Exhibit 10.1

 

WARRANT EXERCISE AND OMNIBUS AMENDMENT AGREEMENT

 

This Warrant Exercise and Omnibus Amendment Agreement (this “Agreement”), dated
as of August 3, 2020, is by and between Sonnet BioTherapeutics Holdings, Inc. a
Delaware corporation (the “Company”), and the undersigned holder (the “Holder”)
of warrants to purchase shares of the Company’s common stock, par value $0.0001
per share (the “Common Stock”).

 

WHEREAS, the Holder beneficially owns in the aggregate the number of Series A
warrants to purchase Common Stock at a current exercise price of $5.3976 per
share that are exercisable until April 16, 2025, as set forth on the Holder’s
signature page hereto (the “Series A Warrants”) and the number of Series B
warrants to purchase Common Stock at an exercise price of $0.0001 per share that
are exercisable in accordance with the terms set forth in such warrants, as set
forth on the Holder’s signature page hereto (the “Series B Warrants”).

 

WHEREAS, the Holder desires to exercise such Series A Warrants in the amounts
set forth on the applicable signature pages hereto and, immediately prior to
such exercise and in consideration of the Holder’s exercise of such Series A
Warrants, the Company has agreed to (i) reduce the exercise price of such Series
A Warrants in accordance with Section 2(b) of the Series A Warrants, (ii) issue
the Holder, in addition to the shares of Common Stock to which such exercising
Holder is entitled pursuant to the exercise of the Series A Warrants, Series C
warrants in the form attached hereto as Exhibit A (the “Series C Warrants”) to
purchase 3.4331 shares of Common Stock for each share of Common Stock issued
upon such exercise of such Series A Warrants pursuant to this Agreement and
(iii) amend the Series B Warrants in accordance with the terms of the Series B
Warrants and certain other agreements between the Company and the Holder as set
forth in this Agreement. The shares of Common Stock underlying the Series A
Warrants are referred to herein as the “Warrant Shares”. The shares of Common
Stock underlying the Series C Warrants are referred to herein as the “Series C
Warrant Shares”.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for good and valuable consideration the receipt and adequacy of
which are hereby acknowledged, the Holder and the Company agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1 Definitions. Capitalized terms not defined in this Agreement shall
have the meanings ascribed to such terms in the Series C Warrants.

 

ARTICLE II

EXERCISE OF SERIES A WARRANTS

 

Section 2.1 Exercise of Warrants. (a) Subject to the conditions in Section 1(f)
of the Series A Warrants, by executing this Agreement, the Company and the
Holder hereby agree that the Holder shall be deemed to have exercised the number
of Series A Warrants set forth on the signature page hereto at, in accordance
with Section 2(b) of the Series A Warrants, a reduced exercise price per share
of $3.19 (the “Reduced Exercise Price”), for aggregate cash proceeds to the
Company in the amount set forth on the Holder’s signature page hereto, pursuant
to the terms of the Series A Warrants. The Holder shall deliver the aggregate
cash exercise price for such Series A Warrants to the bank account set forth on
the Company’s signature page hereto within two Trading Days after the date
hereof and the Company shall deliver the Warrant Shares to the Holder via the
Depository Trust Company Deposit or Withdrawal at Custodian system pursuant to
the terms of the Series A Warrants, but pursuant to DWAC instructions set forth
on the Holder’s signature page hereto. The date of the closing of the exercise
of the Series A Warrants shall be referred to as the “Closing Date”.
Notwithstanding anything to the contrary contained herein, if the Holder has
exercised all of its Series A Warrants on the Closing Date, the provisions of
clauses (b) and (c) of this Section 2.1, and the last sentence of Section 2.2,
shall not apply to the Holder.

