Item 1.01. Entry into a Material Definitive
Agreement.
Omnibus Amendment No. 1 to Indenture
and Letter of Credit
On October 1, 2019, Scilex Pharmaceuticals
Inc. (“Scilex”), an indirect subsidiary of Sorrento Therapeutics, Inc. (the “Company”), the Company, U.S.
Bank National Association, as trustee (the “Trustee”) and collateral agent (the “Agent”), and the beneficial
owners of the senior secured notes due 2026 (the “Securities”) and the holders of such Securities listed on the signature
pages thereto (the “Holders”) entered into an omnibus amendment (the “Amendment”) to: (i) that certain
Indenture, dated September 7, 2018, by and among Scilex, the Company, the Trustee and the Agent (the “Indenture”),
and (ii) that certain Irrevocable Standby Letter of Credit issued by the Company to Scilex in the maximum aggregate amount of $35,000,000,
with a date of issuance of September 7, 2018 (the “Letter of Credit”).
Pursuant to the Indenture, the Company
agreed to irrevocably and unconditionally guarantee, on a senior unsecured basis, the punctual performance and payment when due
of all obligations of Scilex under the Indenture. A portion of the proceeds from the offering of the Securities were used to fund
a segregated reserve account pursuant to the terms of the Indenture. Pursuant to the Indenture, funds in the reserve account were
to be released to Scilex upon receipt by the Trustee of an officer’s certificate under the Indenture from Scilex confirming
receipt of a marketing approval letter from the United States Food and Drug Administration with respect to ZTlido® (lidocaine
topical system) 5.4% or a similar product with a concentration of not less than 5% on or prior to July 1, 2023.
Under the terms of the Amendment, among
other things, the defined term “Change of Control” was revised to include, in addition to certain events described
in the Indenture, (i) prior to the consummation of an initial public offering by Scilex Holding Company, the parent company of
Scilex (“Scilex Holding”) (the “Scilex Holding IPO”), the Company ceasing to own, directly or indirectly,
a majority of the total voting and economic power of the issued and outstanding capital stock that is entitled to vote in the election
of the Board of Directors (the “Voting Stock”) of Scilex, (ii) at any time following the consummation of the Scilex
Holding IPO, Scilex becoming aware of the acquisition by any person or group acquiring, in a single or in a related series of transactions,
by way of merger, amalgamation, consolidation or other business combination or purchase of beneficial ownership of a majority of
the total voting power of the issued and outstanding Voting Stock of Scilex or Scilex Holding, and (iii) Scilex Holding failing
at any time to own 100% of the capital stock of Scilex. The Amendment also provides that Scilex will agree not to engage in or
enter into any business other than the research, development, manufacture, sale, distribution, marketing, detailing, promotion,
selling and securing of reimbursement of ZTlido® (lidocaine topical system) 1.8% and any future iterations, improvements or
modifications thereof (the “Product”), on a worldwide basis (exclusive of Japan), and activities that are necessary
for, or otherwise relevant to, the same, subject to certain exceptions. The Amendment further provides that, if Scilex Holding
fails to contribute $25.0 million of the proceeds of any Scilex Holding IPO to Scilex within three business days following the
closing of the issuance and sale of Scilex Holding’s capital stock in the Scilex Holding IPO, such failure shall constitute
an “Event of Default” under the Indenture.
In connection with the
Amendment, Scilex agreed to repurchase, from each holder of Securities, Securities in a principal amount equal to (i) $20.0
million multiplied by (ii) a fraction the numerator of which will be the then outstanding principal amount of the Securities
held by such holder and the denominator of which will be the then outstanding principal amount of all of the outstanding
Securities, at a purchase price in cash equal to 100% of the principal amount thereof (such repurchase, the “Effective
Date Repurchase”). Pursuant to the Amendment, the Holders agreed to release the funds in the reserve account for the
purpose of consummating the Effective Date Repurchase and the remaining funds in the reserve account after the consummation
of the Effective Date Repurchase will be released to Scilex by the Trustee and Agent.
The Amendment also modifies the Letter
of Credit to provide that one of the conditions that will terminate the Letter of Credit will be the consummation of a Scilex Holding
IPO that satisfies certain valuation thresholds.
The Amendment will be effective upon the
satisfaction of certain terms and conditions, including the consummation of the Effective Date Repurchase. The Amendment will terminate
if the Amendment does not become effective on or prior to October 1, 2020.
The Amendment includes representations
and warranties of the parties, indemnification obligations and other terms and conditions customary in agreements of this type.
The representations, warranties and covenants contained in the Amendment were made only for purposes of such agreement and as of
specific dates, were solely for the benefit of the parties to the Amendment, and may be subject to limitations agreed upon by the
contracting parties. Accordingly, the Amendment is incorporated herein by reference only to provide investors with information
regarding the terms of the Amendment, and not to provide investors with any other factual information regarding the Company or
its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings
with the Securities and Exchange Commission.
The foregoing description 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. Certain terms of the Amendment have been omitted from this Current Report on Form 8-K and have been omitted from the version
of the Amendment filed as Exhibit 10.1 to this Current Report on Form 8-K pursuant to Item 601(b)(10) of Regulation S-K because
such terms are both (i) not material and (ii) would likely cause competitive harm to the Company if publicly disclosed.