UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): June 13, 2018

 

 

 

SORRENTO THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   001-36150   33-0344842

(State or Other Jurisdiction

of Incorporation) 

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

4955 Directors Place

San Diego, CA 92121

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: (858) 203-4100

 

N/A

(Former Name, or Former Address, if Changed Since Last Report)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

  

 

 

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

Amendment to Securities Purchase Agreement

 

On June 13, 2018, Sorrento Therapeutics, Inc. ( the “ Company ”) entered into an amendment (the “Amendment”) to that certain Securities Purchase Agreement (the “Agreement”), dated as of March 26, 2018, by and among the Company and the purchasers identified on Schedule A thereto (the “Purchasers”).

 

The Agreement provided that, among other things, the Company would issue and sell to the Purchasers, in a private placement transaction (the “Private Placement”), (1) convertible promissory notes in an aggregate principal amount of $120,500,000 (the “Notes”), which would accrue simple interest at a rate equal to 5.0% per annum and mature upon the earlier to occur of (a) the date that is five years from the date of issuance, and (b) the date of the closing of a change in control of the Company (the “Maturity Date”), and (2) warrants (“Warrants”) to purchase 8,591,794 shares of the common stock of the Company (“Common Stock”).

 

Under the terms of the Amendment, the Company and the Purchasers agreed that the aggregate principal amount of the Notes was reduced to $37,848,750 and that the aggregate number of shares of Common Stock issuable upon exercise of the Warrants was reduced to 2,698,662, and agreed to certain other adjustments to the threshold principal amount of the Notes required to remain outstanding in order for certain rights and obligations to apply to the Notes. The remaining terms of the Notes and the Warrants, as described in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 27, 2018, remain unchanged.

 

The foregoing summary of the Amendment does not purport to be complete and is qualified in its entirety by reference to the copy of the Amendment filed herewith as Exhibit 10.1.

 

Closing of Private Placement Pursuant to Securities Purchase Agreement

 

On June 13, 2018, pursuant to the Agreement, as amended by the Amendment (as so amended, the “Amended Agreement”), the Company issued and sold to the Purchasers, in the Private Placement (1) Notes in an aggregate principal amount of $37,848,750, and (2) Warrants to purchase an aggregate of 2,698,662 shares of Common Stock.

 

At any time and from time to time before the Maturity Date, each Purchaser shall have the option to convert any portion of the outstanding principal amount of such Purchaser’s Note that is equal to or greater than the lesser of: (1) $4,000,000, and (2) the then-outstanding principal amount of such Purchaser’s Note into shares of Common Stock at a price per share of $7.0125, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. Accrued but unpaid interest on the Notes shall be paid in cash semi-annually in arrears on or prior to the 30th day of June and 31st day of December of each calendar year commencing with December 31, 2018. If a Purchaser elects to convert any of the principal amount of their Note, then all accrued but unpaid interest on such portion of the principal amount shall become due and payable in cash. The Notes contain restrictive covenants and event of default provisions that are customary for transactions of this type.

 

Each Warrant has an exercise price of $8.77 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, will become exercisable on December 11, 2018, has a term of five and a half years and is exercisable on a cash basis, unless there is not an effective registration statement covering the resale of the shares issuable upon exercise of the Warrants (the “Warrant Shares”), in which case the Warrants shall also be exercisable on a cashless exercise basis.

 

In connection with the Private Placement, on June 13, 2018, the Company and the Purchasers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which, among other things, the Company agreed to prepare and file one or more registration statements with the SEC for the purpose of registering for resale the shares of Common Stock issuable upon conversion of the Notes (the “Note Shares”) and the Warrant Shares. Under the Registration Rights Agreement, the Company agreed to file a registration statement with the SEC registering all of the Note Shares and the Warrant Shares for resale by no later than July 27, 2018.

 

 

 

 

The foregoing summaries of the Amended Agreement, the Notes, the Warrants and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the copy of the Agreement that was filed as Exhibit 10.1 to the Current Report on Form 8-K that the Company filed with the SEC on March 27, 2018, the copy of the Amendment filed herewith as Exhibit 10.1 and the copies of the form of Note, the form of Warrant and the Registration Rights Agreement that are filed herewith as Exhibit 4.1, 4.2 and 4.3, respectively.

 

Item 2.03 Creation of a Direct Financial Obligation.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K under the heading “Closing of Private Placement Pursuant to Securities Purchase Agreement” is incorporated herein by reference into this Item 2.03 in its entirety.

 

Item 3.02. Unregistered Sales of Equity Securities.

 

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference into this Item 3.02 in its entirety. The Notes, the Warrants, the Note Shares and the Warrant Shares (collectively, the “Securities”) were offered and sold to the Purchasers on June 13, 2018 in a transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. Each of the Purchasers represented that such Purchaser was an “accredited investor,” as defined in Regulation D, and was acquiring the Securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. Accordingly, the Securities have not been registered under the Securities Act and the Securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws. Neither this Current Report on Form 8-K nor the exhibits attached hereto is an offer to sell or the solicitation of an offer to buy shares of Common Stock, notes, warrants or any other securities of the Company.

 

Item 7.01. Regulation FD Disclosure.

 

On June 14, 2018, Henry Ji, Ph.D., the Chairman and CEO of the Company, provided a corporate update to the Company’s stockholders, a copy of which is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information in this Item 7.01 (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

 

Item 8.01. Other Information.

 

As of June 12, 2018, the Company had 115,495,703 shares of Common Stock outstanding.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

4.1 Form of Convertible Promissory Note issued to investors pursuant to the Securities Purchase Agreement, dated as of June 13, 2018, by and among Sorrento Therapeutics, Inc. and the purchasers identified on Schedule A thereto.
4.2 Form of Common Stock Purchase Warrant issued to investors pursuant to the Securities Purchase Agreement, dated as of June 13, 2018, by and among Sorrento Therapeutics, Inc. and the purchasers identified on Schedule A thereto.
4.3 Registration Rights Agreement, dated June 13, 2018, by and among Sorrento Therapeutics, Inc. and the purchasers identified on Schedule A thereto.
10.1 Amendment No. 1 to Securities Purchase Agreement, effective June 13, 2018, by and among Sorrento Therapeutics, Inc. and the purchasers set forth on the signature pages thereto.
99.1 Corporate update to stockholders , dated June 14, 2018.

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

  SORRENTO THERAPEUTICS, INC.  
       
Date:  June 14, 2018 By: /s/ Henry Ji, Ph.D.  
    Name: Henry Ji, Ph.D.  
    Title: Chairman of the Board, President and Chief Executive Officer  

 

 

 

 

 

 

 

Exhibit 4.1

 

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

 

SORRENTO THERAPEUTICS, INC.

 

CONVERTIBLE PROMISSORY NOTE

 

$ ___________ Date: June 13, 2018

 

FOR VALUE RECEIVED, SORRENTO THERAPEUTICS, INC., a Delaware corporation (the “ Company ”), promises to pay to ____________________ (the “ Purchaser ”), or its registered assigns, in lawful money of the United States of America the principal sum of ___________ Dollars ($___________) (the “ Principal Amount ”), or such lesser amount as shall equal the outstanding Principal Amount hereof, together with simple interest from the date of this Note on the unpaid principal balance at a rate equal to 5.0% per annum (the “ Interest Rate ”), computed on the basis of the actual number of days elapsed and a year of 365 days. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable, if not earlier converted, on the earlier to occur of: (1) June 13, 2023, and (ii) the date of the closing of a Change in Control (as defined below) (the “ Maturity Date ”). This Note is one of the “ Notes ” issued pursuant to that certain Securities Purchase Agreement dated March 26, 2018 (as may be amended or restated from time to time, the “ Securities Purchase Agreement ”), among the Company and the Purchasers (as defined in the Securities Purchase Agreement).

 

The following is a statement of the rights of the Purchaser and the conditions to which this Note is subject, and to which the Purchaser, by the acceptance of this Note, agrees:

 

1.        Definitions . As used in this Note, the following capitalized terms have the following meanings:

 

(a)       “ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 of the Securities Act.

 

(b)       “ Change in Control ” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then-outstanding voting securities, except that any change in the beneficial ownership of the securities of the Company as a result of a private financing of the Company that is approved by the Company’s board of directors, shall not be deemed to be a Change in Control; (ii) the consummation of the sale, lease, license or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

 

 

 

 

(c)       “ Common Stock ” means the Company’s common stock, $0.0001 par value per share.

 

(d)       “ Conversion Amount ” has the meaning given in Section 6(a) .

 

(e)       “ Conversion Date ” has the meaning given in Section 6(a) .

 

(f)       “ Conversion Price ” means $7.0125, subject to adjustment as set forth in Section 6 .

 

(g)       “ Conversion Shares ” has the meaning given in Section 6(a) .

 

(h)       “ Event of Default ” has the meaning given in Section 4 .

 

(i)       “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(j)       “ Indebtedness ” means (i) indebtedness of the Company for borrowed money (including revolving credit line borrowings or indebtedness evidenced by notes payable, commercial paper, interest that has accrued and become payable and the payment of which has been satisfied by non-cash consideration, drafts accepted representing extensions of credit and unpaid reimbursement obligations in respect of letters of credit), (ii) all obligations of the Company evidenced by notes, bonds, debentures or similar instruments, and (iii) all contingent obligations or guarantees of the Company in respect of the foregoing, in each case other than indebtedness of the Company or any subsidiary (a) evidenced by any of the Notes; (b) consisting of a lease or similar obligation relating to an equipment, operating or capital lease; (c) consisting of trade payables incurred in the ordinary course of business; (d) that is unsecured, is made expressly subordinate in right of payment to the indebtedness evidenced by the Notes pursuant to a written subordination agreement that is reasonably acceptable to the Requisite Purchasers, and does not provide at any time for the payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium thereon (if any) until at least 91 days after the Maturity Date; or (e) intercompany debt or other amounts owed between or among the Company and any of its subsidiaries.

 

(k)       “ Issuance Date ” means the date first written above.

