Full Press Release Details
NON-BINDING TERM SHEET
The following non-binding term sheet ("Term
Sheet") outlines, in addition to the other matters described herein, the proposed terms of (A) the declaration of Scilex as
the winning bidder for the purchase of the Securities Transfer (as defined below) pursuant to the Winning Bid (as defined below), and
either (B) the closing of the Winning Bid pursuant to Option 1 below, or (C) the closing of the Winning Bid Pursuant to Option 2 below,
including: (i) the assumption by Scilex Holding Company ("Scilex"), of all rights and obligations of the Borrowers
under and as defined in that certain Senior Secured, Super-Priority Debtor-in-Possession Loan and Security Agreement, by and among Oramed
Pharmaceuticals, Inc. ("Oramed"), on the one hand, and Sorrento Therapeutics, Inc. ("Sorrento")
and Scintilla Pharmaceuticals, Inc. (together with Sorrento, the "DIP Borrowers" or the "Debtors",
and together with Scilex and Oramed, the "Parties", and individually, a "Party"), on the other,
dated as of August 8, 2023 (as amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the
"Senior DIP Loan Agreement"); (ii) the amendment of the Senior DIP Loan Agreement pursuant to the terms herein; (iii)
the conditional termination of Sorrento's and Oramed's rights and obligations under that certain Stock Purchase Agreement
between them, dated as of August 7, 2023 (as amended, the "SPA"), as further summarized herein, and (iv) the acquisition
by Scilex of the Transfer Securities.
This Term Sheet is for discussion purposes only
and (other than the section entitled "Equity Lines of Credit" which is intended by the Parties hereto to be legally binding
from and after the execution of this Term Sheet) is not a legally binding agreement. Neither this Term Sheet nor any course of conduct
by any Party before or after the date hereof will give rise to any obligation of any Party to (a) continue discussions or negotiations
related to, or consummate, any transaction with respect to the subject matter hereof or (b) execute and deliver any definitive agreements
related thereto. Each Party's obligation to enter into one or more definitive transaction agreements with respect to the subject
matter hereof, including any amendment of the Senior DIP Loan Agreement (a "Definitive Agreement") is subject to, among
other things, the review and approval of the transaction by its respective board of directors and the Bankruptcy Court for the Southern
District of Texas (the "Bankruptcy Court"). The Parties will each have the right to terminate negotiations relating
to the subject matter hereof at any time prior to the execution of a Definitive Agreement. Such termination will not result in any liability
SUMMARY OF PROPOSED TRANSACTIONS
Oramed shall not be released from its obligations under the SPA until
the Closing of the Proposed Transactions. Upon Closing of Proposed Transactions, Oramed and Sorrento shall terminate the SPA, including
all rights and obligations of the Parties thereunder, and the Parties thereto will release any and all claims they may have against one
another, including a release by Oramed of any claims to any breakup fee or expense reimbursement in connection therewith, which termination
and waiver shall be effective as of the satisfaction of the applicable conditions precedent below (the "Oramed SPA Termination").
The following shall be conditions precedent to
the DIP Assumption under Option 2 (in addition to the conditions precedent for the Proposed Transactions):
The date on which the foregoing conditions shall
have been satisfied or waived and the transactions under Option 2 shall be consummated is herein referred to as the "Closing
The Bankruptcy Court order approving this Term
Sheet will include a decretal paragraph providing that, upon the Closing, the Stockholder Agreement, dated as of September 12, 2022, by
and among Scilex Holding Company (f/k/a Vickers Vantage Corp. I) and Sorrento Therapeutics, Inc., is deemed terminated and of no further
force or effect. For the avoidance of doubt, if the Proposed Transactions are not consummated, the Stockholder Agreement shall remain
in full force and effect.