 

 

 

 

(b) After the Closing Date, if and whenever the Holder, together with its
Attribution Parties (as defined in Section 18(f) of the Series A Warrants), can
exercise Series A Warrants for 600,000 Warrant Shares (the “Threshold Amount”)
or more in compliance with the Beneficial Ownership Limitation, the Holder
hereby covenants and agrees to promptly exercise for cash the Holder’s
Attribution Party Pro Rata Percentage (as defined below) of such Threshold
Amount of the Series A Warrants held by it by delivery of a Notice of Exercise
pursuant to the terms and conditions of the applicable Series A Warrants, at the
Reduced Exercise Price. The parties hereto further agree that the Holder may
voluntarily exercise for cash, from time to time, the Series A Warrants pursuant
to the terms and conditions of the applicable Series A Warrants at the Reduced
Exercise Price, which exercises shall count toward the number of Series A
Warrants that are required to be exercised to satisfy the Threshold Amount. As
used herein “Attribution Party Pro Rata Percentage” means the percentage
calculated by dividing (i) the total number of Series A Warrants held by the
Holder, by (ii) the total number of Series A Warrants held by the Holder and its
Attribution Parties.

 

(c) Until the date that no Series A Warrants are held by the Holder (the
“Termination Date”), the Holder covenants and agrees (i) subject to the Section
3.1(c), not to purchase (including through the exercise of any other warrants to
purchase Common Stock held by the Holder) any shares of Common Stock of the
Company, other than pursuant to exercises of Series A Warrants and (ii) not to
transfer any Series A Warrants other than to transferees who assume the
obligations under this Agreement.

 

Section 2.2 Issuance of Series C Warrants. Within 3 Trading Days of the Closing
Date, the Company shall deliver to the Holder Series C Warrants to purchase
3.4331 shares of Common Stock for each share of Common Stock that the Holder
receives upon the exercise for cash provided in Section 2.1(a) above, having an
initial exercise price per share equal to the Reduced Exercise Price. Within 3
Trading Days of any other exercise of Series A Warrants for cash, the Company
shall deliver to the Holder Series C Warrants to purchase 3.4331 shares of
Common Stock for each share of Common Stock that the Holder receives upon such
exercise for cash, having an initial exercise price per share equal to the
Reduced Exercise Price.

 

Section 2.3 Legends; Restricted Securities. (a) The Holder understands that the
Series C Warrants and the shares of Common Stock underlying Series C Warrants
are not, and may never be, registered under the Securities Act of 1933, as
amended (the “Securities Act”), or the securities laws of any state and,
accordingly, each certificate, if any, representing such securities shall bear a
legend substantially similar to the following:

 

“THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN
WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.”

 

 

 

 