 

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(l)       “ New Securities ” means any equity security or other instrument of the Company that can be converted into, or exercised or exchanged for equity securities of the Company; provided , however , that “ New Securities ” shall not include (i) securities or other instruments issued or to be issued after the date hereof to employees, officers or directors of, or consultants or advisors to, the Company or any subsidiary, pursuant to stock purchase or stock option plans or other arrangements duly approved by a majority of the non-employee members of the Board of Directors of the Company or a majority of the members of a committee of non-employee directors established for such purpose; (ii) securities or other instruments issued or issuable in a registered public offering under the Securities Act; (iii) securities or other instruments issued pursuant to the exercise or conversion of securities or other instruments outstanding as of the date hereof or pursuant to the conversion of any of the Notes; (iv) securities or other instruments issued or issuable pursuant to the acquisition of another corporation by the Company by merger, purchase of all or substantially all of the assets or other reorganization; (v) securities or other instruments issued in connection with strategic transactions involving the Company and other entities, including without limitation, joint ventures, strategic partnerships manufacturing, marketing or distribution arrangements, sponsored research, collaboration, technology license, development, original equipment manufacturer, marketing or similar arrangements; (vi) securities or other instruments issued to suppliers or third-party service providers in exchange for or as partial consideration for goods or services rendered to the Company pursuant to transactions approved by the Board of Directors of the Company or a committee of the Board of Directors of the Company; (vii) securities or other instruments issued pursuant to a settlement agreement for the purpose of resolving disputes related to the Company or any of its wholly-owned subsidiaries; (viii) securities or other instruments issued pursuant to any equipment loan or leasing arrangement, real property leasing arrangement, commercial property leasing arrangements or debt financing from a bank, broker or similar financial or lending institution; (ix) securities or other instruments issued in one or more transactions the primary purpose of which is not to raise capital; or (x) securities or other instruments that the Requisite Purchasers (as defined below) elect in writing to exclude from the rights of first refusal set forth in Section 15 . For the avoidance of doubt, “ New Securities ” shall also include any additional debt securities that can be converted into, or exercised or exchanged into equity securities of the Company to be issued by the Company pursuant to Section 16(a) .

 

(m)       “ Notice of Conversion ” has the meaning given in Section 6(a) .

 

(n)       “ Person ” means any individual, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization, entity, domestic or foreign multinational, federal, state, provincial, municipal or local government (or any political subdivision thereof) or any domestic or foreign governmental, regulatory or administrative authority or any department, commission, board, agency, court, tribunal, judicial body or instrumentality thereof, or any other body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature (including any arbitral body) .

 

(o)       “ Purchaser ” means the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note.

 

(p)       “ Register ” has the meaning given in Section 12 .

 

(q)       “ Registered Notes ” has the meaning given in Section 12 .

 

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(r)       “ Securities Act ” means the Securities Act of 1933, as amended.

 

(s)       “ Securities Purchase Agreement ” has the meaning given in the introductory paragraph hereof.

 

2.        Interest . Upon the conversion of any portion of the Principal Amount in accordance with Section 6 , the Company shall repay to the Purchaser in cash all accrued but unpaid interest on such portion of the Principal Amount being converted within five (5) business days after the Conversion Date (as defined below). Otherwise, accrued but unpaid interest on this Note shall be due and paid to the Purchaser in cash semiannually in arrears on or prior to the 30 th day of June and 31 st day of December of each calendar year commencing with December 31, 2018. Notwithstanding the above, all unpaid Principal Amount as of the Maturity Date, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be immediately due and payable in cash on the Maturity Date.

 

3.        Prepayment . The Company may not prepay the Principal Amount in whole or in part without the prior written consent of the Purchaser.

 

4.        Events of Default . The occurrence of any of the following shall constitute an “ Event of Default ” under this Note and the other Notes issued under the Securities Purchase Agreement unless the Company obtains the prior written consent or wavier from the Requisite Purchasers:

 

(a)       the Company fails to pay (i) the Principal Amount when due or (ii) any interest or any other amount due under this Note when due and such failure continues for twenty (20) business days following the Company’s receipt of the Purchaser’s written notice to the Company of such failure to pay;

 

(b)       the Company fails to observe or perform in any material respect any of its covenants or obligations contained in this Note or the Securities Purchase Agreement and such failure continues for more than forty-five days following the Company’s receipt of the Purchaser’s written notice of such failure;

 

(c)       any representation or warranty made or deemed made by the Company to the Purchaser in the Securities Purchase Agreement is materially incorrect on the date as of which such representation or warranty was made or deemed made;

 

(d)       (i) the Company makes an assignment for the benefit of creditors; (ii) an order, judgment or decree is entered adjudicating the Company as bankrupt or insolvent; (iii) any order for relief with respect to the Company is entered under the U.S. Bankruptcy Code or any other applicable bankruptcy or insolvency law; (iv) the Company petitions or applies to any tribunal for the appointment of a custodian, trustee, receiver or liquidator of the Company to commence any proceeding relating to the Company under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction; or (v) any such petition or application in (iv) above is filed, or any such proceeding is commenced, against the Company by any individual or entity in any jurisdiction and either (x) the Company by any act indicates its approval thereof, consents thereto or acquiesces therein or (y) such petition, application or proceeding is not dismissed or discharged within 120 days;

 

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(e)       (i) any Indebtedness is not paid when due or (as the case may be) within any originally applicable grace period; (ii) any Indebtedness becomes (or becomes capable of being declared) due and payable prior to its stated maturity otherwise than at the option of any obligor or (except by reason of an event of default, howsoever described, under the terms of the agreement governing such indebtedness) any person entitled to the payment of such Indebtedness; or (iii) any amount payable by the Company under any guarantee of any Indebtedness (including any indemnity of such Indebtedness or any arrangement having a similar effect) of others given by any obligor is not honored when due and called upon; provided, however, that the amount of Indebtedness referred to in paragraphs (i) and/or (ii) above and/or the amount payable under any guarantee referred to in paragraph (iii) above individually or in the aggregate exceeds US$2,500,000 (or its equivalent in any other currency or currencies);

 

(f)       one or more final and non-appealable judgment(s) or order(s) not covered by insurance for the payment of an amount in excess of US$2,500,000 (or its equivalent in any other currency or currencies), whether individually or in aggregate, is or are rendered against the Company or any of its majority-owned subsidiaries and continue(s) unsatisfied and unstayed for a period of 21 days after the date(s) thereof or, if later, the date therein specified for payment;

 

(g)       one or more events that have, or could reasonably be expected to have, a material adverse effect on (i) the Company’s ability to comply with its obligations under any Transaction Document, or (ii) the rights of the Purchaser under this Note;

 

(h)       the delisting or suspension of trading of the Common Stock on the Trading Market; provided, however, that such delisting or suspension shall not be deemed an Event of Default if it is a result of any action or actions taken by the Securities and Exchange Commission or the Trading Market, which action or actions were generally applicable and affected all issuers with a class of securities listed on the Trading Market; and provided , further that any Event of Default triggered under this Section 4(h) shall be deemed immediately and automatically cured when the Common Stock is relisted for trading on the Trading Market or the suspension of trading ends;

 

(i)       the Company sells, assigns, transfers, conveys or disposes of a material amount of its assets and such sale, assignment, transfer, conveyance or disposition has a material adverse effect on the Company’s ability to comply with its obligations under this Note;

 

(j)       the Company acquires a material amount of assets and such acquisition has a material adverse effect on the Company’s ability to comply with its obligations under this Note; or

 

(k)       the Company takes any action that alters or changes the rights, preferences or privileges of the Notes as a class.

 

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5.        Rights of the Purchaser upon Default . Upon the occurrence of any Event of Default and at any time thereafter during the continuance of such Event of Default, the Purchaser may, by written notice to the Company, declare all outstanding Obligations to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Company, notwithstanding anything contained herein or in the Securities Purchase Agreement to the contrary. From and after the occurrence and during the continuance of any Event of Default, the Interest Rate shall be automatically increased to 12.0% per annum, computed on the basis of the actual number of days elapsed and a year of 365 days. In the event that such Event of Default is subsequently cured (and no other Event of Default then exists), the adjustment referred to in the preceding sentence shall cease to be effective as of the calendar day immediately following the date of such cure; provided that the interest as calculated and unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to the days after the occurrence of such Event of Default through but excluding the date of such cure of such Event of Default.

 

6.        Conversion .

 

(a)       Subject to the limitations set forth in Section 6(f), the Purchaser may, at the Purchaser’s option, at any time while any Principal Amount remains outstanding, and so long as the Conversion Amount (as defined below) is equal to or greater than the lesser of: (i) $4,000,000, and (ii) the then-outstanding Principal Amount; convert the then-outstanding Principal Amount or any portion thereof (the “ Conversion Amount ”), into the number of fully paid and non-assessable shares of Common Stock (the “ Conversion Shares ”) determined by dividing the Conversion Amount by the Conversion Price then in effect. The Purchaser may exercise the right to convert all or any portion of the Conversion Amount by delivering to the Company (A) a duly executed and completed notice of conversion in the form attached to this Note as Exhibit A (the “ Notice of Conversion ”), and (B) this Note. The business day on which a Notice of Conversion and this Note are delivered to the Company in accordance with the provisions hereof shall be deemed a “ Conversion Date .” The Company will cause the Company’s transfer agent to provide a book-entry statement evidencing the Conversion Shares issuable upon such conversion of this Note to the Purchaser via electronic transmission or express courier within five (5) business days after the Conversion Date. Whether such book-entry statement has been received by the Purchaser or not, the Purchaser shall be deemed to be the rightful beneficial and record owner of the Conversion Shares as of the Conversion Date. No fractional shares shall be issued upon conversion of this Note. The amount of any of the Conversion Amount which is less than a whole share of Common Stock shall be paid to the Purchaser in cash at a rate equal to the Conversion Price. Any delay due to such circumstance shall not be an Event of Default under this Note.

 

(b)       The Principal Amount, and any accrued interest thereon, shall be reduced by the Principal Amount indicated on the Notice of Conversion and the corresponding interest paid with respect thereto in accordance with Section 2 , upon the proper receipt by the Purchaser of the Conversion Shares and the corresponding interest paid with respect thereto in accordance with Section 2 , respectively, due upon such Notice of Conversion.

 

(c)       The Conversion Price shall be adjusted as follows:

 

(i)       If the Company shall at any time after the Issuance Date subdivide its outstanding shares of Common Stock into a greater number of shares of Common Stock, the Conversion Price in effect immediately prior to such subdivision shall be proportionately decreased, and conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect immediately prior to such combination shall be proportionately increased.

 

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(ii)       If the Company shall at any time or from time to time after the Issuance Date make, or fix a record date for the determination of the holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price shall be proportionately reduced; provided , however , that if such record date is fixed and such dividend is not fully paid, or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed to reflect that such dividend was not fully paid or that such distribution was not fully made.

 

(d)       If the Company at any time or from time to time after the Issuance Date makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, any dividend or distribution, whether of cash, assets in specie or other property (whenever paid or made and however described), then and in each such event provision shall be made so that the Purchaser shall receive upon exercise of the conversion right of this Note, in addition to the number of shares of Common Stock and the corresponding interest receivable thereupon, the amount of such dividend or distribution of the Company which the Purchaser would have received had the Conversion Amount of this Note been exercised on the date of such event and had it thereafter, during the period from the date of such event to and including the date of conversion or purchase, retained such securities receivable during such period.