| SCILEX HOLDING COMPANY | ||
| By: | /s/ Stephen Ma | |
| Name: | Stephen Ma | |
| Title: | Chief Accounting Officer | |
| ORAMED PHARMACEUTICALS, INC. | ||
| By: | /s/ Nadav Kidron | |
| Name: | Nadav Kidron | |
| Title: | Chief Executive Officer |
| ORAMED PHARMACEUTICALS, INC. | ||
| By: | /s/ Josh Hexter | |
| Name: | Josh Hexter | |
| Title: | Chief Operating Officer |
| SORRENTO THERAPEUTICS INC. | ||
| By: | /s/ Mohsin Y. Meghji | |
| Name: | Mohsin Y. Meghji | |
| Title: | Chief Restructuring Officer |
| OFFICIAL COMMITTEE OF UNSECURED CREDITORS | ||
| By: | /s/ Mark Shinderman | |
| Name: | Mark Shinderman | |
| MILBANK LLP Counsel for Official Committee of Unsecured Creditors | ||
| Official Committee of Equity Securities Holders | ||
| By: | /s/ Andrew K. Glenn | |
| Name: | Andrew K. Glenn | |
| GLENN AGRE BERGMAN & FUENTES Counsel for Official Committee of Equity Securities Holders |
Senior Debt Term Sheet
SENIOR SECURED NOTE AND WARRANTS
| PARTIES | |
| Company: | Scilex Holding Company, a Delaware corporation (the " Company " or " SCLX "). |
| Investor: | Oramed Pharmaceuticals, Inc. (the " Investor " or " Oramed "). |
| Sorrento: | Sorrento Therapeutics Inc., a Delaware corporation (" Sorrento "). |
| NON-BINDING TERMS | |
| Securities: | In exchange for the consummation of the DIP Assumption (as defined in that certain Non-Binding Term Sheet, executed on the date hereof, between the Company, Investor and Sorrento and presented at mediation (such term sheet, the " Short Form Term Sheet ")), the Company will issue a Senior Secured Note (the " Note "), as described below. The initial principal balance of the Note shall be an amount equal to the unpaid principal and accrued and unpaid interest under the Senior DIP Loan agreement (as defined in the Short Form Term Sheet) (the " Initial Principal Amount "). As contemplated pursuant to the Short Form Term Sheet, the definitive documents in respect of the Note shall be substantially the same as the HB Documents (as defined in the Short Form Term Sheet) except as expressly modified by this term sheet (this " Term Sheet ") or as otherwise agreed by the Investor and the Company. All references herein to terms that are "customary for transactions of this type" (or similar language) shall be deemed to refer to such terms as are set forth in the HB Documents to the extent addressed therein. |
| Maturity and Repayment: | The Note will mature on the 18-month anniversary of the Closing (as described below), except as otherwise provided in the Note (the " Maturity Date "). The Company shall make principal payments, without premium or penalty, in respect of the Note as follows: (a) $5.0 million on the 90th day following the Closing; (b) $15.0 million on the 180th day following the Closing; and (c) $20.0 million on 270th day of the Closing and every 90 days thereafter; provided that each such principal payment amount shall be reduced on a dollar-for-dollar basis by the amount of any mandatory or voluntary prepayments made prior to the date of such principal payment amount. If a principal payment would be due on a date that is not a business day, then payment shall be made on the next business day. The aggregate outstanding principal amount of the Note (the " Amount Outstanding "), together with any accrued but unpaid interest, shall be due and payable in full on the Maturity Date or, at the written election of the Investor, upon an uncured Event of Default. |
| Voluntary Prepayments: | The Note may be prepaid, in whole or in part, at the option of the Company, from time to time without premium or penalty (except as set forth in the next paragraph), in minimum amounts to be agreed, upon two (2) business days' prior notice (which notice may be conditioned upon the occurrence of a refinancing or other event). If any voluntary prepayment occurs on or prior to the 1-year anniversary of Closing, such voluntary prepayment will be accompanied by a customary 50.0% interest make-whole on the portion of the Note so prepaid. |
| Mandatory Prepayments: | The Company will be required to repay the Note as follows, without premium or penalty: (i) 70% of the net cash proceeds to which the Company is entitled to from advances made under the standby equity purchase agreement entered into between the Company and YA II PN, Ltd. (" YA "), dated November 17, 2022, as amended by an amended and restated standby equity purchase agreement on February 8, 2023 (the " YA ELOC ") and/or the Standby Equity Purchase Agreement dated January 8, 2023 with B. Riley Principal Capital II (" B. Riley Principal ") (the " B. Riley Equity Line of Credit ", and together with the YA ELOC, the " Equity Lines of Credit ") will be directed by the Company to be paid directly by YA or the B. Riley Principal to Oramed or, if the financing source cannot or will not do so, then instead deposited into a blocked account (the " Blocked Account ") that sweeps to an account designated by Oramed (which account will, unless prohibited by the applicable banking institution, have a signatory designated by Oramed), and (ii) 70% of the net cash proceeds received by the Company from any debt or equity financing, including the Sales Agreement (as defined below) (other than (w) the AR Line, (x) the Equity Lines of Credit, (y) the Subordinate Debt (as defined below) and (z) up to $30.0 million of indebtedness (which indebtedness may be incurred before, on, or after the Assumption Closing) owed by the Company to B. Riley Securities (the " B. Riley Indebtedness ") and which B. Riley Indebtedness may be secured by the proceeds of the Equity Lines of Credit or the Sales Agreement)) will be directed by the Company to be paid directly by the applicable lender or investor to Oramed or, if the financing source cannot or will not do so, then instead deposited into a blocked account that sweeps to an account designated by Oramed (which account will, unless prohibited by the applicable banking institution, have a signatory designated by Oramed); provided , that the mandatory prepayment requirements under clauses (i) and (ii) above shall not begin until after the earlier of (a) April 1, 2024 and (b) the date upon which all the Yorkville Debentures and the B. Riley Indebtedness are repaid in full. For the avoidance of doubt, the mandatory prepayment terms set forth in this section (including the foregoing proviso) shall not alter, limit, or restrict in any manner the repayment terms (including applicable repayment timelines) set forth in the "Maturity and Repayment" section or in any other section of this Term Sheet. The Company's outstanding convertible debentures dated March 21, 2023 (the " Yorkville Debentures ") issued to Yorkville and which are outstanding as of the date hereof. |
| Interest: | The Note will bear interest at a per annum rate equal to the Secured Overnight Financing Rate (" SOFR ") plus 8.5%, which shall be payable in-kind by being capitalized and added to the principal amount of the Note, on a monthly basis. Upon the occurrence and during the continuance of an event of default, at the election of the Investor, the Note will bear interest at a default rate of SOFR plus 15.0%, which shall be payable in-kind by being capitalized and added to the principal amount of the Loan, on a monthly basis. In each case, SOFR will be subject to a 4.0% floor. |
| Exit Fee: | If the Note is not repaid in full on or prior to the date that is six (6) months from the Closing Date, an exit fee equal to 3.0% of the Initial Principal Amount (the " Exit Fee ") shall be fully earned on such date, which Exit Fee shall be due and payable upon repayment of the Note in full. |
| Conversion: | None. |
| Upon the reasonable request of the Investor, the Company shall amend the organizational documents of one or more of its subsidiaries at the Closing in connection with the implementation of the rights granted under the security agreements. | |
| Covenants: | The Note will contain customary affirmative and negative covenants (the " Covenants "), including that: 1. the Company will not incur or guarantee any other debt, except for (a) the AR Line, the aggregate principal amount of which shall not at any time exceed $30.0 million, (b) either the B. Riley Indebtedness or the Yorkville Debentures (but, for the avoidance of doubt, not both) (either such debt, the " Anticipated Debt "), the aggregate principal amount such Anticipated Debt shall not at any time exceed $30.0 million, (c) the Post-Closing Cash Payment (as defined in the Short Form Term Sheet), (d) subordinated debt in an aggregate principal amount not to exceed at any time $30.0 million (the " Subordinate Debt "), (e) additional subordinated debt, but only to the extent that the proceeds thereof will be used to repay the Note in full concurrently with the incurrence thereof, and (f) other customary exceptions acceptable to the Investor and set forth in the definitive documentation (each of clauses (a) through (f), " Permitted Debt "); 2. on or about November 12, 2023, the Company may file a shelf registration on Form S-3 and simultaneously enter into an at-the-market sales agreement with a financial institution acceptable to the Investor (it being acknowledged and agreed that B. Riley Securities shall be acceptable to the Investor) (the " Sales Agreement "), each for an amount no less than 150.0% of the Investment Amount. Once the Form S-3 is declared effective and the Sales Agreement is executed, the Company may terminate the B. Riley Equity Line of Credit in compliance with the terms thereof; 3. the Company will seek a court order from the Bankruptcy Court to extend the existing lock-up on all shares of Common Stock owned by Sorrento shareholders that were issued in January 2023 as part of Sorrento's dividend of Shares of Common Stock to its stockholders (approximately 76.0 million shares) to March 31, 2024; 4. the Company will enter into voting agreements with respect to the securities transferred pursuant to the Securities Transfer, to approve the transactions contemplated hereby, including the issuance of shares with respect to the Equity Line of Credit, as may be required under Delaware law, stock exchange rules, including the 20% rule, or otherwise. 