(b) Certificates evidencing shares of Common Stock underlying the Series C
Warrants shall not contain any legend (including the legend set forth in Section
2.3(a) hereof), (i) while a registration statement covering the resale of such
Common Stock is effective under the Securities Act, (ii) following any sale of
such Common Stock pursuant to Rule 144, (iii) if such Common Stock is eligible
for sale under Rule 144, without the requirement for the Company to be in
compliance with the current public information required under Rule 144 as to
such Common Stock and without volume or manner-of-sale restrictions, (iv) if
such Common Stock may be sold under Rule 144 and the Company is then in
compliance with the current public information required under Rule 144 as to
such Common Stock, or (v) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the Securities and Exchange Commission
(the “Commission”)). The Company shall cause its counsel to issue a legal
opinion to the transfer agent promptly after the Delegend Date (as defined
below) if required by the Company and/or the transfer agent, or if requested by
the Holder, in connection with the removal of the legend hereunder, which
opinion shall be in form and substance reasonably acceptable to the Holder. If
such Common Stock may be sold under Rule 144 without the requirement for the
Company to be in compliance with the current public information required under
Rule 144, if such Common Stock may be sold under Rule 144 and the Company is
then in compliance with the current public information required under Rule 144
as to such Common Stock, or if such legend is not otherwise required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) then
such Common Stock shall be issued free of all legends. The Company agrees that
following the Delegend Date or at such time as such legend is no longer required
under this Section 2.3(b), it will, no later than two (2) Trading Days following
the delivery by the Holder to the Company or the transfer agent of a certificate
representing the Common Stock underlying the Series C Warrants issued with a
restrictive legend (such second Trading Day, the “Legend Removal Date”), deliver
or cause to be delivered to the Holder a certificate representing such shares
that is free from all restrictive and other legends or, at the request of the
Holder shall credit the account of the Holder’s prime broker with the Depository
Trust Company System as directed by the Holder. The Company may not make any
notation on its records or give instructions to the transfer agent that enlarge
the restrictions on transfer set forth in this Section 2.3(b). “Delegend Date”
means the earliest of the date that (a) a registration statement with respect to
the Common Stock has been declared effective by the Commission, (b) all of the
Common Stock has been sold pursuant to Rule 144 or may be sold pursuant to Rule
144 without the requirement for the Company to be in compliance with the current
public information required under Rule 144 and without volume or manner-of-sale
restrictions or (c) following the six (6) month anniversary of (I) the issuance
date of the applicable Series C Warrant if a Series C Warrant is exercised
pursuant to a cashless exercise or (II) the date of the related cash exercise of
the Series C Warrants provided, in each case that the applicable holder of the
Series C Warrants or the Common Stock, as the case may be, is not an Affiliate
of the Company, the Company is in compliance with the current public information
required under Rule 144 (“Current Public Information Requirement”) and all such
Common Stock may be sold pursuant to Rule 144 or an exemption from registration
under Section 4(a)(1) of the Securities Act without volume or manner-of-sale
restrictions; provided, further, however, that if the Company fails to comply
with the Current Public Information Requirement at any time following the
applicable six (6) month anniversary set forth above and prior to the date that
is six (6) months thereafter, the Company shall promptly provide notice to the
Holder and the Holder undertakes not to sell such Common Stock pursuant to Rule
144 until the Company notifies the Holder that it has regained compliance with
the Current Public Information Requirement; and provided further, that if a
delegending is in effect solely as the result of the effectiveness of a
registration statement covering the resale of any Common Stock, the Holder
undertakes not to sell any such Common Stock if the Holder is notified or
otherwise becomes aware that such registration statement has been withdrawn or
suspended, contains a material misstatement or omission or has become stale. The
Holder agrees with the Company that the Holder will sell or transfer any Series
C Warrants or shares of Common Stock underlying Series C Warrants pursuant to
either the registration requirements of the Securities Act, including any
applicable prospectus delivery requirements, or an exemption therefrom, and that
if such securities are sold pursuant to a registration statement, they will be
sold in compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from certificates
representing any such securities as set forth in this Section 2.3 or otherwise
is predicated upon the Company’s reliance upon this understanding.

 

Section 2.4 Amendment to Series B Warrants. Effective as of the date hereof, the
Company and the Holder agree that, in accordance with the terms of the Series B
Warrants, the Series B Warrants held by the Holder are hereby amended as
follows:

 