 

(e)       If the Common Stock issuable upon the conversion of this Note is changed into the same or a different number of shares of any class or classes of stock, whether by recapitalization, reclassification or otherwise (other than a transaction described elsewhere in this Section 6 ), then, and in any such event, the Purchaser shall have the right thereafter, upon conversion of this Note or purchase the kind and amount of stock and other securities and property receivable upon such reorganization or other change, in an amount equal to the amount that the Purchaser would have been entitled to had it immediately prior to such reorganization, reclassification or change converted this Note, but only to the extent this Note is actually converted, all subject to further adjustment as provided herein.

 

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(f)       The Company shall not effect any conversion of this Note, and the Purchaser shall not have the right to convert any portion of this Note, to the extent that after giving effect to the conversion set forth on the applicable Notice of Conversion, the Purchaser (together with the Purchaser’s Affiliates, and any other Persons acting as a group together with the Purchaser or any of the Purchaser’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section 6(f) , beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 6(f) applies, the determination of whether shares of Common Stock may be issued pursuant to this Note shall be in the sole discretion of the Purchaser, and the submission of a Notice of Conversion shall be deemed to be the Purchaser’s determination of whether shares of Common Stock may be issued pursuant to this Note subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Purchaser will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 6(f) , in determining the number of outstanding shares of Common Stock, the Purchaser may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written request of the Purchaser, the Company shall within two business days confirm orally and in writing to the Purchaser the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company by the Purchaser or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the applicable issuance of shares of Common Stock pursuant to this Note held by the Purchaser. The Purchaser, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 6(f) . Any increase or decrease in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 6(f) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Note.

 

7.        Waiver and Amendment . The Purchaser hereby appoints and authorizes any combination of the Purchasers (as defined in the Securities Purchase Agreement, but excluding any affiliate of the Company for purposes of this Section 7 only) who, collectively, represent a majority of the outstanding principal under all of the Notes (together, the “ Requisite Purchasers ”) to take all actions and exercise all rights on the Purchaser’s behalf under this Note, including the right to amend, waive or modify any provisions of this Note, in the sole and absolute discretion of the Requisite Purchasers, without the requirement of receiving consent from the Purchaser, but with the requirement of delivering written notice to the Company in accordance with the provisions of Section 14 at least five (5) days prior to the taking of any such action or the exercise of any such right, except that the Requisite Purchasers shall not, without the Purchaser’s prior written consent exercise any such right as to the Purchaser unless the exercise thereof applies equally to all of the Purchasers in the same relative fashion. The Purchaser acknowledges that by the operation of this Section 7 , and subject to the limitations set forth in this Section 7 , the Requisite Purchasers shall have the right and power to diminish or eliminate certain rights of the Purchaser under this Note. Any provision of this Note may also be amended, waived or modified upon the mutual written consent of the Company and the Purchaser. In any case, no amendment, waiver or modification in any one instance shall be construed to be a continuing waiver or a waiver in any other instance unless it expressly so provides.

 

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8.        No Rights as a Stockholder . This Note does not by itself entitle the Purchaser to any voting rights or other rights as a stockholder of the Company. In the absence of conversion of this Note, no provisions of this Note, and no enumeration herein of the rights or privileges of the Purchaser, shall cause the Purchaser to be a stockholder of the Company for any purpose.

 

9.        Governing Law . This Note shall be construed under the laws of the State of California, without regard to principles of conflicts of law or choice of law that would permit or require the application of the laws of another jurisdiction. All actions or proceedings arising directly or indirectly from or in connection this Note shall be resolved in accordance with Section 10 of the Securities Purchase Agreement, as may be amended or restated from time to time.

 

10.        Successors and Assigns . Subject to the restrictions on transfer and assignment described in Section 11 and Section 12 , the rights and obligations of the Company and the Purchaser shall be binding upon and inure to the benefit of the parties and their respective successors and assigns.

 

11.        Transfer of this Note or Securities Issuable on Conversion Hereof . With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, the Purchaser will give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of the Purchaser’s counsel, or other evidence if reasonably satisfactory to the Company, to the effect that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law then in effect). Upon receiving such written notice and reasonably satisfactory opinion, or other evidence, if so requested, the Company, as promptly as practicable, shall notify the Purchaser in writing that the Purchaser may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this Section 11 that the opinion of counsel for the Purchaser, or other evidence, is not reasonably satisfactory to the Company, the Company shall so notify the Purchaser promptly in writing after such determination has been made. Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may, if so required under the Securities Act, issue stop-transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company as provided in the Securities Purchase Agreement. Prior to presentation of this Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Company shall not be affected by notice to the contrary.

 

12.        Registration; Book-Entry . The Company shall maintain a register (the “ Register ”) for the recordation of the names and addresses of the holders of each Note and the Principal Amount of the Notes held by such holders (the “ Registered Notes ”). The entries in the Register shall be conclusive and binding for all purposes absent manifest error, and to that extent the Company and the holders of the Notes shall treat each person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of the Principal Amount and interest, if any, hereunder, notwithstanding notice to the contrary. A Registered Note may be assigned or sold in whole or in part only in accordance with the terms of Section 11 and by registration of such assignment or sale on the Register.

 

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13.        Assignment by the Company . The rights, interests or obligations hereunder may not be assigned, by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Requisite Purchasers.

 

14.        Notices . Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Note shall be given in accordance with Section 16 of the Securities Purchase Agreement, as may be amended or restated from time to time.

 

15.        Right of First Refusal .

 

(a)       So long as the aggregate principal amount of all outstanding Notes is at least $36,121,214, if the Company proposes to issue and sell New Securities for bona fide capital raising purposes, the Company shall give each of the Purchasers holding Notes written notice of its intention, describing the price and the terms and conditions upon which the Company proposes to issue the New Securities. Each Purchaser shall have 10 business days from the giving of such notice to agree to purchase its pro rata share of the New Securities (based on the ratio of the principal amount of all Notes then held by such Purchaser to the aggregate principal amount of all then-outstanding Notes) for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the amount of New Securities to be purchased by such Purchaser.

 

(b)       If not all of the Purchasers elect to loan to the Company their pro rata share of the New Securities, then the Company shall promptly notify in writing the Purchasers who do so elect (the “ Electing Purchasers ”) and shall offer each such Electing Purchaser the right to purchase such unsubscribed New Securities. Each of the Electing Purchasers shall have five days after receipt of such notice to notify the Company of its election to purchase all or a portion of the unsubscribed New Securities.

 

(c)       The Company may, during the 180 days thereafter, sell the New Securities in respect of which the Purchasers’ rights were not exercised, at a price not lower and upon general terms and conditions not materially more favorable to the purchasers thereof than specified in the Company’s notice to the Purchasers pursuant to Section 15(a) .

 

(d)       Notwithstanding anything to the contrary in this Section 15 , the Company shall not be required to offer or to sell any New Securities to any Purchaser who would cause the Company to be in violation of applicable laws by virtue of such offer or sale.

 

16.        Restrictive Covenants . The Company covenants and agrees that, so long as the aggregate principal amount of all outstanding Notes is at least $18,845,851, it shall not, without the prior written consent of the Requisite Purchasers:

 

(a)       incur any additional Indebtedness, except for additional Indebtedness in an aggregate principal amount of up to $50,000,000 in any calendar year commencing with the calendar year ending December 31, 2018;

 

(b)       declare or pay any cash dividend or make a cash distribution on any of its capital stock; provided , however , that this provision shall not apply to the repurchase of Common Stock from employees, officers, directors, consultants or other persons performing services for the Company or any subsidiary of the Company pursuant to agreements under which the Company has the option to repurchase such shares at no greater than cost upon the occurrence of certain events, such as the termination of employment or service;

 

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(c)       sell, assign, transfer, convey or otherwise dispose of all or substantially all of the Company’s assets; or

 

(d)       alter or change the rights, preferences or privileges of the Notes as a class.

 

17.        Pari Passu Notes . The Notes constitute direct, unconditional and unsecured obligations of the Company and will at all times rank pari passu and without any preference or priority among themselves and with all other present and future direct, unconditional and unsecured debt obligations of the Company. The Purchaser acknowledges and agrees that the payment of all or any portion of the outstanding Principal Amount and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to the Securities Purchase Agreement or pursuant to the terms of such Notes. In the event the Purchaser receives payments in excess of the Purchaser’s pro rata share of the Company’s payments to the Purchasers of all of the Notes, then the Purchaser shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

 

18.        Replacement of Note . Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction, or mutilation of this Note and of indemnity satisfactory to it, and upon surrender and cancellation of this Note, the Company will make and deliver a new Note of like tenor in lieu of this Note.

 

19.        Payment; Currency . Payment shall be made in lawful tender of the United States. All references to “$” contained in this Note shall refer to United States Dollars unless otherwise stated.

 

20.        Usury . In the event any interest is paid on this Note which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

 

21.        Expenses; Waivers . If action is instituted to collect this Note, the Company promises to pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred in connection with such action. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be issued as of the date first written above.

 

  SORRENTO THERAPEUTICS, INC.  
       
       
  By:    
  Name: Henry Ji, Ph.D.  
  Title: Chairman of the Board, President and Chief Executive Officer  

 

 

 

 

 

 

 

 

[Signature Page to Convertible Promissory Note]

 

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

Reference is made to that certain Convertible Promissory Note dated June 13, 2018 (as may be amended or restated from time to time, the “ Note ”) in the original principal amount of $ ___________ issued to the undersigned by Sorrento Therapeutics, Inc., a Delaware corporation (the “ Company ”). Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Note.

 

Pursuant to Section 6 of the Note, the undersigned hereby irrevocably elects to convert $______________ in Principal Amount of the Note outstanding on the date hereof into shares of Common Stock (“ Conversion Shares ”) at the Conversion Price in effect on the date hereof and on the terms and subject to the conditions set forth in Section 6 of the Note.

 

All accrued but unpaid interest on the Principal Amount of the Note being converted as specified in the previous paragraph shall be paid in cash in accordance with Section 2 of the Note.

 

If the Conversion Shares are to be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to undersigned for any conversion except as provided herein.

 

 

Name of Purchaser: __________________________________

 

 

By: _______________________________________________

 

 

Name: ____________________________________________

 

 

Title: ______________________________________________

 

 

Date: ______________________________________________

 

Address to which certificates representing Conversion Shares and check for accrued but unpaid interest should be delivered:

 

_______________________________________________

 

_______________________________________________

 

_______________________________________________

 

 

 

Exhibit 4.2

 

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

 

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, AS SET FORTH IN A SECURITIES PURCHASE AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SECURITIES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

COMMON STOCK PURCHASE WARRANT

 

SORRENTO THERAPEUTICS, INC.