5. the Note will not contain any financial covenants other than a covenant requiring that the Company and its subsidiaries maintain at all times at least (a) for the first period from Closing until the 60 th day thereafter, $1.0 million of the sum of (i) unrestricted cash and cash equivalents and (ii) availability under the AR Line (such sum, " Liquidity "), (b) for the period beginning on the 61 st day from Closing until the 180 th day thereafter, $3.0 million of Liquidity, and (c) thereafter, $5.0 million of Liquidity; 6. the Company will obtain all necessary consents and approvals in connection with the Note and the New Warrants, including approval of the Company's and the guarantors' boards of directors and shareholders; 7. the Company will not transfer any assets, pay any dividends, make any investments, enter into any affiliated transactions, repurchase stock, or make any distributions outside the ordinary course of business as set forth in the definitive documentation; 8. a customary passive holding company covenant with respect to the BRE (as defined in the Short Form Term Sheet), except in connection with any transaction in which the Note is repaid in full; and 9. all written notices regarding breaches or defaults by the Company received by the Company from License counterparties shall be provided in writing to Oramed within (i) 2 business days for any such notices relating to any Material License Agreement/Material Licenses (as defined below), and (ii) 4 business days for any such notices relating to all other license agreements or licenses. For the avoidance of doubt, the restricted debt payment covenant to be set forth in the Note will expressly permit the payment of the B. Riley Indebtedness . |
| Representations and Warranties: | Customary for transactions of this type, including without limitation, representations and warranties in respect of the Company and the Collateral. |
| Events of Default: | Customary for transactions of this type, including for the avoidance of doubt, the failure to make the payments described above under "Maturity and Repayment", in each case, subject to notice and grace periods no less favorable to the Company than those reflected in the HB Documents (as defined in the Short Form Term Sheet), and including the following events of default: (i) Company is in breach or default under any Material License Agreement or Material License (each as defined below) and the licensor has threated (in writing) to (A) terminate such Material License Agreement or Material License and such termination would be materially adverse to the Company or the Business or (B) otherwise take an action (including, without limitation, any modification, suspension or revocation of such Material License Agreement or Material License) that would be materially adverse to the Company or the Business, and, in each case, such breach (solely to the extent curable under the terms of the Material License Agreement) is not cured within the applicable cure period (or, if none is specified, within seven (7) Business Days) or otherwise waived by the licensor; or (ii) The licensor under any Material License Agreement has (A) terminated such Material License Agreement or Material License on the basis of a breach or default by the Company or otherwise for cause and such termination would be materially adverse to the Company or the Business or (B) otherwise taken any action (including, without limitation, any modification, suspension or revocation of such Material License Agreement or Material License) that is materially adverse to the Company or the Business; provided that the breaches or defaults set forth on a Schedule that either occurred and are continuing or are anticipated, in each case, as of the date of the Note will not constitute Events of Default. As used herein: (a) " Material License Agreement " means (i) those license agreements (as amended, supplemented or modified, including after Closing) set forth on a Schedule at Closing, (ii) all License Agreements disclosed as material in SEC Filings of the Company from time to time, and (iii) all other license agreements, whether now in existence or entered into following the Closing, that are or become material to the Company and the Business from time to time; and (b) " Material License " means any License (as amended, supplemented or modified, including after Closing) under a Material License Agreement. |