(a) Section 1(g) is amended and restated in its entirety to read as follows:
“Insufficient Authorized Shares. If at any time while this Warrant remains
outstanding the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to reserve for
issuance upon exercise of this Warrant at least 100% of the maximum number of
shares of Common Stock as shall from time to time be necessary to effect the
exercise of all of this Warrant then outstanding without regard to any
limitation on exercise included herein (the “Required Reserve Amount” and the
failure to have such sufficient number of authorized and unreserved shares of
Common Stock, an “Authorized Share Failure”), then the Company shall immediately
take all action necessary to increase the Company’s authorized shares of Common
Stock to an amount sufficient to allow the Company to reserve the Required
Reserve Amount for this Warrant then outstanding. Without limiting the
generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty
(60) days after the occurrence of such Authorized Share Failure, the Company
shall hold a meeting of its stockholders for the approval of an increase in the
number of authorized shares of Common Stock. In connection with such meeting,
the Company shall provide each stockholder with a proxy statement and shall use
its best efforts to solicit its stockholders’ approval of such increase in
authorized shares of Common Stock and to cause its board of directors to
recommend to the stockholders that they approve such proposal. Notwithstanding
the foregoing, if any such time of an Authorized Share Failure, the Company is
able to obtain the written consent of a majority of the shares of its issued and
outstanding shares of Common Stock to approve the increase in the number of
authorized shares of Common Stock, the Company may satisfy this obligation by
obtaining such consent and submitting for filing with the SEC an Information
Statement on Schedule 14C. In the event that upon any exercise of this Warrant,
the Company does not have sufficient authorized shares to deliver in
satisfaction of such exercise, then unless the Holder elects to void such
attempted exercise, the Holder may require the Company to pay to the Holder
within three (3) Trading Days of the applicable exercise, cash in an amount
equal to the product of (i) the number of Warrant Shares that the Company is
unable to deliver pursuant to this Section 1(g) and (ii) the highest Weighted
Average Price during the period beginning on the date of such attempted exercise
and the date that the Company makes the applicable cash payment.”

 

 

 

 

(b) In order to provide that there shall be no further resets of the number of
shares underlying the Series B Warrants, Section 2(d) is deleted in its
entirety.

 

(c) In order to fix the number of shares underlying the Series B Warrants,
Section 18(aa) is amended and restated in its entirety to read as follows:
“‘Maximum Eligibility Number’ means [_____]1 .”

 

Section 2.5 Registration. Following the Termination Date, the Company shall have
the right to file one or more registration statements to register the Series C
Warrant Shares for resale by the Holder.

 

Section 2.6 Prior Registration Rights Agreement. The Holder acknowledges and
agrees that as of the date hereof, any and all requirements for the Company to
file additional registration statements under that certain Registration Rights
Agreement, dated February 7, 2020, among the Company, the Holder and the other
parties thereto, are hereby terminated.

 

Section 2.7 Lock-Up and Reserve Amendments. The Securities Purchase Agreement,
dated February 7, 2020, among the Company, the Holder and the other parties
thereto, is hereby amended as follows:

 

  (a) Section 5(l) is amended and restated to read as follows : “Intentionally
omitted.”       (b) Section 5(n)(ii) is amended and restated to read as follows:
“Intentionally omitted.”       (c) Section 5(t) is amended and restated to read
as follows: “Intentionally omitted.”

 

Section 2.8 Filing of Form 8-K. Prior to 9:00 am ET on August 4, 2020, the
Company shall issue a Current Report on Form 8-K, reasonably acceptable to the
Holder disclosing the material terms of the transactions contemplated hereby,
which shall include this form of Agreement (the “8-K Filing”). From and after
the issuance of the 8-K Filing, the Company represents to the Holder that it
shall not be in possession of any material, nonpublic information received from
the Company, any of its Subsidiaries or any of their respective officers,
directors, employees or agents, that is not disclosed in the 8-K Filing. In
addition, effective upon the filing of the 8-K Filing, the Company acknowledges
and agrees that any and all confidentiality or similar obligations under any
agreement, whether written or oral, between the Company, any of its Subsidiaries
or any of their respective officers, directors, employees or agents, on the one
hand, and the Holder or any of its affiliates, on the other hand, shall
terminate. The Company shall not, and shall cause each of its Subsidiaries and
its and each of their respective officers, directors, employees and agents, not
to, provide the Holder with any material, nonpublic information regarding the
Company or any of its Subsidiaries from and after the date hereof without the
express prior written consent of the Holder. To the extent that the Company, any
of its Subsidiaries or any of their respective officers, directors, employees or
agents, delivers any material, non-public information to the Holder without the
Holder’s consent, the Company hereby covenants and agrees that the Holder shall
not have any duty of confidentiality with respect to, or a duty not to trade on
the basis of, such material, non-public information.