 

Warrant Shares: ___________ Initial Issuance Date: June 13, 2018

 

THIS COMMON STOCK PURCHASE WARRANT (this “ Warrant ”) certifies that, for value received, ___________ or its assigns (the “ Holder ”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time and from time to time on or after December 11, 2018 (the “ Initial Exercise Date ”) and on or prior to the close of business on December 13, 2023 (the “ Termination Date ”) but not thereafter, to subscribe for and purchase from Sorrento Therapeutics, Inc., a Delaware corporation (the “ Company ”), up to ___________ shares of Common Stock (subject to the limitation in Section 2(e) and as subject to adjustment hereunder, the “ Warrant Shares ”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price (as defined below).

 

Section 1 . Definitions . Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (as may be amended or restated from time to time, the “ Purchase Agreement ”), dated March 26, 2018, by and among the Company and the purchasers identified on Schedule A thereto. For purposes of this Warrant, the following capitalized terms have the meanings assigned to them in this Section 1 .

 

a)                   Business Day ” means any day except a Saturday, a Sunday or any other day on which commercial banks are required or authorized to close in the City of New York, State of New York or the City of San Diego, State of California.

 

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b)                   Change of Control ” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then-outstanding voting securities, except that any change in the beneficial ownership of the securities of the Company as a result of a private financing of the Company that is approved by the Company’s board of directors, shall not be deemed to be a Change of Control; (ii) the consummation of the sale, lease, license or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.

  

c)                   Closing Bid Price ” means, for any date, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or quoted on a Trading Market, the last reported closing bid price for such date on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P., (ii) if the Common Stock is not then listed on a Trading Market or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the last bid price per share of the Common Stock so reported, or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company and reasonably acceptable to the Holder, the fees and expenses of which shall be paid by the Company.

 

d)                   Trading Day means a day on which the Common Stock is traded on a Trading Market or, if the Common Stock is not traded on a Trading Market, then on the principal securities exchange or securities market on which the Common Stock is then traded .

 

e)                   Trading Market ” means any market or exchange of The Nasdaq Stock Market LLC or the New York Stock Exchange .

 

f)                    VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (ii) if the Common Stock is not then listed on a Trading Market or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (iii) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company and reasonably acceptable to the Holder, the fees and expenses of which shall be paid by the Company.

 

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Section 2 . Exercise .

 

a)                   Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the principal office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile or original copy of the Notice of Exercise Form annexed hereto (each, a “ Notice of Exercise ”). Unless being exercised on a cashless basis in accordance with Section 2(c) , within three Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and this Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall inform the Holder if a Notice of Exercise has not been duly completed within one Business Day of receipt of such notice, but shall not refuse or object to the issuance of the Warrant Shares upon receipt of, and pursuant to, a duly completed Notice of Exercise. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b)                   Exercise Price . The exercise price per share of the Common Stock under this Warrant shall be $8.77 , subject to adjustment hereunder (the “ Exercise Price ”).

 

c)                   Cashless Exercise . If at the time of exercise of this Warrant there is no effective registration statement registering the resale of the Warrant Shares by the Holder, the Holder, at its option, may exercise this Warrant, in whole or in part, by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(Y)*(A-B)] by (A), where:

 

(A) = the average of the Closing Bid Price of the shares of Common Stock for the five consecutive Trading Days ending on the last Trading Day immediately preceding the date on which the Holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable Notice of Exercise;

 

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(B) = the Exercise Price of this Warrant, as adjusted hereunder; and

 

(Y) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.

 

d)                   Mechanics of Exercise .

 

i.                         Delivery of Certificates Upon Exercise . Certificates for shares purchased hereunder shall be transmitted by the Company’s transfer agent (the “ Transfer Agent ”) to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“ DWAC ”) if the Company is then a participant in such system and there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder, or otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if required), and (C) payment of the aggregate Exercise Price as set forth above, including by means of a “cashless exercise” (such date, the “ Warrant Share Delivery Date ”). The Warrant Shares shall be deemed to have been issued, and the Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date this Warrant has been exercised, with payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(v) prior to the issuance of such shares, having been paid.

 

ii.                         Delivery of New Warrants Upon Exercise . If this Warrant shall have been exercised in part, the Company shall, at the request of the Holder and upon surrender of this Warrant, at the time of delivery of the certificate or certificates representing the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.                         Rescission Rights . If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise. Any rescission by the Holder pursuant to this Section 2(d)(iii) shall not affect any other remedies available to the Holder under Laws or equity as a result of the Company’s failure to timely deliver the Warrant Shares.

 

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iv.                         No Fractional Shares or Scrip . No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

v.                         Charges, Taxes and Expenses . Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided , however , that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder, and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

vi.                         Closing of Books . The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

e)                   Limitation on Exercise . The Company shall not effect any exercise of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section 2(e) , beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this Section 2(e) , applies, the determination of whether this Warrant is exercisable and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Exercise that such Notice of Exercise has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e) , in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (i) the Company’s most recent periodic or annual report filed with the Securities and Exchange Commission, as the case may be, (ii) a more recent public announcement by the Company, or (iii) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written request of the Holder, the Company shall within two business days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the applicable issuance of shares of Common Stock pursuant to this Warrant. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e) . Any increase or decrease in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The Beneficial Ownership Limitation provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation contained herein or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

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Section 3 . Certain Adjustments .

 

a)                   Stock Dividends and Splits . If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)                   Pro Rata Distributions . If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of Common Stock as determined by the Board of Directors of the Company in good faith, and of which the denominator shall be the VWAP determined as of the record date mentioned above. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

c)                   Calculations . All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3 , the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

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d)                   Notice to the Holder .

 

i.       Adjustment to Exercise Price . Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3 , the Company shall, at the request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant, and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable) and setting forth a brief statement of the facts requiring such adjustment. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder.

 

ii.       Notice to Allow Exercise by the Holder . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock or rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights of the Company, (D) a Change of Control is pending, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register (as defined below) of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined, or (y) the date on which such Change of Control is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such Change of Control; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein. Except as otherwise prohibited by applicable laws, to the extent that any notice provided pursuant to this Section 3(d)(ii) contains material, non-public information regarding the Company, the Company shall, disclose such information regarding the Company in a Current Report on Form 8-K and file such Current Report on Form 8-K with the SEC no later than the second Trading Day following the date such notice is delivered to the Holder.

 

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Section 4 . Transfer of Warrant .

 

a)                   Transferability . Subject to applicable securities laws, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. This Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)                   New Warrants . This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a) , as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c)                   Warrant Register . The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “ Warrant Register ”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

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Section 5 . Warrant Agent . The Company shall serve as warrant agent under this Warrant. Upon 15 days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as it shall appear upon the Warrant Register.

 

Section 6 . Miscellaneous .

 

a)                   No Rights as Stockholder Until Exercise . This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i) .

 

b)                   Loss, Theft, Destruction or Mutilation of Warrant . The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of this Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c)                   Saturdays, Sundays, Holidays, etc . If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

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d)                   Authorized Shares .

 

The Company covenants that, during the period this Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e)                   Governing Law . This Warrant shall be construed under the laws of the State of California, without regard to principles of conflicts of law or choice of law that would permit or require the application of the laws of another jurisdiction. All actions or proceedings arising directly or indirectly from or in connection this Warrant shall be resolved in accordance with Section 10 of the Purchase Agreement, as may be amended or restated from time to time.

 

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f)                    Restrictions . The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant constitute “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be sold, pledged or otherwise disposed of unless they are subsequently registered under the Securities Act and applicable state securities laws or unless an exemption from registration thereunder is available.

 

g)                   Fees and Expenses . Except as otherwise provided in this Warrant, all expenses incurred in connection with this Warrant and the transactions contemplated hereby shall be paid by the party incurring such expenses.

 

h)                   Notices . Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Warrant shall be given in accordance with Section 16 of the Purchase Agreement, as may be amended or restated from time to time.

 

i)                    Limitation of Liability . No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j)                    Remedies . The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k)                   Successors and Assigns . Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of the Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l)                    Amendment . No provision of this Warrant may be amended, waived or modified other than by an instrument in writing signed by the Company and the Holder.

 

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

 

n)                   Headings . The headings of this Warrant are for convenience of reference and shall not form part of, or effect the interpretation of, this Warrant.

 

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

 

********************

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

  SORRENTO THERAPEUTICS, INC.
       
  By:  
    Name: Henry Ji, Ph.D.
    Title: President and Chief Executive Officer  

  

 

 

 

 

[Signature Page to Common Stock Purchase Warrant]

 

 

 

NOTICE OF EXERCISE

 

To: SORRENTO THERAPEUTICS, inc.

 

(1)                The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Common Stock Purchase Warrant (the “ Warrant ”), and tenders herewith payment of the applicable exercise price, together with all applicable transfer taxes, if any.

 

(2)                Payment shall take the form of (check applicable box):

 

[ ] in lawful money of the United States; or

 

[ ] if permitted, the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 2(c) of the Warrant, to exercise the Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 2(c) of the Warrant.

 

(3)                Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

 

_______________________________

 

_______________________________

 

_______________________________

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: ______________________________________________________

Signature of Authorized Signatory of Investing Entity : ________________________________

Name of Authorized Signatory: __________________________________________________

Title of Authorized Signatory: ___________________________________________________

Date: ______________________________________________________________________

 

 

 

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, all of or [_______] of the shares of the foregoing Common Stock Purchase Warrant (the “ Warrant ”) and all rights evidenced thereby are hereby assigned to

 

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

 

 

_______________________________________________________________

 

Dated: ______________, _______

 

 

Holder’s Signature: _____________________________

 

Holder’s Address: _____________________________

 

_____________________________

 

 

 

Signature Guaranteed: ___________________________________________

 

 

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the Warrant.

 

 

 

 

Exhibit 4.3

 

 

SORRENTO THERAPEUTICS, INC.

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “ Agreement ”) is made as of June 13, 2018, by and among Sorrento Therapeutics, Inc., a Delaware corporation (the “ Company ”), and the purchasers identified on Schedule A hereto (each, a “ Purchaser ” and collectively, the “ Purchasers ”) and such other Persons, if any, from time to time, that become a party hereto as holders of Registrable Securities (as defined below). Unless otherwise defined herein, capitalized terms used in this Agreement have the meanings ascribed to them in that certain Securities Purchase Agreement dated as of March 26, 2018 by and among the Company and the Purchasers (as may be amended or restated from time to time, the “ Purchase Agreement ”).

