Item
2.01 Completion of Acquisition or Disposition of Assets.
On March 3, 2017, pursuant to the Purchase
Agreement, the Company completed its previously announced sale to Cardinal Health 414 of its assets used, held for use, or intended
to be used in operating its business of developing, manufacturing and commercializing a product used for lymphatic mapping, lymph
node biopsy, and the diagnosis of metastatic spread to lymph nodes for staging of cancer (the “Business”), including
the Company’s radioactive diagnostic agent marketed under the Lymphoseek® trademark for current approved indications
by the U.S. Food and Drug Administration (“FDA”) and similar indications approved by the FDA in the future (the “Product”),
in Canada, Mexico and the United States (the “Territory”) (giving effect to the License-Back described below and excluding
certain assets specifically retained by the Company) (the “Asset Sale”). Such assets sold in the Asset Sale consist
primarily of, without limitation, (i) intellectual property used in or reasonably necessary for the conduct of the Business, (ii)
inventory of, and customer, distribution, and product manufacturing agreements related to, the Business, (iii) all product registrations
related to the Product, including the new drug application approved by the FDA for the Product and all regulatory submissions in
the United States that have been made with respect to the Product and all Health Canada regulatory submissions and, in each case,
all files and records related thereto, (iv) all related clinical trials and clinical trial authorizations and all files and records
related thereto, and (v) all right, title and interest in and to the Product, as specified in the Purchase Agreement (the “Acquired
Assets”).
In exchange for the Acquired Assets, Cardinal
Health 414 (i) made a cash payment to the Company at closing of approximately $80.6 million after adjustments based on inventory
being transferred and an advance of $3 million of guaranteed earnout payments as part of the CRG settlement described in Item 1.01
above, (ii) assumed certain liabilities of the Company associated with the Product as specified in the Purchase Agreement, and
(iii) agreed to make periodic earnout payments (to consist of contingent payments and milestone payments which, if paid, will be
treated as additional purchase price) to the Company based on net sales derived from the purchased Product subject, in each case,
to Cardinal Health 414’s right to off-set. In no event will the sum of all earnout payments, as further described in the
Purchase Agreement, exceed $230 million over a period of ten years, of which $20.1 million are guaranteed payments for the three
years immediately after closing of the Asset Sale. At the closing of the Asset Sale, $3 million of such earnout payments were advanced
by Cardinal Health 414 to the Company, and paid to CRG as part of the Deposit Amount paid to CRG described in Item 1.01 above.
In addition to payment of the Deposit Amount
to CRG set forth in Item 1.01 above, the Company repaid to Platinum Partners Credit Opportunities Master Fund, LP (“PPCO”)
an aggregate of $7,714,109.47 in partial satisfaction of the Company’s liabilities, obligations and indebtedness under that
certain Loan Agreement, dated July 25, 2012 (as amended on June 25, 2013, March 4, 2014, May 8, 2015 and otherwise) by and between
the Company and Platinum-Montaur Life Sciences, LLC (“Platinum-Montaur”), which, to the extent of such payment, were
transferred by Platinum Montaur to PPCO. The Company was informed by Platinum Partners Value Arbitrage Fund LP (“PPVA”)
that it was the owner of the balance of the Platinum Montaur loan. Such balance was due upon closing of the Asset Sale but withheld
by the Company and not paid to anyone as it is subject to competing claims of ownership by both Michael Goldberg, the Company’s
Chief Executive Officer, and PPVA.
Upon closing of the Asset Sale, the Supply
and Distribution Agreement, dated November 15, 2007 (as amended, the “Supply and Distribution Agreement”), between
Cardinal Health 414 and the Company was terminated and, as a result, the provisions thereof are of no further force or effect (other
than any indemnification, payment, notification or data sharing obligations which survive the termination). At the closing of the
Asset Sale, Cardinal Health 414 paid to the Company $1.2 million, as an estimate of the accrued revenue sharing payments owed to
the Company as of the closing date, net of prior payments.
In connection with the closing of the Asset
Sale, the Company entered into a License-Back Agreement (the “License-Back”) with Cardinal Health 414. Pursuant to
the License-Back, Cardinal Health 414 granted to the Company a sublicensable (subject to conditions) and royalty-free license to
use certain intellectual property rights included in the Acquired Assets (as defined below) and owned by Cardinal Health 414 as
of the closing of the Asset Sale to the extent necessary for the Company to (i) on an exclusive basis, subject to certain conditions,
develop, manufacture, market, sell and distribute new pharmaceutical and other products that are not Competing Products (as defined
in the License-Back), and (ii) on a non-exclusive basis, develop, manufacture, market, sell and distribute the Product (as defined
below) throughout the world other than in the Territory. Subject to the Company’s compliance with certain restrictions in
the License-Back, the License-Back also restricts Cardinal Health 414 from using the intellectual property rights included in the
Acquired Assets to develop, manufacture, market, sell, or distribute any product other than the Product or other product that (a)
accumulates in lymphatic tissue or tumor-draining lymph nodes for the purpose of (1) lymphatic mapping or (2) identifying the existence,
location or staging of cancer in a body, or (b) provides for or facilitates any test or procedure that is reasonably substitutable
for any test or procedure provided for or facilitated by the Product. Pursuant to the License-Back and subject to rights under
existing agreements, Cardinal Health 414 was given a right of first offer to market, sell and/or market any new products developed
from the intellectual property rights licensed by Cardinal Health 414 to the Company by the License-Back.
As part of the Asset Sale, the Company and
Cardinal Health 414 also entered into ancillary agreements providing for transitional services and other arrangements. The Company
amended and restated its license agreement with The Regents of the University of California (San Diego) (“UCSD”) pursuant
to which UCSD grants a license to the Company to exploit certain intellectual property rights owned by UCSD and, separately, Cardinal
Health 414 entered into a license agreement with UCSD pursuant to which UCSD granted a license to Cardinal Health 414 to exploit
certain intellectual property rights owned by UCSD for Cardinal Health 414 to sell the Product in the Territory.
Pursuant to the Purchase Agreement, the
Company granted to each of Cardinal Health 414 and UCSD a five (5)-year warrant to purchase up to 10 million shares and 1 million
shares, respectively, of the Company’s common stock, par value $.001 per share, at an exercise price of $1.50 per share,
each of which warrant is subject to anti-dilution and other customary terms and conditions.
Prior to the Asset Sale, the Company had
no material relationships with Cardinal Health 414 or its affiliates except that Cardinal Health 414 was the Company’s primary
distributor of the Product throughout the United States pursuant to the Supply and Distribution Agreement which, as set forth above,
was terminated as of the closing of the Asset Sale.
The foregoing description of the Purchase
Agreement, the License-Back, the Warrants and the UCSD License Agreement does not purport to be complete and is qualified in its
entirety by reference to such documents attached hereto as Exhibits 10.2 through 10.6, and incorporated herein by reference.