| Limitations on Beneficial Ownership: | Notwithstanding anything herein to the contrary the Warrants shall not be exercisable if after such exercise the Investor (or any number of investors acting in concert so as to form a "group") would beneficially own more than 9.9% of the Common Stock then outstanding (as defined under Section 13(d) of the Securities Act of 1933, as amended) (the " Beneficial Ownership Limitation "). The Investor may, at any time, elect to reduce the Beneficial Ownership Limitation from 9.9% to 4.9%. Any such reduction will be effective immediately. If the exercise of the Warrants into Common Stock would otherwise result in the Investor exceeding the Beneficial Ownership Limitation, the Company will only issue up to that number of shares that would amount to the Investor's reaching the Beneficial Ownership Limitation and the balance will be paid in cash or held in abeyance by the Company. |
| Registration Rights: | The Company shall file on or prior to the date that is 30 days following the Closing Date and have declared effective on or prior to the date that is 60 days following the Closing Date (or the date that is 90 days following the Closing Date if subject to a full review by the SEC) a registration statement on Form S-1 (or Form S-3 if available) covering the resale of the shares underlying the Warrants, to the extent such underlying shares are eligible for registration under applicable securities laws. Beginning on the date that is 30 days following the Closing Date and the date that is 60 days following the Closing Date (and the date that is 90 days following the Closing if subject to a full review by the SEC), respectively, and for every subsequent 30-day period that such registration statement has not been filed or declared effective, as applicable, the Company shall pay Investors 2.0% of the sum of the Amount Outstanding and the aggregate Exercise Price of the New Warrants for which the underlying shares of Common Stock are eligible to be registered in cash as liquidated damages. Liquidated damages for any 30-day period in which the registration statement is actually filed or declared effective will be pro-rated for that 30-day period. Any shares underlying New Warrants that were not eligible for registration at the time the above referenced registration statement on Form S-1 (or Form S-3, if applicable) is filed with the SEC will be eligible for registration under similar terms and conditions to be set forth in a registration rights agreement containing customary terms, provided that the Company will not be required to file more than two registration statements on Form S-1 in respect thereof within any 12 month period. Following the Closing, the Company shall file within fifteen (15) days following the Closing a prospectus supplement to the Registration Statement on Form S-1 (File No. 333-268603) to reflect that the Transferred Warrants have been transferred to the Investor and update the Selling Securityholder section thereof to add Investor as a Selling Securityholder. |
| Definitive Agreements: | The definitive documents in connection with the transactions will contain such additional and supplementary provisions, including, without limitation, customary representations, warranties, covenants, agreements, events of default, change of control provisions, payments and remedies, as are appropriate to preserve and protect the economic benefits intended to be conveyed to each of the Company and Investor and are customary for a transaction of this type. The closing of the Note will occur upon the satisfaction or waiver of standard closing conditions set forth in definitive documents (the " Closing " and the date on which the Closing occurs, the " Closing Date "). |
| BINDING TERMS | |
| Banks and Brokers: | The Company is responsible for payment of all banker and broker fees. The Company agrees to indemnify and hold Investor harmless from and against any loss, cost, damage or expense arising out of any claim for any item related to financing including banking fees and brokerage commissions alleged to be due on account of the placing of the investment. |
| Diligence, Expenses and Fees: | All advisor and legal fees, costs and expenses incurred by Investor in connection with the SPA and the Senior DIP shall be paid or reimbursed by the Investor; provided that, if the Closing Date occurs, the Company agrees to pay at the Closing reasonable and documented out-of-pocket costs and expenses incurred by Investor through and including the Closing Date in connection with the SPA and the Senior DIP of up to, together with the costs and expenses of Investor reimbursed by the Company pursuant to the paragraph immediately below, $2,910,000 in the aggregate (with up to $1,910,000 of such aggregate amount payable in cash upon the Closing and up to $1.0 million of such aggregate amount payable by being added to and included in the