 

RECITALS

 

Whereas , pursuant to the Purchase Agreement, concurrently with the execution of this Agreement, at the Closing, each Purchaser will purchase from the Company, and the Company will issue and sell to each Purchaser, (i) a convertible promissory note in the form attached as Exhibit A to the Purchase Agreement, in the aggregate principal amount set forth opposite such Purchaser’s name on Schedule A hereto (each, a “ Note ” and collectively, the “ Notes ”), and (ii) a warrant to purchase such number of shares of Common Stock as is set forth opposite such Purchaser’s name on Schedule A hereto (each, a “ Warrant ” and collectively, the “ Warrants ”);

 

Whereas , the Notes will be convertible into shares of Common Stock from time to time, and the Warrants will be exercisable into shares of Common Stock from time to time on the date that is 181 days after the Closing Date, in each case in accordance with the terms thereof; and

 

Whereas , in connection with the execution and delivery of the Purchase Agreement and the consummation of the transactions contemplated thereby, the Company has agreed to grant the Holders (as defined below) certain registration rights as set forth below.

 

Now, Therefore , in consideration of the mutual promises and covenants herein contained, and other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

Article I.
Definitions

 

1.1        Definitions . As used in this Agreement, the following terms shall have the meanings set forth below:

 

(a)       “ Additional Shares ” means any shares of Common Stock issued to the Purchasers pursuant to a stock split, stock dividend or other distribution with respect to, or in exchange or in replacement of, the Shares.

 

(b)       “ Affiliate ” means, with respect to any specified Person, any other Person who or which, directly or indirectly, controls, is controlled by, or is under common control with such specified Person, including, without limitation, any general partner, limited partner, member, officer, director or manager of such Person and any venture capital or private equity fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person. For purposes of this definition, the terms “ controls ,” “ controlled by ,” or “ under common control with ” means the possession, direct or indirect, of power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise).

 

 

 

 

(c)       “ Business Day ” means a weekday on which banks are open for general banking business in San Diego, California.

 

(d)        “ Common Stock ” means shares of the common stock of the Company, par value $0.0001 per share.

 

(e)       “ Entity ” means any corporation (including any non profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

 

(f)       “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.

 

(g)       “ Governmental Body ” means any domestic or foreign multinational, federal, state, provincial, municipal or local government (or any political subdivision thereof) or any domestic or foreign governmental, regulatory or administrative authority or any department, commission, board, agency, court, tribunal, judicial body or instrumentality thereof, or any other body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature (including any arbitral body).

 

(h)       “ Holder ” (collectively, “ Holders ”) means any Purchaser and any transferee permitted under Section 3.1, in each case, to the extent holding Registrable Securities.

 

(i)       “ Person ” means any individual, Entity, trust, Governmental Body or other organization.

 

(j)       “ register ,” “ registered ” and “ registration ” refer to a registration effected by filing with the SEC a registration statement in compliance with the Securities Act, and the declaration or ordering by the SEC of the effectiveness of such registration statement.

 

(k)       “ Registrable Securities ” means (i) the Shares, and (ii) any Additional Shares; provided , however , that Shares or Additional Shares shall cease to be treated as Registrable Securities on the earliest to occur of, (a) the date such security has been disposed of pursuant to an effective registration statement, (b) the date on which such security is sold pursuant to Rule 144, (c) the date on which such security ceases to be outstanding, or (d) the date on which the Holder thereof, together with its Affiliates, is able to dispose of all of its Registrable Securities without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144 (or any successor rule).

 

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(l)       “ Registration Expenses ” means any and all expenses incident to the performance of or compliance with this Agreement, including without limitation: (i) all registration and filing fees; (ii) all fees and expenses associated with a required listing of the Registrable Securities on any securities exchange; (iii) fees and expenses with respect to filings required to be made with an exchange or any securities industry self-regulatory body; (iv) fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of counsel for the underwriters or holders of securities in connection with blue sky qualifications of the securities and determination of their eligibility for investment under the laws of such jurisdictions); (v) printing, messenger, telephone and delivery expenses of the Company; (vi) fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters, or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters, if such comfort letter or comfort letters is required by the managing underwriter); (vii) securities acts liability insurance, if the Company so desires; (viii) all internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties); (ix) the expense of any annual audit; and (x) the fees and expenses of any Person, including special experts, retained by the Company; provided , however that “ Registration Expenses ” shall not include underwriting fees, discounts or commissions attributable to the sale of the Registrable Securities or any legal fees and expenses of counsel to the Holders .

 

(m)       “ Rule 144 ” means Rule 144 under the Securities Act.

 

(n)       “ SEC ” means the Securities and Exchange Commission.

 

(o)       “ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, as the same may be amended from time to time.

 

(p)       “ Shares ” means any and all shares of Common Stock issuable upon conversion of the Notes and exercise of the Warrants.

 

Article II.
Registration Rights

 

2.1        Resale Registration Statements . Within 45 days following the Closing Date , the Company shall (a) file with the SEC, or (b) have filed with the SEC, a resale registration statement (together with any New Registration Statement (as defined below), the “ Resale Registration Statement ”) pursuant to Rule 415 under the Securities Act pursuant to which all of the Registrable Securities shall be included (on the initial filing or by supplement or amendment thereto) to enable the public resale on a delayed or continuous basis of the Registrable Securities by the Holders. The Company shall file the Resale Registration Statement on such form as the Company may then utilize under the rules of the SEC and use its best efforts to have the Resale Registration Statement declared effective under the Securities Act as soon as practicable , but in no event more than the earlier of: (A) 120 days following the Closing Date, and (B) five trading days after the date the Company receives written notification from the SEC that the Resale Registration Statement will not be reviewed. The Company agrees to use its best efforts to maintain the effectiveness of the Resale Registration Statement, including by filing any necessary post-effective amendments and prospectus supplements, or, alternatively, by filing one or more new registration statements (each, a “ New Registration Statement ”) relating to the Registrable Securities as required by Rule 415 under the Securities Act, continuously until the date that is the earlier of (i) four years following the date of effectiveness of the Resale Registration Statement, or (ii) the date on which the Holders no longer hold any Registrable Securities covered by the Resale Registration Statement .

 

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2.2        Provisions Relating to Registration .

 

(a)       Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause (i) the Resale Registration Statement (as of the effective date of the Resale Registration Statement), any amendment thereof (as of the effective date thereof) or supplement thereto (as of its date), (A) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the SEC, and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and (ii) any related prospectus, preliminary prospectus and any amendment thereof or supplement thereto, as of its date, (A) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the SEC, and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , the Company shall have no such obligations or liabilities with respect to any written information pertaining to a Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein.

 

(b)       The Company shall notify the Holders: (i) when the Resale Registration Statement or any amendment thereto has been filed with the SEC and when the Resale Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the SEC for amendments or supplements to the Resale Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Resale Registration Statement or the initiation of any proceedings for that purpose and of any other action, event or failure to act that would cause the Resale Registration Statement not to remain effective; and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose.

 

(c)       As promptly as practicable after becoming aware of such event, the Company shall notify the Holders of the happening of any event (a “ Suspension Event ”), of which the Company has knowledge, as a result of which the prospectus included in the Resale Registration Statement as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and use its best efforts promptly to prepare a supplement or amendment to the Resale Registration Statement to correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to the Holders as the Holders may reasonably request; provided , however , that, for not more than 45 consecutive trading days (or a total of not more than 120 trading days in any 12 month period), the Company may delay, to the extent permitted by and in a manner not in violation of applicable securities laws, the disclosure of material non-public information concerning the Company (as well as prospectus or Resale Registration Statement updating), the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company; provided , further , that, if the Resale Registration Statement was not filed on Form S-3, such number of days shall not include the 15 calendar days following the filing of any Current Report on Form 8-K, Quarterly Report on Form 10-Q or Annual Report on Form 10-K, or other comparable form, for purposes of filing a post-effective amendment to the Resale Registration Statement.

 

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(d)       Upon a Suspension Event, the Company shall give written notice (a “ Suspension Notice ”) to the Holders to suspend sales of the affected Registrable Securities, and such notice shall state that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and the Company is pursuing with reasonable diligence the completion of the matter giving rise to the Suspension Event or otherwise taking all reasonable steps to terminate suspension of the effectiveness or use of the Resale Registration Statement. In no event shall the Company, without the prior written consent of the Holders, disclose to the Holders any of the facts or circumstances giving rise to the Suspension Event. The Holders shall not effect any sales of the Registrable Securities pursuant to the Resale Registration Statement (or such filings), at any time after they have received a Suspension Notice and prior to receipt of an End of Suspension Notice. The Holders may resume effecting sales of the Registrable Securities under the Resale Registration Statement (or such filings), following further notice to such effect (an “ End of Suspension Notice ”) from the Company. This End of Suspension Notice shall be given by the Company to the Holders in the manner described above promptly following the conclusion of any Suspension Event and its effect. For the avoidance of doubt, a Suspension Notice shall not affect or otherwise limit sales of affected Registrable Securities under Rule 144 or otherwise outside of the Resale Registration Statement.

 

(e)       Notwithstanding any provision herein to the contrary, if the Company gives a Suspension Notice pursuant to this Section 2.2 with respect to the Resale Registration Statement, the Company shall extend the period during which the Resale Registration Statement shall be maintained effective under this Agreement by the number of days during the period from the date of the giving of the Suspension Notice to and including the date when the Holders shall have received the End of Suspension Notice and copies of the supplemented or amended prospectus necessary to resume sales.

 

(f)       The Company shall bear all Registration Expenses incurred by the Company in connection with the registration of the Registrable Securities pursuant to this Agreement.

 

(g)       Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be required to include Registrable Securities in the Resale Registration Statement unless the Holder owning the Registrable Securities to be registered on the Resale Registration Statement, following reasonable advance written request by the Company, furnishes to the Company, at least 10 Business Days prior to the scheduled filing date of the Resale Registration Statement, an executed stockholder questionnaire in the form attached hereto as Exhibit A .

 

  5  

 

 

2.3        Indemnification.

 

(a)       In the event of the offer and sale of the Registrable Securities held by the Holders under the Securities Act, the Company agrees to indemnify and hold harmless each Holder and its directors, officers, employees, Affiliates and agents and each Person who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively, the “ Holder Indemnified Parties ”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof to which each Holder Indemnified Party may become subject under the Securities Act or the Exchange Act, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Resale Registration Statement or in any amendment thereof, in each case at the time such became effective under the Securities Act, or in the preliminary prospectus or other information that is deemed, under Rule 159 promulgated under the Securities Act to have been conveyed to purchasers of securities at the time of sale of such securities (“ Disclosure Package ”), in the prospectus or in any amendment thereof or supplement thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Disclosure Package or any prospectus, in the light of the circumstances under which they were made) not misleading, and shall reimburse, as incurred, the Holder Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided , however , that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in the Resale Registration Statement, the Disclosure Package, any prospectus or in any amendment thereof or supplement thereto in reliance upon and in conformity with written information pertaining to a Holder and furnished to the Company by or on behalf of such Holder Indemnified Party specifically for inclusion therein; provided further, however , that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Disclosure Package, where (A) such statement or omission had been eliminated or remedied in any subsequently filed amended prospectus or prospectus supplement (the Disclosure Package, together with such updated documents, the “ Updated Disclosure Package ”), the filing of which such Holder had been notified in accordance with the terms of this Agreement, (B) such Updated Disclosure Package was available at the time such Holder sold Registrable Securities under the Resale Registration Statement, (C) such Updated Disclosure Package was not furnished by such Holder to the Entity asserting the loss, liability, claim, damage or liability, or an underwriter involved in the distribution of such Registrable Securities, at or prior to the time such furnishing is required by the Securities Act, and (D) the Updated Disclosure Package would have cured the defect giving rise to such loss, liability, claim, damage or action; and provided further , however , that this indemnity agreement will be in addition to any liability that the Company may otherwise have to such Holder Indemnified Party. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Holder Indemnified Parties and shall survive the transfer of the Registrable Securities by any Holder .

