS BIOSYSTEMS, CORP., a Delaware
corporation (“Concortis”), with offices located at 11760 Sorrento Valley Road,
Suite N, San Diego, CA 92121, and ARK ANIMAL THERAPEUTICS, INC., a Delaware
corporation, with offices located at [ADDRESS] (jointly and severally,
collectively, “Borrower”) HEREBY PROMISE TO PAY to the order of [OXFORD FINANCE
LLC][SILICON VALLEY BANK] (“Lender”) the principal amount of
[                    ] Dollars ($[                    ]) or such lesser amount
as shall equal the outstanding principal balance of the Term Loan made to
Borrower by Lender, plus interest on the aggregate unpaid principal amount of
such Term Loan, at the rates and in accordance with the terms of the Amended and
Restated Loan and Security Agreement dated March 31, 2014 by and among Borrower,
Lender, Oxford Finance LLC, as Collateral Agent, and the other Lenders from time
to time party thereto (as amended, restated, supplemented or otherwise modified
from time to time, the “Loan Agreement”). If not sooner paid, the entire
principal amount and all accrued and unpaid interest hereunder shall be due and
payable on the Maturity Date as set forth in the Loan Agreement. Any capitalized
term not otherwise defined herein shall have the meaning attributed to such term
in the Loan Agreement.

Principal, interest and all other amounts due with respect to the Term Loan, are
payable in lawful money of the United States of America to Lender as set forth
in the Loan Agreement and this Secured Promissory Note (this “Note”). The
principal amount of this Note and the interest rate applicable thereto, and all
payments made with respect thereto, shall be recorded by Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Note.

The Loan Agreement, among other things, (a) provides for the making of a secured
Term Loan by Lender to Borrower, and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.

This Note may not be prepaid except as set forth in Section 2.2(c) and
Section 2.2(d) of the Loan Agreement.

This Note and the obligation of Borrower to repay the unpaid principal amount of
the Term Loan, interest on the Term Loan and all other amounts due Lender under
the Loan Agreement is secured under the Loan Agreement.

Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.

Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower’s obligations hereunder not
performed when due.

This Note shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of California.

The ownership of an interest in this Note shall be registered on a record of
ownership maintained by Lender or its agent. Notwithstanding anything else in
this Note to the contrary, the right to the principal of, and stated interest
on, this Note may be transferred only if the transfer is registered on such
record of ownership and the transferee is identified as the owner of an interest
in the obligation. Borrower shall be entitled to treat the registered holder of
this Note (as recorded on such record of ownership) as the owner in fact thereof
for all purposes and shall not be bound to recognize any equitable or other
claim to or interest in this Note on the part of any other person or entity.

--------------------------------------------------------------------------------

[Except as otherwise set forth herein, this Amended and Restated Secured
Promissory Note is intended to and does completely amend and restate, without
novation, that certain Secured Promissory Note issued February 3, 2014, by
Sorrento Therapeutics, Inc., IgDraSol, Inc., Sherrington Pharmaceuticals, Inc.
and Concortis Biosystems, Corp. in favor of Lender.]

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of
its officers thereunto duly authorized on the date hereof.

 

BORROWER:

SORRENTO THERAPEUTICS, INC.

By

   

Name:

   

Title:

   

 

IGDRASOL, INC.

By

   

Name:

   

Title:

   

 

SHERRINGTON PHARMACEUTICALS, INC.

By

   

Name:

   

Title:

   

 

CONCORTIS BIOSYSTEMS, CORP.

By

   

Name:

   

Title:

   

 

ARK ANIMAL THERAPEUTICS, INC.

By

   

Name:

   

Title:

   

--------------------------------------------------------------------------------

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

 

Date

  

Principal

Amount

  

Interest Rate

  

Scheduled

Payment Amount

  

Notation By

--------------------------------------------------------------------------------

CORPORATE BORROWING CERTIFICATE

 

BORROWER:

     SORRENTO THERAPEUTICS, INC.    DATE: March 31, 2014

LENDERS:

     OXFORD FINANCE LLC, as Collateral Agent and Lender         SILICON VALLEY
BANK, as Lender   

I hereby certify as follows, as of the date set forth above:

1.         I am the Secretary, Assistant Secretary or other officer of Borrower.
My title is as set forth below.

2.         Borrower’s exact legal name is set forth above. Borrower is a
corporation existing under the laws of the State of Delaware.

3.         Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and
(ii) Borrower’s Bylaws, as amended. Neither such Certificate of Incorporation
nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented,
and such Certificate of Incorporation and such Bylaws remain in full force and
effect as of the date hereof.