calculation of the Initial Principal Amount). If the Closing Date occurs, the Company shall pay or reimburse Investor or its designee(s) for all reasonable costs and expenses incurred in connection with Investor's preparation, negotiation and review of this Term Sheet and the definitive documentation in respect of the transactions contemplated hereby at the Closing; provided , that such amounts reimbursed by the Company, together with the amounts the Company pays to the Investor for costs and expenses incurred by Investor in connection with the SPA and the Senior DIP, shall not exceed $2,910,000 for all costs and expenses incurred through and including the Closing Date (with up to $1,910,000 of such aggregate amount payable in cash upon the Closing and up to $1.0 million of such aggregate amount payable by being added to and included in the calculation of the Initial Principal Amount). For the avoidance of doubt, all fees, costs and expenses of H.C. Wainwright & Co., Proskauer Rose LLP, Gray Reed LLP, and Richards, Layton & Finger P.A. shall be deemed reasonable for purposes of this section. Payment instructions for Investor's legal counsel and advisors will be delivered by the Investor to the Company not less than one (1) business day prior to the Closing. |
| Indemnification: | The definitive documents in connection with the transactions will contain usual and customary lender indemnification provisions for the benefit of Investor relating to losses, costs, damages or expenses relating to the transactions contemplated by this Term Sheet or any claim made by Hudson Bay or claims from third parties arising from any financing or advisory exclusivity, refusal rights, most favored nations or similar agreements or arrangements, or with respect to the SPA, the Senior DIP or the transactions contemplated thereby. |
| Equity Line of Credit, Financings: | Sorrento and the Oramed shall provide written consent to Company not less than one (1) Business Day after this term sheet is issued, providing that, notwithstanding any other agreement among the parties hereto (including, without limitation, any restrictions under the SPA), Company shall be permitted, from and after such date to incur any equity financing, including, without limitation, any advances under the Equity Lines of Credit, or any indebtedness financing that will constitute Permitted Debt under clauses (a) - (d) of the definition thereof, above (and, for the avoidance of doubt, subject to the applicable caps set forth herein on such Permitted Debt). The Company shall provide the Investor a reasonable opportunity to review and provide reasonable comments to any documentation in respect of any Permitted Debt to be incurred or guaranteed prior to the Closing Date. |
| eCap ICA: | The Company will (i) reasonably cooperate with Oramed in connection with its negotiation of the eCap ICA and (ii) use its commercially reasonable efforts to assist Oramed in finalizing the eCap ICA so that it is entered into at the Closing. |
| Governing Law: | This Term Sheet and the definitive agreements to be executed by the parties at Signing (as described below) shall be governed by and construed in accordance with the laws of the State of New York without regard to any conflict of law's provisions. The state and Federal courts residing in The Borough of Manhattan in New York City shall have exclusive jurisdiction in any action to enforce, interpret or construe any provision hereof. Each party hereby irrevocably waives any right it may have, and agrees not to request, a jury trial for the adjudication of any dispute hereunder or in connection with or arising out of this Term Sheet or any transaction contemplated hereby. |
| Miscellaneous: | This Term Sheet may be executed via electronic transmission and may be executed in separate counterparts, each of which shall be deemed to be an original and all of which together shall constitute a single instrument. In the event that any signature is delivered by an e-mail which contains a portable document format (.pdf) file of an executed signature page, or via DocuSign, Adobe Sign, or a similar electronic signature service, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof. Execution and delivery of this Term Sheet by electronic signature is legal, valid and binding for all purposes. |
[Signature Page Follows]
[Signature Page to Term Sheet]
| SCILEX HOLDING COMPANY | ||
| By: | /s/ Stephen Ma | |
| Name: | Stephen Ma | |
| Title: | Chief Accounting Officer | |
| ORAMED PHARMACEUTICALS, INC. | ||
| By: | /s/ Nadav Kidron | |
| Name: | Nadav Kidron | |
| Title: | Chief Executive Officer | |
| ORAMED PHARMACEUTICALS, INC. | ||
| By: | /s/ Josh Hexter | |
| Name: | Josh Hexter | |
| Title: | Chief Operating Officer | |
| SORRENTO THERAPEUTICS INC. | ||
| By: | /s/ Mohsin Y. Meghji | |
| Name: | Mohsin Y. Meghji | |
| Title: | Chief Restructuring Officer |