 

  6  

 

 

(b)       As a condition to including any Registrable Securities to be offered by a Holder in any registration statement filed pursuant to this Agreement, such Holder agrees to severally and not jointly indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Resale Registration Statement, as well as any officers, employees, Affiliates and agents of the Company, and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (a “ Company Indemnified Party ”) from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which a Company Indemnified Party may become subject under the Securities Act or the Exchange Act, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Resale Registration Statement or in any amendment thereof, in each case at the time such became effective under the Securities Act, or in any Disclosure Package, prospectus or in any amendment thereof or supplement thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Disclosure Package or any prospectus, in the light of the circumstances under which they were made) not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation immediately preceding this clause, shall reimburse, as incurred, the Company Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder, or any such director, officer, employees, Affiliates and agents and shall survive the transfer of such Registrable Securities by such Holder, and such Holder shall reimburse the Company, and each such director, officer, employees, Affiliates and agents for any legal or other expenses reasonably incurred by them in connection with investigating, defending, or settling and such loss, claim, damage, liability, action, or proceeding; provided, however , that the indemnity amount contained in this Section 2.3(b) shall in no event exceed the gross proceeds from the offering received by such Holder. Such indemnity shall remain in full force and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer, employees, Affiliates and agents and shall survive the transfer by a Holder of such Registrable Securities.

 

  7  

 

 

(c)       Promptly after receipt by a Holder Indemnified Party or a Company Indemnified Party (each, an “ Indemnified Party ”) of notice of the commencement of any action or proceeding (including a governmental investigation), such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 2.3, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve the indemnifying party from liability under Sections 2.3(a) or 2.3(b)  unless and to the extent it did not otherwise learn of such action and the indemnifying party has been materially prejudiced by such failure. In case any such action is brought against any Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the indemnifying party), and after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof the indemnifying party will not be liable to such Indemnified Party under this Section 2.3 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such Indemnified Party in connection with the defense thereof; provided , however , if such Indemnified Party shall have been advised by counsel that there are one or more defenses available to it that are in conflict with those available to the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), the reasonable fees and expenses of such Indemnified Party’s counsel shall be borne by the indemnifying party. In no event shall the indemnifying party be liable for the fees and expenses of more than one counsel (together with appropriate local counsel) at any time for any Indemnified Party in connection with any one action or separate but substantially similar or related actions arising in the same jurisdiction out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the Indemnified Party (not to be unreasonably withheld or delayed), effect any settlement of any pending or threatened action in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party unless such settlement (i) includes an unconditional release of such Indemnified Party from all liability on any claims that are the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. If the indemnification provided for in this Section 2.3 is unavailable or insufficient to hold harmless an Indemnified Party under Sections 2.3(a) or 2.3(b), then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in Sections 2.3(a) or 2.3(b) in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the Indemnified Party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or a Holder or Holder Indemnified Party, as the case may be, on the other, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 2.3 shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any action or claim that is the subject of this Section 2.3(c). The parties agree that it would not be just and equitable if contributions were determined by pro rata allocation (even if a Holder was treated as one Entity for such purpose) or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding any other provision of this Section 2.3(c), no Holder shall be required to contribute any amount in excess of the amount by which the net proceeds received by such Holder from the sale of the Registrable Securities pursuant to the Resale Registration Statement exceeds the amount of damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

  8  

 

 

(d)       The agreements contained in this Section 2.3 shall survive the sale of the Registrable Securities pursuant to the Resale Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any Indemnified Party.

 

Article III.
Transfer Restrictions

 

3.1        Transfer Restrictions . Each Holder acknowledges and agrees to the that the following legend shall be imprinted on any certificate or book-entry security entitlement evidencing any of the Registrable Securities:

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

This legend shall be removed by the Company from any certificate or book-entry security entitlement evidencing the Registrable Securities upon delivery by the holder thereof to the Company of a written request to that effect if at the time of such written request (i) a registration statement under the Securities Act is at that time in effect with respect to the legended security, or (ii) the legended security can be transferred in a transaction in compliance with Rule 144 under the Securities Act, and, in the case of (ii), upon the request and in the reasonable discretion of the Company’s transfer agent, the holder of such Registrable Securities executes and delivers a representation letter that includes customary representations regarding the holding requirements and whether such holder is an “affiliate” for purposes of Rule 144 under the Securities Act. The Company represents and warrants to the Purchasers that the Company is not currently a shell company (as defined in Rule 405 promulgated under the Securities Act).

 

Article IV.
Miscellaneous
.

 

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

 

  9  

 

 

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

 

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

 

If to the Company:

 

Sorrento Therapeutics Inc.

4955 Directors Place

San Diego, California 92121

E-mail: hji@sorrentotherapeutics.com
Attn: Henry Ji, Ph.D.

 

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

 

Paul Hastings LLP

4747 Executive Drive, 12th Floor

San Diego, CA 92121

E-mail: jeffhartlin@paulhastings.com

Attn: Jeffrey Hartlin, Esq.

 

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

 

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

 

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

 

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

 

  10  

 

 

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

 

4.6        Assignment and Successors . This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Notes and/or the Warrants.

 

4.7        Entire Agreement; Amendments . This Agreement supersedes all other prior oral or written agreements between the Purchasers, the Company, their Affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, none of the Company or any of the Purchasers makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be amended, waived or modified other than by an instrument in writing signed by the Company and: (a) prior to the Closing, the Purchasers purchasing at least a majority of the aggregate principal amount of the Notes, as set forth on Schedule A hereto, or (b) after the Closing, the Purchasers holding at least a majority of the aggregate principal amount of the then-outstanding Notes. Any such amendment, waiver or modification effected in accordance with this Section 4.7 shall be binding upon all Purchasers and each transferee of the Notes (or the Note Shares) or the Warrants (or the Warrant Shares), each future holder of all such securities and the Company.

 

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

 

4.9        Termination . This Agreement shall terminate on the date when there are no longer any remaining Registrable Securities or upon the dissolution, liquidation or winding up of the Company; provided that Section 2.3 of this Agreement shall survive such termination.

 

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

 

  11  

 

 

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

 

[The remainder of this page intentionally left blank]

 

 

 

 

 

 

 

 

 

 

  12  

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Registration Rights Agreement as of the date first written above.

 

 

  THE COMPANY:
       
  Sorrento Therapeutics, Inc.,
  a Delaware corporation
       
       
       
  By: /s/ Henry Ji, Ph.D.
    Name: Henry Ji, Ph.D.
    Title: President and Chief Executive Officer

 

 

 

[ Signature Page to Registration Rights Agreement ]

 

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Registration Rights Agreement as of the date first written above.

 

 

  PURCHASERS:
       
  ASIA PACIFIC MEDTECH (BVI) LIMITED
       
  By: /s/ GU NANA
    Name: GU NANA
    Title: Director

 

 

[ Signature Page to Registration Rights Agreement ]

 

 

 


IN WITNESS WHEREOF , the parties hereto have duly executed this Registration Rights Agreement as of the date first written above.

   

 

  PURCHASERS:
       
  Famous Sino Limited
       
       
  By: /s/ Guangze WU
    Name: Guangze WU
    Title: Director

 

 

 

[ Signature Page to Registration Rights Agreement ]

 

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Registration Rights Agreement as of the date first written above.

 

 

  PURCHASERS:
       
  China In Shine Investment Limited
       
       
  By: /s/ CHIT FUNG
    Name: CHIT FUNG
    Title: Director

 

 

 

[ Signature Page to Registration Rights Agreement ]

 

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Registration Rights Agreement as of the date first written above.

 

 

  PURCHASERS:
       
  Himark Group (Holdings) Company Limited
       
       
  By: /s/ O Na
    Name: O Na
    Title: Director

 

 

 

[ Signature Page to Registration Rights Agreement ]

 

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Registration Rights Agreement as of the date first written above.

 

 

  PURCHASERS:
       
  SUCCESS INDICATOR INVESTMENTS LIMITED
       
       
  By: /s/ Kang LI
    Name: Kang LI
    Title: Director

 

 

 

[ Signature Page to Registration Rights Agreement ]

 

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Registration Rights Agreement as of the date first written above.

 

 

  PURCHASERS:
       
  PIPELINE VENTURES, LLC
       
       
  By: /s/ Patrick Lin
    Name: Patrick Lin
    Title: Partner

 

 

 

[ Signature Page to Registration Rights Agreement ]

 

 

 

Schedule A

 

Purchasers

 

Purchaser Contact Information for Notices Principal Amount of Note Purchased Shares Issuable Upon Conversion of Notes Shares Issuable Upon Exercise of Warrants Total Registrable Securities
Asia Pacific MedTech (BVI) Limited c/o Offshore Incorporations Limited, P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands $10,000,000 1,426,024 713,012 2,139,036
Famous Sino Limited Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands $5,610,000 800,000 400,000 1,200,000
China In Shine Investment Limited Flat F, 12/F, Tower 5, Harbour Green, 8 Sham Mong Road, Tai Kok Tsui, Kowloon, Hong Kong $7,713,750 1,100,000 550,000 1,650,000
Himark Group (Holdings) Company Limited Flat C, 7/F, One Island Place, 51 Tanner Road, North Point, Hong Kong $7,012,500 1,000,000 500,000 1,500,000
Success Indicator Investments Limited P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands $7,012,500 1,000,000 500,000 1,500,000
Pipeline Ventures, LLC

Pipeline Ventures, LLC

c/o Patrick Lin

21 “C” Orinda Way #138

Orinda, CA 94563

$500,000 71,301 35,650 106,951
TOTAL $37,848,750.00 5,397,325 2,698,662 8,095,987

 

  Schedule A  

 

  

Exhibit A

 

Form of Selling Stockholder Questionnaire

 

SORRENTO THERAPEUTICS, INC.