4.         The following resolutions were duly and validly adopted by Borrower’s
Board of Directors at a duly held meeting of such directors (or pursuant to a
unanimous written consent or other authorized corporate action). Such
resolutions are in full force and effect as of the date hereof and have not been
in any way modified, repealed, rescinded, amended or revoked, and the Lenders
may rely on them until each Lender receives written notice of revocation from
Borrower.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

RESOLVED, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name

  

Title

  

Signature

  

Authorized to

Add or Remove

Signatories

 

  

 

  

 

   ¨

 

  

 

  

 

   ¨

 

  

 

  

 

   ¨

 

  

 

  

 

   ¨

RESOLVED FURTHER, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

Borrow Money.    Borrow money from the Lenders pursuant to the terms of the
Amended and Restated Loan and Security Agreement dated as of March 31, 2014, by
and among Borrower and Lenders.

Execute Loan Documents.    Execute any loan documents relating to the Loan
Agreement any Lender requires.

Grant Security.    Grant Collateral Agent a security interest in the Collateral
under the Loan Agreement.

Negotiate Items.    Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

Issue Warrants.    Issue warrants for Borrower’s capital stock.

Further Acts.    Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effectuate such resolutions.

RESOLVED FURTHER, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

5.         The persons listed above are Borrower’s officers or employees with
their titles and signatures shown next to their names.

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

I, the                                                       of Borrower, hereby
certify as to paragraphs 1 through 5 above, as of the date set forth above.

                                         [print title]

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

[Signature Page to Corporate Borrowing Certificate]

[Sorrento Therapeutics, Inc.]

--------------------------------------------------------------------------------

EXHIBIT A

Certificate of Incorporation (including amendments)

[see attached]

--------------------------------------------------------------------------------

EXHIBIT B

Bylaws

[see attached]

--------------------------------------------------------------------------------

CORPORATE BORROWING CERTIFICATE

 

BORROWER:

     IGDRASOL, INC.      DATE: March 31, 2014   

LENDERS:

     OXFORD FINANCE LLC, as Collateral Agent and Lender         SILICON VALLEY
BANK, as Lender   

I hereby certify as follows, as of the date set forth above:

1.          I am the Secretary, Assistant Secretary or other officer of
Borrower. My title is as set forth below.

2.          Borrower’s exact legal name is set forth above. Borrower is a
corporation existing under the laws of the State of Delaware.

3.          Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and
(ii) Borrower’s Bylaws, as amended. Neither such Certificate of Incorporation
nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented,
and such Certificate of Incorporation and such Bylaws remain in full force and
effect as of the date hereof.

4.          The following resolutions were duly and validly adopted by
Borrower’s Board of Directors at a duly held meeting of such directors (or
pursuant to a unanimous written consent or other authorized corporate action).
Such resolutions are in full force and effect as of the date hereof and have not
been in any way modified, repealed, rescinded, amended or revoked, and the
Lenders may rely on them until each Lender receives written notice of revocation
from Borrower.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

RESOLVED, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name    Title    Signature    Authorized to
Add or Remove
Signatories

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

RESOLVED FURTHER, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

Borrow Money.    Borrow money from the Lenders pursuant to the terms of the
Amended and Restated Loan and Security Agreement dated as of March 31, 2014, by
and among Borrower and Lenders.

Execute Loan Documents.    Execute any loan documents relating to the Loan
Agreement any Lender requires.

Grant Security.     Grant Collateral Agent a security interest in the Collateral
in the Loan Agreement.

Negotiate Items.    Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

Further Acts.    Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effectuate such resolutions.

RESOLVED FURTHER, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

5.          The persons listed above are Borrower’s officers or employees with
their titles and signatures shown next to their names.

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

I, the                                                       of Borrower, hereby
certify as to paragraphs 1 through 5 above, as of the date set forth above.

                                         [print title]

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

[Signature Page to Corporate Borrowing Certificate]

[IgDraSol, Inc.]

--------------------------------------------------------------------------------

EXHIBIT A

Certificate of Incorporation (including amendments)

[see attached]

--------------------------------------------------------------------------------

EXHIBIT B

Bylaws

[see attached]

--------------------------------------------------------------------------------

CORPORATE BORROWING CERTIFICATE

 

BORROWER:

     SHERRINGTON PHARMACEUTICALS, INC.      DATE: March 31, 2014   

LENDERS:

     OXFORD FINANCE LLC, as Collateral Agent and Lender         SILICON VALLEY
BANK, as Lender   

I hereby certify as follows, as of the date set forth above:

1.          I am the Secretary, Assistant Secretary or other officer of
Borrower. My title is as set forth below.

2.          Borrower’s exact legal name is set forth above. Borrower is a
corporation existing under the laws of the State of Delaware.

3.          Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and
(ii) Borrower’s Bylaws, as amended. Neither such Certificate of Incorporation
nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented,
and such Certificate of Incorporation and such Bylaws remain in full force and
effect as of the date hereof.

