Item 8.01. Other Events.
On August 7, 2020, Sorrento Therapeutics,
Inc. (the “Company”) granted to Henry Ji, Ph.D., the Company’s Chairman of the Board, Chief Executive Officer
and President, a 10-year CEO performance award tied solely to achieving market capitalization milestones (the “CEO Performance
Award”), subject to approval of the Company’s stockholders
at the Company’s upcoming 2020 Annual Meeting of Stockholders (the “Annual Meeting”). The CEO Performance
Award, which was approved by the Compensation Committee of the Company’s Board of Directors (the “Board”) comprised
entirely of independent members of the Board, consists of a 10-year option to purchase an aggregate of 24,935,882 shares of the
Company’s common stock, which was equal to 10% of the Company’s outstanding shares of common stock on the day prior
to the date of grant, and vests in ten tranches. Each of the ten tranches vests only if a market capitalization milestone is met.
To meet the first market capitalization milestone, the Company’s current market capitalization must increase to $5.0 billion.
For the next two milestones, the Company’s market capitalization must continue to increase in additional $2.0 billion increments.
For the three milestones thereafter, the Company’s market capitalization must increase in additional $3.0 billion increments.
For the next three milestones thereafter, the Company’s market capitalization must increase in additional $4.0 billion increments.
For the final milestone, the Company’s market capitalization must increase by an additional $5.0 billion. Thus, for Dr. Ji
to fully vest in the award, the Company’s market capitalization must increase to $35.0 billion.
For each of the ten milestones that is
achieved, one-tenth of the shares of common stock (an amount equal to approximately 1% of the Company’s total outstanding
shares of common stock as of the day prior to the date of grant) subject to the CEO Performance Award will vest, as follows:
|
Tranche
|
Market Capitalization
|
Number of Shares that will Vest
|
|
1
|
$5.0 billion
|
2,493,588
|
|
2
|
$7.0 billion
|
2,493,588
|
|
3
|
$9.0 billion
|
2,493,588
|
|
4
|
$12.0 billion
|
2,493,588
|
|
5
|
$15.0 billion
|
2,493,588
|
|
6
|
$18.0 billion
|
2,493,588
|
|
7
|
$22.0 billion
|
2,493,588
|
|
8
|
$26.0 billion
|
2,493,588
|
|
9
|
$30.0 billion
|
2,493,588
|
|
10
|
$35.0 billion
|
2,493,590
|
If none of the ten market capitalization
milestones is achieved, none of the shares subject to the CEO Performance Award will vest. In order to satisfy a market capitalization
milestone, the Company must sustain the market capitalization threshold based on both: (i) a six calendar month trailing average
(based on trading days); and (ii) a 30 calendar day trailing average (based on trading days). In addition, for vesting to occur
when the milestones are met, Dr. Ji must remain as the Company’s Chief Executive Officer or Executive Chairman.
The exercise price per share subject
to the CEO Performance Award is $17.30, which is a 20% premium to the closing sales price of the Company’s common
stock on August 7, 2020, the date of grant.
The effectiveness of the CEO Performance
Award is subject to the approval of the Company’s stockholders. The Company expects to solicit the approval of the CEO Performance
Award by the Company’s stockholders at the Company’s upcoming Annual Meeting expected to be held in October 2020.
Any stockholder of record or beneficial
owner of shares of the Company’s common stock as of the record date for the Annual Meeting will be entitled to vote their
shares at the Annual Meeting and the CEO Performance Award will only become effective if: (1) a majority of the votes cast, and
(2) a majority of the votes cast (excluding any shares held directly or indirectly by Dr. Ji) are in favor of the proposal.
Other Information
The Company plans to file with the Securities
and Exchange Commission (the “SEC”), and furnish to its stockholders, a proxy statement in connection with the CEO
Performance Award (the “Proxy Statement”) to be voted upon at the Annual Meeting. The Proxy Statement will contain
important information about the CEO Performance Award and related matters. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THESE
MATERIALS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT THE COMPANY WILL FILE WITH THE
SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY AND THE CEO PERFORMANCE AWARD.
Stockholders will be able to obtain free copies of these documents and other documents filed with the SEC by the Company through
the website maintained by the SEC at www.sec.gov. In addition, stockholders will be able to obtain free copies of these documents
from the Company by contacting the Company’s Investor Relations by email at investors@sorrentotherapeutics.com, or by going
to the Company’s Investor Relations page on its website at http://investors.sorrentotherapeutics.com.
Participants in the Solicitation
The directors and executive officers of
the Company may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection
with the CEO Performance Award. The information regarding the interests of participants in the solicitation of proxies in respect
of the Annual Meeting will be included in the Proxy Statement.
The foregoing description of the CEO Performance
Award is qualified in its entirety by reference to the full text of the CEO Performance Award, a copy of which will be included
as an appendix to the Proxy Statement.