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

 

The undersigned holder of convertible promissory notes and warrants issued by Sorrento Therapeutics, Inc. (the “ Company ”) understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-3 (the “ Resale Registration Statement ”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of the Registrable Securities in accordance with the terms of the Registration Rights Agreement, dated June 13, 2018, by and among the Company and the several signatories thereto (the “ Registration Rights Agreement ”). All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Registration Rights Agreement.

 

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the “ Prospectus ”), deliver the Prospectus to purchasers of Registrable Securities (including pursuant to Rule 172 under the Securities Act) and be bound by the provisions of the Registration Rights Agreement (including certain indemnification provisions, as described therein). Holders must complete and deliver this notice and questionnaire (“ Notice and Questionnaire ”) in order to be named as selling stockholders in the Prospectus. Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus. Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not named as a selling stockholder in the Resale Registration Statement and the Prospectus.

 

NOTICE

 

The undersigned holder (the “ Selling Stockholder ”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Part 3(b) pursuant to the Resale Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.

 

The undersigned hereby provides the following information to the Company and represents and warrants that such information is materially accurate and complete:

 

  A- 1  

 

 

QUESTIONNAIRE

 

PART 1. Name:

 

1.1 Full legal name of the Selling Stockholder:
     
     

 

1.2 Full legal name of the registered holder (if not the same as Part 1(a) above) through which the Registrable Securities listed in Part(3) below are held:
     
     

 

1.3 Full legal name of any natural control person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the Registrable Securities listed in Part (3) below):
     
     

  

PART II. Notices to Selling Stockholder:

 

(a) Address:
     
     

 

(b) Telephone:
     
     

 

(c) Fax:
     
     

 

(d) Contact person:
     
     

 

(e) E-mail address of contact person:
     
     

 

  A- 2  

 

 

PART III. Beneficial Ownership of Registrable Securities:

 

(a) Type and number of Registrable Securities beneficially owned:
     
     
     
     

  

(b) Number of shares of Common Stock to be registered for resale pursuant to this Notice and Questionnaire:
     
     
     
     

  

PART IV. Broker-Dealer Status:

 

(a) Are you a broker-dealer?

 

  Yes ¨ No ¨

 

(b) If you answered “yes” to Part 4(a) above, did you receive your Registrable Securities as compensation for investment banking services provided to the Company?

 

  Yes ¨ No ¨

 

  Note: If you answered “no”, the SEC’s staff has indicated that you should be identified as an underwriter in the Resale Registration Statement.

 

(c) Are you an affiliate of a broker-dealer?

 

  Yes ¨ No ¨

 

  If you answered “yes”, provide a narrative explanation below:

 

   
   
   

 

(d) If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any person to distribute the Registrable Securities?

 

  Yes ¨ No ¨

 

  Note: If you answered “no”, the SEC’s staff has indicated that you should be identified as an underwriter in the Resale Registration Statement.

 

  A- 3  

 

 

PART V. Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder:

 

Except as set forth below in this Part 5, the undersigned is not the beneficial or registered owner of any securities of the Company, other than the Registrable Securities listed above in Part 3.

 

Type and amount of other securities beneficially owned:

 

   
   
   

 

PART VI. Relationships with the Company:

 

(a) Have you or any of your affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the undersigned) held any position or office or have you had any other material relationship with the Company (or its predecessors or affiliates) within the past three years?

 

  Yes ¨ No ¨

 

(b) If your response to Part 6(a) above is “yes”, please state the nature and duration of your relationship with the Company:

 

   
   
   

  

PART VII. Plan of Distribution:

 

The undersigned has reviewed the form of Plan of Distribution attached as Annex A hereto, and hereby confirms that, except as set forth below, the information contained therein regarding the undersigned and its plan of distribution is correct and complete.

 

State any exceptions here:

 

   
   
   

 

 

  A- 4  

 

  

The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the effective date of any applicable Resale Registration Statement. All notices hereunder shall be delivered as set forth in the Registration Rights Agreement. In the absence of any such notification, the Company shall be entitled to continue to rely on the accuracy of the information in this Notice and Questionnaire.

 

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Parts 1 through 7 above and the inclusion of such information in the Resale Registration Statement and the Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of any such Resale Registration Statement and Prospectus.

 

By signing below, the undersigned acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M in connection with any offering of Registrable Securities pursuant to the Resale Registration Statement. The undersigned also acknowledges that it understands that the answers to this Notice and Questionnaire are furnished for use in connection with registration statements filed pursuant to the Registration Rights Agreement and any amendments or supplements thereto filed with the SEC pursuant to the Securities Act.

 

The undersigned confirms that, to the best of his/her knowledge and belief, the foregoing answers to this Notice and Questionnaire are correct.

 

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

Dated: _____________

 

  Selling Stockholder:
   
   
   
   
  Name of Entity or Individual

 

 

  By:  
  Name:  
  Title:  

 

 

  A- 5  

Exhibit 10.1

 

Amendment No. 1 to Securities PURCHASE AGREEMENT

 

This Amendment No. 1 to Securities Purchase Agreement (this “ Amendment ”) is effective as of June 13, 2018 by and among Sorrento Therapeutics, Inc., a Delaware corporation (the “ Company ”), and the purchasers identified on the signature pages to this Amendment (collectively, the “ Majority Purchasers ”).

 

Recitals

 

Whereas , the Company and the Majority Purchasers are parties to that certain Securities Purchase Agreement, dated as of March 26, 2018 (as may be amended or restated from time to time, the “ Purchase Agreement ”), pursuant to which, among other things, the Company agreed to issue and sell to the purchasers identified on Schedule A thereto, and such purchasers agreed to purchase from the Company, (1) convertible promissory notes in an aggregate principal amount of $120,500,000, and (2) warrants to purchase an aggregate of 8,591,794 shares of common stock of the Company, par value $0.0001 per share;

 

Whereas , pursuant to Section 15 of the Purchase Agreement, no provision of the Purchase Agreement may by amended, waived or modified other than by an instrument in writing signed by the Company and, prior to the Closing, the Purchasers purchasing at least a majority of the aggregate principal amount of the Notes, as set forth on Schedule A thereto, and any such amendment, waiver or modification effected in accordance with Section 15 of the Purchase Agreement shall be binding upon all Purchasers and each transferee of the Securities, each future holder of all such securities and the Company;

 

Whereas , as of the date of this Amendment, the Closing has not occurred;

 

Whereas , the Majority Purchasers are Purchasers purchasing at least a majority of the aggregate principal amount of the Notes as set forth on Schedule A to the Purchase Agreement; and

 

Whereas , the Company and the Majority Purchasers wish to amend the Purchase Agreement to reduce the aggregate principal amount of Notes to be issued thereunder and reduce the aggregate number of shares of Common Stock issuable upon conversion of the Warrants on the terms set forth herein.

 

Now Therefore , in consideration of the mutual covenants and agreements contained herein, and with reference to the above recitals, the parties hereby agree as follows:

 

ARTICLE 1
AMENDMENTS

 

1.1        Amendment of Recitals . The first recital of the Purchase Agreement is hereby amended by deleting the reference to “$120,500,000” therein and replacing it with “$37,848,750” and by deleting the reference to “8,591,794” therein and replacing it with “2,698,662”.

 

 

 

 

1.2        Amendment and Restatement of Schedule A . Schedule A of the Purchase Agreement is hereby amended and restated in its entirety to read as set forth on Exhibit 1 hereto.

 

1.3        Amendment to Section 4.2 . Section 4.2 of the Purchase Agreement is hereby amended by deleting the reference to “$60,250,000” therein and replacing with “$18,924,375”.

 

1.4        Amendment to Section 15 of Exhibit A . Section 15 of Exhibit A of the Purchase Agreement is hereby amended by deleting the reference to “$115,000,000” therein and replacing with “$36,121,214”.

 

1.5        Amendment to Section 16 of Exhibit A . Section 16 of Exhibit A of the Purchase Agreement is hereby amended by deleting the reference to “$60,000,000” therein and replacing with “$18,845,851”.

 

1.6        Amendment and Restatement of Schedule A to Exhibit C . Schedule A of Exhibit C of the Purchase Agreement is hereby amended and restated in its entirety to read as set forth on Exhibit 2 hereto.

 

ARTICLE 2
GENERAL PROVISIONS

 

2.1        Definitions . Capitalized terms in this Amendment but not otherwise defined in this Amendment shall have the meanings set forth in the Purchase Agreement.

 

2.2        Recitals . The Recitals shall be deemed to form part of this Amendment and are binding on the parties hereto.

 

2.3        Continuing Effectiveness . Except as modified by this Amendment, the Purchase Agreement shall remain in full force and effect and no party by virtue of entering into this Amendment is waiving any rights it has under the Purchase Agreement, and once this Amendment is executed by the parties hereto, all references in the Purchase Agreement to “the Agreement” or “this Agreement,” as applicable, shall refer to the Purchase Agreement as modified by this Amendment.

 

2.4        Successors and Assigns . No party to this Amendment may assign any of its rights or delegate any of its obligations under this Amendment without the prior written consent of the other parties to this Amendment. Subject to the preceding sentence, this Amendment shall apply to, be binding in all respects upon and inure to the benefit of the successors and permitted assigns of the parties to this Amendment.

 

2.5        Governing Law; Venue . This Amendment, the relationship of the parties hereto and any claims or disputes arising under or relating to this Amendment shall be governed by and construed in accordance with Section 10 of the Purchase Agreement.

 

  2

 

 

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

 

[Signature Page Follows]

 

  3

 

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Securities Purchase Agreement as of the date first written above.

 

COMPANY:

 

 

SORRENTO THERAPEUTICS, INC.

 

 


By: /s/ Henry Ji, Ph.D.

Name: Henry Ji, Ph.D.

Title: Chairman of the Board, President & Chief Executive Officer

 

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Securities Purchase Agreement as of the date first written above.

 

PURCHASER:

 

 

Asia Pacific MedTech (BVI) Limited

 

 

 

By: /s/ GU NANA

Name: GU NANA

Title: Director

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Securities Purchase Agreement as of the date first written above.

 

PURCHASER:

 

 

Famous Sino Limited

 

 

 

By: /s/ Guangze WU

Name: Guangze WU

Title: Director

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Securities Purchase Agreement as of the date first written above.

 

PURCHASER:

 

 

China In Shine Investment Limited

 

 

 

By: /s/ CHIT FUNG

Name: CHIT FUNG

Title: Director

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Securities Purchase Agreement as of the date first written above.

 

PURCHASER:

 

 

Himark Group (Holdings) Company Limited

 

 

 

By: /s/ O Na

Name: O Na

Title: Director

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Securities Purchase Agreement as of the date first written above.