4.          The following resolutions were duly and validly adopted by
Borrower’s Board of Directors at a duly held meeting of such directors (or
pursuant to a unanimous written consent or other authorized corporate action).
Such resolutions are in full force and effect as of the date hereof and have not
been in any way modified, repealed, rescinded, amended or revoked, and the
Lenders may rely on them until each Lender receives written notice of revocation
from Borrower.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

RESOLVED, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name    Title    Signature    Authorized to
Add or Remove
Signatories

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

RESOLVED FURTHER, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

Borrow Money.    Borrow money from the Lenders pursuant to the terms of the
Amended and Restated Loan and Security Agreement dated as of March 31, 2014, by
and among Borrower and Lenders.

Execute Loan Documents.    Execute any loan documents relating to the Loan
Agreement any Lender requires.

Grant Security.     Grant Collateral Agent a security interest in the Collateral
in the Loan Agreement.

Negotiate Items.    Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

Further Acts.    Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effectuate such resolutions.

RESOLVED FURTHER, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

5.          The persons listed above are Borrower’s officers or employees with
their titles and signatures shown next to their names.

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

I, the                                                       of Borrower, hereby
certify as to paragraphs 1 through 5 above, as of the date set forth above.

                                         [print title]

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

[Signature Page to Corporate Borrowing Certificate]

[Sherrington Pharmaceuticals, Inc.]

--------------------------------------------------------------------------------

EXHIBIT A

Certificate of Incorporation (including amendments)

[see attached]

--------------------------------------------------------------------------------

EXHIBIT B

Bylaws

[see attached]

--------------------------------------------------------------------------------

CORPORATE BORROWING CERTIFICATE

 

BORROWER:

     CONCORTIS BIOSYSTEMS, CORP.      DATE: March 31, 2014   

LENDERS:

     OXFORD FINANCE LLC, as Collateral Agent and Lender         SILICON VALLEY
BANK, as Lender   

I hereby certify as follows, as of the date set forth above:

1.          I am the Secretary, Assistant Secretary or other officer of
Borrower. My title is as set forth below.

2.          Borrower’s exact legal name is set forth above. Borrower is a
corporation existing under the laws of the State of Delaware.

3.          Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and
(ii) Borrower’s Bylaws, as amended. Neither such Certificate of Incorporation
nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented,
and such Certificate of Incorporation and such Bylaws remain in full force and
effect as of the date hereof.

4.          The following resolutions were duly and validly adopted by
Borrower’s Board of Directors at a duly held meeting of such directors (or
pursuant to a unanimous written consent or other authorized corporate action).
Such resolutions are in full force and effect as of the date hereof and have not
been in any way modified, repealed, rescinded, amended or revoked, and the
Lenders may rely on them until each Lender receives written notice of revocation
from Borrower.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

RESOLVED, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name    Title    Signature    Authorized to
Add or Remove
Signatories

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

RESOLVED FURTHER, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

Borrow Money.    Borrow money from the Lenders pursuant to the terms of the
Amended and Restated Loan and Security Agreement dated as of March 31, 2014, by
and among Borrower and Lenders.

Execute Loan Documents.    Execute any loan documents relating to the Loan
Agreement any Lender requires.

Grant Security.     Grant Collateral Agent a security interest in the Collateral
in the Loan Agreement.

Negotiate Items.    Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

Further Acts.    Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effectuate such resolutions.

RESOLVED FURTHER, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

5.         The persons listed above are Borrower’s officers or employees with
their titles and signatures shown next to their names.

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

I, the                                                       of Borrower, hereby
certify as to paragraphs 1 through 5 above, as of the date set forth above.

                                         [print title]

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

[Signature Page to Corporate Borrowing Certificate]

[Concortis Biosystems, Corp.]

--------------------------------------------------------------------------------

EXHIBIT A

Certificate of Incorporation (including amendments)

[see attached]

--------------------------------------------------------------------------------

EXHIBIT B

Bylaws

[see attached]

--------------------------------------------------------------------------------

CORPORATE BORROWING CERTIFICATE

 

BORROWER:

    

ARK ANIMAL THERAPEUTICS, INC.

  

DATE: March 31, 2014

LENDERS:

    

OXFORD FINANCE LLC, as Collateral Agent and Lender

       

SILICON VALLEY BANK, as Lender

  

I hereby certify as follows, as of the date set forth above:

1.        I am the Secretary, Assistant Secretary or other officer of Borrower.
My title is as set forth below.

2.        Borrower’s exact legal name is set forth above. Borrower is a
corporation existing under the laws of the State of Delaware.

3.        Attached hereto as Exhibit A and Exhibit B, respectively, are true,
correct and complete copies of (i) Borrower’s Certificate of Incorporation
(including amendments), as filed with the Secretary of State of the state in
which Borrower is incorporated as set forth in paragraph 2 above; and
(ii) Borrower’s Bylaws, as amended. Neither such Certificate of Incorporation
nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented,
and such Certificate of Incorporation and such Bylaws remain in full force and
effect as of the date hereof.