 

 

1 Note to Draft: To be the Holder’s pro rata share of 4,532,526 (2,284,800 plus
the aggregate Series B Warrants as of April 16, 2020). For the avoidance of
doubt, as already provided in Section 1(a) of the Series B Warrant, the number
of shares that the Holder may exercise is net of all previous Series B Warrant
exercises.

 

 

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Section 3.1 Representations and Warranties of the Company. The Company hereby
makes the representations and warranties set forth below to the Holder that as
of the date of its execution of this Agreement:

 

(a) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
this Agreement and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such Company and no further
action is required by such Company, its board of directors or its stockholders
in connection therewith. This Agreement has been duly executed by the Company
and, when delivered in accordance with the terms hereof will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.

 

(b) Organization. The Company is a duly organized and validly existing
corporation in good standing under the laws of the State of Delaware.

 

(c) Registration Statement. The Warrant Shares are registered for issuance on a
Form S-3 Registration Statement (the “Registration Statement”) and the Company
knows of no reasons why such registration statement shall not remain available
for the issuance of such Warrant Shares for the foreseeable future. The Company
shall use commercially reasonable efforts to keep the Registration Statement
effective and available for the issuance of the Warrant Shares underlying the
Series A Warrants until all Series A Warrants are exercised. During any time in
which the Company is unable to keep the Registration Statement effective and
available despite its commercially reasonable efforts, notwithstanding anything
to the contrary contained in this Agreement, the Holder shall not be required to
exercise any remaining Series A Warrants under this Agreement and the Holder
shall not be restricted by the provisions of clause (i) of Section 2.1(c) above.

 

(d) No Conflicts. The execution, delivery and performance of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby do not and will not: (i) conflict with or violate any provision of the
Company’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any lien upon any of the properties or
assets of the Company, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any material agreement, credit facility, debt or other material instrument
(evidencing Company debt or otherwise) or other material understanding to which
the Company is a party or by which any property or asset of the Company is bound
or affected, or (iii) conflict with or result in a violation of any law, rule,
regulation, order, judgment, injunction, decree or other restriction of any
court or governmental authority to which the Company is subject (including
federal and state securities laws and regulations), or by which any property or
asset of the Company is bound or affected.

 

(e) Disclosure. Except with respect to the material terms and conditions of the
transactions contemplated by this Agreement and any other information that will
be public after the issuance of the 8-K Filing, the Company confirms that
neither it nor any other Person acting on its behalf has provided any of Holder
or their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information. The Company understands and
confirms that the Holder will rely on the foregoing representation in effecting
transactions in securities of the Company. All of the disclosure furnished by or
on behalf of the Company to the Holder regarding the Company and its
Subsidiaries, their respective businesses and the transactions contemplated
hereby, including but not limited to the disclosure set forth in the SEC
Reports, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. As used herein, “SEC Reports” means all reports,
schedules, forms, statements and other documents required to be filed by the
Company with the Commission pursuant to the reporting requirements of the 1934
Act, including all exhibits included therein and financial statements, notes and
schedules thereto and documents incorporated by reference therein.

 

 

 

 

(f) Issuance of Securities. The issuance of the Series C Warrants and amendments
to the Series A and Series B Warrants are duly authorized and, upon issuance in
accordance with the terms of this Agreement, the Series C Warrants and
additional Series B Warrants shall be validly issued and free from all
preemptive or similar rights (except for those which have been validly waived
prior to the date hereof), taxes, liens and charges and other encumbrances with
respect to the issue thereof. As of the Closing Date, a number of shares of
Common Stock shall have been duly authorized and reserved for issuance which
equals or exceeds (i) the maximum number of Series C Warrant Shares issuable
upon exercise of the Series C Warrants (without taking into account any
limitations on the exercise of the Series C Warrants set forth therein) and (ii)
the maximum number of shares (the “Series B Warrant Shares”) of Common Stock
issuable upon exercise of the Series B Warrants (without taking into account any
limitations on the exercise of the Series B Warrants set forth therein). Upon
exercise of the Series C Warrants and Series B Warrants in accordance with the
Series C Warrants and Series B Warrants, respectively, the Series C Warrant
Shares and Series B Warrant Shares when issued will be validly issued, fully
paid and nonassessable and free from all preemptive or similar rights, taxes,
liens, charges and other encumbrances with respect to the issue thereof, with
the holders being entitled to all rights accorded to a holder of Common Stock.
Assuming the accuracy of each of the representations and warranties set forth in
Section 3.2 of this Agreement, the offer and issuance by the Company of the
Series C Warrants and Series B Warrants is exempt from registration under the
1933 Act.

