Item 1.01. Entry into a Material Definitive Agreement.
Chapter 11 Cases
As previously disclosed, on
February 13, 2023, Sorrento Therapeutics, Inc. (“Sorrento” or the “Company”) and its wholly-owned direct subsidiary,
Scintilla Pharmaceuticals, Inc. (together with the Company, the “Debtors”), commenced voluntary proceedings under Chapter 11
of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).
The Debtors’ Chapter 11 proceedings are jointly administered under the caption In re Sorrento Therapeutics, Inc., et al.,
Case Number 23-90085 (DRJ) (the “Chapter 11 Cases”). The Debtors continue to operate their business in the ordinary course
and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
Debtor-in Possession Financing
As previously disclosed, on
February 19, 2023, the Debtors executed that certain Debtor-In-Possession Term Loan Facility Summary of Terms and Conditions (the “DIP
Term Sheet”) with JMB Capital Partners Lending, LLC (“JMB Capital” or the “DIP Lender”), pursuant to which
JMB Capital (or its designees or its assignees) provided the Debtors with a non-amortizing super-priority senior secured term loan facility
in an aggregate principal amount not to exceed $75,000,000 in term loan commitments (the “DIP Facility”), subject to the terms
and conditions set forth in the DIP Term Sheet.
As previously disclosed, at
a hearing before the Bankruptcy Court on February 21, 2023, the Bankruptcy Court entered an interim order (the “Interim DIP Order”)
approving the DIP Facility on an interim basis and providing the Debtors with the necessary liquidity to continue to operate in Chapter
11. Upon entry of the Interim DIP Order and satisfaction of all applicable conditions precedent, as set forth in the DIP Term Sheet, the
Debtors were authorized to make a single, initial draw of $30,000,000 on the DIP Facility (the “Initial Draw”). The Debtors
then negotiated definitive financing documentation, including a Senior Secured, Super-Priority Debtor-in-Possession Loan
and Security Agreement (the “DIP Credit Agreement”) and other documents evidencing the DIP Facility (collectively with the
DIP Credit Agreement, the “DIP Documents”).
After a hearing before
the Bankruptcy Court on March 29, 2023, the Bankruptcy Court entered a final order (the “Final DIP Order”) approving the
DIP Facility on a final basis and providing the Debtors with access to the remaining $45,000,000 of the DIP Facility (subject to the
terms, conditions, and covenants set forth in the DIP Documents), through additional draws of no less than $5,000,000, each upon
five business days’ written notice to the DIP Lender, and the Debtors and DIP Lender proceeded to enter into the DIP Documents
on March 30, 2023. Among other terms, the DIP Facility bears interest at a per annum rate equal to 14% payable in cash on the first
day of each month in arrears (and a default interest rate that shall accrue at an additional per annum rate of 3% plus the
non-default interest, payable in cash on the first day of each month) and other fees and charges as described in the DIP Documents.
The DIP Facility is secured by first-priority liens on substantially all of the Debtors’ unencumbered assets, subject to
certain enumerated exceptions, and second-priority liens on those assets of the Debtors that are encumbered by certain permitted
liens (as set forth in the Final DIP Order).
The DIP Facility matures on
the earliest of: (i) July 31, 2023; (ii) the effective date of any chapter 11 plan of reorganization with respect to the Debtors; (iii)
the consummation of any sale or other disposition of all or substantially all of the assets of the Debtors pursuant to section 363
of the Bankruptcy Code; (iv) the date of the acceleration of the DIP Loans and the termination of the DIP Commitments in accordance with
(and as defined in) the DIP Documents; and (v) dismissal of the Chapter 11 Cases or conversion of the Chapter 11 Cases into cases under
chapter 7 of the Bankruptcy Code. The DIP Facility does not contain a roll-up or cross-collateralization of prepetition debt or otherwise
dictate how prepetition claims will be addressed in a chapter 11 plan.
The foregoing summary of the
DIP Facility is qualified in its entirety by reference to the full text of the DIP Documents and the Final DIP Order. A copy of the DIP
Credit Agreement is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated by reference herein.
Additional information about
the Chapter 11 Cases, including access to copies of the Final DIP Order, the DIP Credit Agreement, and other documents filed with the
Bankruptcy Court, is available online at https://cases.stretto.com/sorrento, a website administered by Stretto, a third-party bankruptcy
claims and noticing agent. The information on that website is not incorporated by reference into, and does not constitute part of, this
Current Report on Form 8-K.