 

PURCHASER:

 

 

Success Indicator Investments Limited

 

 

 

By: /s/ Kang LI

Name: Kang LI

Title: Director

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to Securities Purchase Agreement as of the date first written above.

 

PURCHASER:

 

 

Pipeline Ventures, LLC

 

 

By: /s/ Patrick Lin

Name: Patrick Lin

Title: Partner

 

[Signature Page to Amendment No. 1 to Securities Purchase Agreement]

 

Exhibit 1

 

Schedule A

 

Schedule of Purchasers

 

Name of Purchaser Address Jurisdiction of Formation (for Entities) Principal Amount of Note Purchased Number of Warrant Shares
Asia Pacific MedTech (BVI) Limited c/o Offshore Incorporations Limited, P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands British Virgin Islands $10,000,000 713,012
Famous Sino Limited Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands British Virgin Islands $5,610,000 400,000
China In Shine Investment Limited Flat F, 12/F, Tower 5, Harbour Green, 8 Sham Mong Road, Tai Kok Tsui, Kowloon, Hong Kong British Virgin Islands $7,713,750 550,000
Himark Group (Holdings) Company Limited Flat C, 7/F, One Island Place, 51 Tanner Road, North Point, Hong Kong British Virgin Islands $7,012,500 500,000
Success Indicator Investments Limited P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands British Virgin Islands $7,012,500 500,000
Pipeline Ventures, LLC

Pipeline Ventures, LLC

c/o Patrick Lin

21 “C” Orinda Way #138

Orinda, CA 94563

California $500,000 35,650
TOTAL $37,848,750.00 2,698,662

 

Schedule A- 1

 

 

 

Exhibit 2

 

Schedule A

 

Purchasers

 

Purchaser Contact Information for Notices Principal Amount of Note Purchased Shares Issuable Upon Conversion of Notes Shares Issuable Upon Exercise of Warrants Total Registrable Securities
Asia Pacific MedTech (BVI) Limited c/o Offshore Incorporations Limited, P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands $10,000,000 1,426,024 713,012 2,139,036
Famous Sino Limited Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands $5,610,000 800,000 400,000 1,200,000
China In Shine Investment Limited Flat F, 12/F, Tower 5, Harbour Green, 8 Sham Mong Road, Tai Kok Tsui, Kowloon, Hong Kong $7,713,750 1,100,000 550,000 1,650,000
Himark Group (Holdings) Company Limited Flat C, 7/F, One Island Place, 51 Tanner Road, North Point, Hong Kong $7,012,500 1,000,000 500,000 1,500,000
Success Indicator Investments Limited P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands $7,012,500 1,000,000 500,000 1,500,000
Pipeline Ventures, LLC

Pipeline Ventures, LLC

c/o Patrick Lin

21 “C” Orinda Way #138

Orinda, CA 94563

$500,000 71,301 35,650 106,951
TOTAL $37,848,750.00 5,397,325 2,698,662 8,095,987

 

 

Schedule A- 2

 

 

Exhibit 99.1

 

 

 

Sorrento Therapeutics issues Chairman/CEO corporate update to stockholders.

 

SAN DIEGO, June 14th, 2018 – GlobeNewswire – Sorrento Therapeutics, Inc. (NASDAQ:SRNE)

 

Dear Sorrento Stockholders,

 

It is with pride that I issue this mid-year update letter to our shareholders. Since the beginning of 2018, we have been working diligently on the implementation of our current plans and have made noteworthy progress on multiple fronts.

 

· Closing of financing adjusted to $38M (versus $120.5M prior announcement) – June 13 th , 2018

 

The notes will be convertible into shares of Sorrento common stock at a price of $7.0125 per share and will accrue interest at a rate of 5% per year. Each purchaser of the convertible notes will also receive a warrant to purchase 50% of the number of shares of Sorrento common stock into which such purchaser’s note is initially convertible. The warrants have an exercise price of $8.77 per share, or 125% of the initial conversion price of the notes. Following the closing, we expect to have approximately $50m cash on hand to execute our business plan for the remainder of 2018. We decided to lower the final amount for this convertible note financing with the intent to limit shareholder dilution. Considering recent progress in our potential strategic partnership discussions and non-dilutive financing pursuits, we feel confident that this level of financing should be appropriate for our current business needs.

  

· Sorrento to be included in the FTSE Russell 3000®/2000® indexes - June 25 th , 2018

 

Effective as of the opening of the U.S. markets on Monday, June 25, 2018, based on a preliminary list of additions to the index posted by FTSE Russell on Friday, June 8, 2018, our company’s shares (SRNE, Nasdaq) will be included in the aforementioned indices. The Company's addition to the Russell indices is part of FTSE Russell's annual index reconstitution process that is done to reflect prior year changes in the ever-evolving global equity markets. We are encouraged by this inclusion to the Russell indices and expect trading liquidity of our shares and institutional ownership base may strengthen as a result.

  

· HKSE/Nasdaq dual listing for Sorrento Therapeutics Inc. – by Q1 2019

 

We have taken into consideration multiple parameters and decided to pursue the corporate entity listing versus a subsidiary spin-out on the Hong Kong stock exchange. We believe our shareholders will be best served by not separating our core immuno-oncology development assets and simplifying our organizational structure. We will seek to be listed by the first quarter of 2019.

  

 

 

 

· SCILEX ZTlido™ (lidocaine topical system) 1.8% commercialization – Q4 2018

 

Our majority owned subsidiary is building up a commercial support organization for the launch of its recently approved lidocaine topical system, ZTlido, in the US, expected to be operational in the fourth quarter of 2018, while progressing on international strategic partnerships for ex-US territories. Scilex is also pursuing a non-dilutive royalty-based financing to independently support the commercial launch.

  

· Development projects and clinical trials continue to advance on planed target dates.

 

Our main development projects are progressing as planned. Clinical trials are being set-up for patient inclusion in CD38 CAR-T in refractory or relapsing multiple myeloma and RTX for osteoarthritis knee pain. We continue expanding our program pipeline with new IND enabling data generation (pre-clinical) in particular, in the areas of monoclonal antibody (PD-L1, in phase 1 trials in S. Korea and China) and CAR (BCMA) technologies.

 

As a team, we have reached some key milestones in the first half of 2018 (FDA approval of ZTlido and IND filing of CD38 CAR-T, for example). We strive to continue to execute on our business plan and move our development programs forward in the second half of 2018. We are encouraged by the high level of interest from outside parties and are evaluating strategic partnerships for some of our assets in development.

 

Dr. Henry Ji

 

Chairman and CEO, Sorrento Therapeutics.

 

 

 

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About Sorrento Therapeutics, Inc. 

 

Sorrento is a clinical stage, antibody-centric, biopharmaceutical company developing new therapies to turn malignant cancers into manageable and possibly curable diseases. Sorrento's multimodal multipronged approach to fighting cancer is made possible by its’ extensive immuno-oncology platforms, including key assets such as fully human antibodies (“G-MAB™ library”), clinical stage immuno-cellular therapies (“CAR-T”), intracellular targeting antibodies (“iTAbs”), antibody-drug conjugates (“ADC”), and clinical stage oncolytic virus (“Sephrevir®”). 

 

Sorrento's commitment to life-enhancing therapies for cancer patients is also demonstrated by our effort to advance a first-in-class (TRPV1 agonist) non-opioid pain management small molecule in Resiniferatoxin (“RTX”) and ZTlido. Resiniferatoxin is completing a phase IB trial in terminal cancer patients. ZTlido was approved by US FDA on February 28, 2018.

 

For more information visit www.sorrentotherapeutics.com

 

The notes, warrants and shares issuable upon conversion of the notes and exercise of the warrants have not been registered under the Securities Act of 1933, as amended, or with any securities regulatory authority of any state or other jurisdiction, and may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements. This letter shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. At the closing of the financing, Sorrento and the purchasers of the notes entered into a registration rights agreement pursuant to which, among other things, Sorrento agreed to prepare and file one or more registration statements with the Securities and Exchange Commission (the SEC) for the purpose of registering for resale the shares issuable upon conversion of the notes and exercise of the warrants. Under the registration rights agreement, Sorrento agreed to file a registration statement with the SEC registering all of shares issuable upon conversion of the notes and exercise of the warrants for resale by no later than the date 45 days after the closing of the financing.

 

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Forward-Looking Statements

 

This letter to the stockholders of Sorrento Therapeutics, Inc. contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those projected. Forward-looking statements include, among others, those relating to our cash on hand and the use and timing thereof to execute our business plan, our potential financing opportunities, our commercialization and strategic partnership plans and opportunities and the advancement of our clinical stage assets, including CD38 CAR-T and RTX clinical trials, ZTlido commercialization efforts and timing, partnering efforts and plans for ZTlido, expected effects on being included in certain indices, including the Russell 2000 and 3000 indices, expectations as to whether raised capital is sufficient to fund anticipated future commercialization and development efforts, and our efforts toward and results from pursuing a Hong Kong listing and the expected timing thereof. Risks and uncertainties include whether Sorrento will continue the development of its assets; regulatory risks and risks in seeking and obtaining US and non-US regulatory approvals of Sorrento’s product candidates; risks associated with conducting clinical trials of product candidates; whether ongoing or planned clinical trials are implemented and conducted on the timelines Sorrento currently expects; whether any product candidates will be shown to be safe and efficacious in clinical trials; Sorrento’s ability to use the proceeds from the financing effectively and as described in this letter; whether Sorrento will have access to sufficient capital to fund its planned development and potential commercialization activities; risks related to retaining our key employees; risks regarding competitors’ products and product candidates; and other matters that are described in Sorrento's Annual Report on Form 10-K for the year ended December 31, 2017, and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission, including the risk factors set forth in those filings. These forward-looking statements represent the Company's judgment as of the date of this letter to stockholders. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this letter and we undertake no obligation to update any forward-looking statement in this letter except as required by law.

 

# #

 

Media and Investor Relations

 

Contact: Alexis Nahama, Vice President Corporate Development

 

Telephone: 1.858.203.4120

 

Email: investors@sorrentotherapeutics.com

 

Website: www.sorrentotherapeutics.com

 

# # #

 

Sorrento® and the Sorrento logo are registered trademarks of Sorrento Therapeutics, Inc.

 

ZTlido™ and G-MAB™ are trademarks owned by Scilex Pharmaceuticals, Inc. and Sorrento, respectively.

 

Seprehvir®, is a registered trademark of Virttu Biologics Limited, a wholly-owned subsidiary of TNK Therapeutics, Inc. and part of the group of companies owned by Sorrento Therapeutics, Inc.

 

All other trademarks are the property of their respective owners.

 

© 2018 Sorrento Therapeutics, Inc. All Rights Reserved.

 

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