 

(g) No General Solicitation. Neither the Company, nor any of its Subsidiaries or
affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the Series C Warrants and
Series B Warrants.

 

(h) No Integrated Offering. None of the Company, its Subsidiaries or any of
their affiliates, nor any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of the
issuance of any of the Series C Warrants, Series B Warrants or the shares of
Common Stock underlying the Series C Warrants and Series B Warrants
(collectively, the “Securities”) under the 1933 Act, whether through integration
with prior offerings or otherwise, or cause this offering of the Securities to
require approval of shareholders of the Company for purposes of the 1933 Act or
any applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated for
quotation. None of the Company, its Subsidiaries, their affiliates nor any
Person acting on their behalf will take any action or steps that would require
registration of the issuance of any of the Securities under the 1933 Act or
cause the offering of any of the Securities to be integrated with other
offerings for purposes of any such applicable shareholder approval provisions.

 

(i) No Disqualification Events. With respect to Securities to be offered and
sold hereunder in reliance on Rule 506(b) under the 1933 Act (“Regulation D
Securities”), none of the Company, any of its predecessors, any affiliated
issuer, any director, executive officer, other officer of the Company
participating in the offering hereunder, any beneficial owner of 20% or more of
the Company’s outstanding voting equity securities, calculated on the basis of
voting power, nor any promoter (as that term is defined in Rule 405 under the
1933 Act) connected with the Company in any capacity at the time of sale (each,
an “Issuer Covered Person” and, together, “Issuer Covered Persons”) is subject
to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to
(viii) under the 1933 Act (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has
exercised reasonable care to determine whether any Issuer Covered Person is
subject to a Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and has furnished
to the Holder a copy of any disclosures provided thereunder.

 

(j) Issued and Outstanding Shares. As of the date hereof, the Company has issued
and outstanding 11,424,039 shares of Common Stock.

 

Section 3.2 Representations and Warranties of the Holder. The Holder hereby
makes the representations and warranties set forth below to the Company that as
of the date of its execution of this Agreement.

 

(a) Due Authorization. The Holder represents and warrants that (i) the execution
and delivery of this Agreement by it and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
action on its behalf and (ii) this Agreement has been duly executed and
delivered by the Holder and constitutes the valid and binding obligation of the
Holder, enforceable against it in accordance with its terms.

 

 

 

 

(b) No Conflicts. The Holder represents and warrants that the execution,
delivery and performance of this Agreement by the Holder and the consummation by
the Holder of the transactions contemplated hereby do not and will not: (i)
conflict with or violate any provision of the Holder’s organizational or charter
documents, or (ii) conflict with or result in a violation of any agreement, law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority which would interfere with the ability of
the Holder to perform its obligations under this Agreement.

 

(c) Access to Information. The Holder acknowledges that it has had the
opportunity to review this Agreement and the SEC Reports and has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the exercise of the Series A Warrants and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
its financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. The Holder
acknowledges and agrees that neither Chardan Capital Markets, LLC (the
“Advisor”) nor any Affiliate of the Advisor has provided the Holder with any
information or advice with respect to the Securities nor is such information or
advice necessary or desired. Neither the Advisor nor any Affiliate has made or
makes any representation as to the Company or the quality of the securities
issued and issuable hereunder and the Advisor and any Affiliate may have
acquired non-public information with respect to the Company which the Holder
agrees need not be provided to it. In connection with the issuance of the
securities hereunder to the Holder, neither the Advisor nor any of its
Affiliates has acted as a financial advisor or fiduciary to the Holder.