4.        The following resolutions were duly and validly adopted by Borrower’s
Board of Directors at a duly held meeting of such directors (or pursuant to a
unanimous written consent or other authorized corporate action). Such
resolutions are in full force and effect as of the date hereof and have not been
in any way modified, repealed, rescinded, amended or revoked, and the Lenders
may rely on them until each Lender receives written notice of revocation from
Borrower.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

RESOLVED, that any one of the following officers or employees of Borrower, whose
names, titles and signatures are below, may act on behalf of Borrower:

 

Name    Title    Signature    Authorized to
Add or Remove
Signatories

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

 

 

  

 

 

  

 

 

   ¨

RESOLVED FURTHER, that any one of the persons designated above with a checked
box beside his or her name may, from time to time, add or remove any individuals
to and from the above list of persons authorized to act on behalf of Borrower.

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

Borrow Money.    Borrow money from the Lenders pursuant to the terms of the
Amended and Restated Loan and Security Agreement dated as of March 31, 2014, by
and among Borrower and Lenders.

Execute Loan Documents.    Execute any loan documents relating to the Loan
Agreement any Lender requires.

Grant Security.     Grant Collateral Agent a security interest in the Collateral
in the Loan Agreement.

Negotiate Items.    Negotiate or discount all drafts, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.

Further Acts.    Designate other individuals to request advances, pay fees and
costs and execute other documents or agreements (including documents or
agreement that waive Borrower’s right to a jury trial) they believe to be
necessary to effectuate such resolutions.

RESOLVED FURTHER, that all acts authorized by the above resolutions and any
prior acts relating thereto are ratified.

[Balance of Page Intentionally Left Blank]

--------------------------------------------------------------------------------

5.          The persons listed above are Borrower’s officers or employees with
their titles and signatures shown next to their names.

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

*** If the Secretary, Assistant Secretary or other certifying officer executing
above is designated by the resolutions set forth in paragraph 4 as one of the
authorized signing officers, this Certificate must also be signed by a second
authorized officer or director of Borrower.

I, the                                                       of Borrower, hereby
certify as to paragraphs 1 through 5 above, as of the date set forth above.

                                         [print title]

 

By:                                                                             
     Name:                                   
                                        Title:                                  
                                           

[Signature Page to Corporate Borrowing Certificate]

[Ark Animal Therapeutics, Inc.]

--------------------------------------------------------------------------------

EXHIBIT A

Certificate of Incorporation (including amendments)

[see attached]

--------------------------------------------------------------------------------

EXHIBIT B

Bylaws

[see attached]

--------------------------------------------------------------------------------

DEBTOR:

     [SORRENTO THERAPEUTICS, INC.][IGDRASOL, INC.][SHERRINGTON PHARMACEUTICALS,
INC.][CONCORTIS BIOSYSTEMS, CORP.][ARK ANIMAL THERAPEUTICS, INC.]

SECURED PARTY:

     OXFORD FINANCE LLC, As Collateral Agent

EXHIBIT A TO UCC FINANCING STATEMENT

Description of Collateral

The Collateral consists of all of Debtor’s right, title and interest in and to
the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include (i) any
Intellectual Property; provided, however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property. If a judicial authority
(including a U.S. Bankruptcy Court) would hold that a security interest in the
underlying Intellectual Property is necessary to have a security interest in
such Accounts and such property that are proceeds of Intellectual Property, then
the Collateral shall automatically, and effective as of the Effective Date,
include the Intellectual Property to the extent necessary to permit perfection
of Collateral Agent’s security interest in such Accounts and such other property
of Borrower that are proceeds of the Intellectual Property; and (ii) more than
65% of the total combined voting power of all classes of stock entitled to vote
the shares of capital stock (the “Shares”) of (x) Sorrento HK; and (y) any
Foreign Subsidiary, if Borrower demonstrates to Collateral Agent’s reasonable
satisfaction that a pledge of more than sixty five percent (65%) of the Shares
of such Subsidiary creates a present and existing adverse tax consequence to
Borrower under the U.S. Internal Revenue Code.

Pursuant to the terms of a certain negative pledge arrangement with Collateral
Agent and the Lenders, Borrower has agreed not to encumber any of its
Intellectual Property.

Capitalized terms used but not defined herein have the meanings ascribed in the
Uniform Commercial Code in effect in the State of California as in effect from
time to time (the “Code”) or, if not defined in the Code, then in the Amended
and Restated Loan and Security Agreement by and between Debtor, Secured Party
and the other Lenders party thereto (as modified, amended and/or restated from
time to time).