 

(d) Holder Status. The Holder represents and warrants that is an “accredited
investor” as defined in Rule 501 under the Securities Act.

 

(e) Knowledge. The Holder, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, and has so evaluated the merits and
risks of such investment. The Holder is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.

 

ARTICLE IV

MISCELLANEOUS

 

Section 4.1 [Intentionally Omitted].

 

Section 4.2 Subsequent Equity Sales.

 

(a) From the date hereof until the earlier of (i) 90 days after the Closing Date
and (ii) the Trading Day following the date that the Common Stock’s Weighted
Average Price exceeds $8.00 (subject to adjustment for forward and reverse stock
splits and the like) for a period of 5 consecutive Trading Days (the “Trigger
Date”), neither the Company nor any Subsidiaries thereof shall, directly or
indirectly, file any registration statement or any amendment or supplement
thereto, or cause any registration statement to be declared effective by the
Commission, or grant any registration rights to any Person that can be exercised
prior to such time as set forth above, other than pursuant to the terms of
Section 2.5 hereof. From the date hereof until the Trigger Date, the Company
shall not, (1) directly or indirectly, offer, sell, grant any option to
purchase, or otherwise dispose of (or announce any offer, sale, grant or any
option to purchase or other disposition of) any of its or its Subsidiaries’
debt, equity or equity equivalent securities, including without limitation any
debt, preferred stock or other instrument or security that is, at any time
during its life and under any circumstances, convertible into or exchangeable or
exercisable for the Company’s Common Stock or Common Stock Equivalents (as
defined below), including, without limitation, any rights, warrants or options
to subscribe for or purchase the Company’s Common Stock or directly or
indirectly convertible into or exchangeable or exercisable for the Company’s
Common Stock at a price which varies or may vary with the market price of the
Company’s Common Stock , including by way of one or more reset(s) to any fixed
price (any such offer, sale, grant, disposition or announcement being referred
to as a “Subsequent Placement”), (2) enter into, or effect a transaction under,
any agreement, including, but not limited to, an equity line of credit or
“at-the-market” offering, whereby the Company may issue securities at a future
determined price or (3) be party to any solicitations, negotiations or
discussions with regard to the foregoing. As used herein “Common Stock
Equivalents” means any securities of the Company or the Subsidiaries which would
entitle the holder thereof to acquire at any time Common Stock, including,
without limitation, any debt, preferred stock, right, option, warrant or other
instrument that is at any time convertible into or exercisable or exchangeable
for, or otherwise entitles the holder thereof to receive, Common Stock.

 

 

 

 

(b) Until the date that is one (1) year following the Closing Date, the Company
and each Subsidiary shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Placement involving a Variable Rate
Transaction other than, on or after the date that is six (6) months following
the Closing Date, with respect to (i) the Common Stock Purchase Agreement dated
August 6, 2019 between the Company GEM Global Yield Fund LLC SCS, as amended,
provided that such Common Stock Purchase Agreement is not amended, modified or
changed on or after the date hereof and (ii) an “at-the-market” offering.
“Variable Rate Transaction” means a transaction in which the Company or any
Subsidiary (i) issues or sells any Convertible Securities either (A) at a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of the Common
Stock at any time after the initial issuance of such Convertible Securities, or
(B) with a conversion, exercise or exchange price that is subject to being reset
at some future date after the initial issuance of such Convertible Securities or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of the Company or the market for the Common Stock, other
than pursuant to a customary “weighted average” anti-dilution provision or (ii)
enters into any agreement (including, without limitation, an equity line of
credit or an “at-the-market” offering) whereby the Company or any Subsidiary may
sell securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Holder shall be entitled to obtain
injunctive relief against Company or any Subsidiaries to preclude any such
issuance, which remedy shall be in addition to any right to collect damages for
an actual breach of this Section 4.2(b).

 

(c) Notwithstanding the foregoing, this Section 4.2 shall not apply in respect
of an Exempt Issuance, except that no Variable Rate Transaction shall be an
Exempt Issuance. “Exempt Issuance” means the issuance of (a) shares of Common
Stock or options to employees, officers or directors of the Company pursuant to
any share or option plan duly adopted for such purpose, 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 for services rendered to the Company, (b) securities upon the exercise
or exchange of or conversion of securities exercisable or exchangeable for or
convertible into shares of Common Stock issued and outstanding on the date of
this Agreement, provided that such securities have not been amended since the
date of this Agreement to increase the number of such securities or to decrease
the exercise price, exchange price or conversion price of such securities (other
than in connection with stock splits or combinations) or to extend the term of
such securities and (c) securities issued pursuant to acquisitions or strategic
transactions approved by a majority of the disinterested directors of the
Company, provided that such securities are issued as “restricted securities” (as
defined in Rule 144) and carry no registration rights that require or permit the
filing of any registration statement in connection therewith during the
prohibition period in Section 4.2(a) and provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities.

 

Section 4.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be made by email to the
email address of the Holder set forth on Holders’ signature page.

 

Section 4.4 Survival. All warranties and representations (as of the date such
warranties and representations were made) made herein or in any certificate or
other instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the parties hereto and shall survive the
issuance of the Series C Warrants. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties;
provided however that no party may assign this Agreement or the obligations and
rights of such party hereunder without the prior written consent of the other
parties hereto.

 

 

 

 

Section 4.5 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature 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 facsimile signature page
were an original thereof.

 

Section 4.6 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

 

Section 4.7 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined pursuant to
Section 10 of the Series C Warrants.

 

Section 4.8 Entire Agreement. The Agreement, together with the exhibits and
schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

 

Section 4.9 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

 

Section 4.10 Fees and Expenses. Except as expressly set forth herein, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the delivery of any Warrant Shares.

 

Section 4.11 Equal Treatment of Series C Warrant Holders. No consideration
(including any modification of this Agreement or the Series C Warrants) shall be
offered or paid to any holder of Series C Warrants to amend or consent to a
waiver or modification of any provision of this Agreement or the Series C
Warrants unless the same consideration is also offered to all of the holders of
the Series C Warrants. For clarification purposes, this provision constitutes a
separate right granted to each holder of Series C Warrants by the Company and
negotiated separately by each holder of the Series C Warrants, and is intended
for the Company to treat the holders of Series C Warrants as a class and shall
not in any way be construed as the holders of Series C Warrants acting in
concert or as a group with respect to the purchase, disposition or voting of
Securities or otherwise.

 

(remainder of page intentionally left blank; signature page follows)

 

 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Warrant Exercise
Agreement as of the date first written above.

 

COMPANY:   SONNET BIOTHERAPEUTICS HOLDINGS, INC.       By:
                                Name:   Title:  

 

Bank Account and Wire Instructions

[insert]

 

 

 

 

[HOLDER SIGNATURE PAGES TO SONNET BIOTHERAPEUTICS HOLDINGS, INC. 

WARRANT EXERCISE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.

 

Name of Holder:  

 

Signature of Authorized Signatory of Holder:  

 

Name of Authorized Signatory:  

 

Title of Authorized Signatory:  

 

Email Address of Holder:  

 

Number of Series A Warrants held:   Number of Series B Warrants held:   Number
of Series A Warrants deemed exercised:  

 

Aggregate Exercise Price of Series A Warrants deemed exercised:   Warrant Shares
underlying Series A Warrants deemed exercised:  

 

Instructions for Warrant Shares to be issued upon initial exercise of Series A
Warrants:

 

 

 

Number of Series C Warrants to be issued to Holder upon deemed exercise:  

 

Address for Delivery of Series C Warrants for Holder:        

 

 

 

 

Exhibit A

 

Series C Warrant