Item 1.01 Entry Into a Material Definitive Agreement.
On October 29, 2019, Tetraphase Pharmaceuticals, Inc. (Tetraphase or the Company) entered into a securities purchase agreement
(the Securities Purchase Agreement) with a healthcare focused institutional investor (the Purchaser), pursuant to which the Company agreed to sell, in a registered direct offering priced at-the-market, (i) 300,000 shares of common stock and accompanying warrants to purchase an aggregate of 300,000 shares of common stock (the Common Stock Warrants), and (ii) pre-funded warrants to purchase up to an aggregate of 1,830,493 shares of common stock (the Pre-Funded Warrant) and accompanying Common Stock Warrants to
purchase an aggregate of 1,830,493 shares of common stock. Each share of common stock and accompanying Common Stock Warrant are being sold together at a combined price of $3.755, and each Pre-Funded Warrant
and accompanying Common Stock Warrant are being sold together at a combined price of $3.745. The offering is expected to close on or about November 1, 2019, subject to the satisfaction of customary closing conditions.
The gross proceeds to the Company from the offering, before deducting the placement agents fees and other estimated offering expenses payable by the
Company, are approximately $8.0 million. The Company intends to use the net proceeds from the offering for the commercialization of Xerava as well as for working capital and other general corporate purposes.
Each Pre-Funded Warrant will have an exercise price per share of common stock equal to $0.01 per share. The Pre-Funded Warrants are exercisable at any time after their original issuance until all of the Pre-Funded Warrants are exercised in full. Each Common Stock Warrant will be
immediately exercisable and will have an exercise price per share of common stock equal to $3.62 and will expire five years from the date of issuance. The Pre-Funded Warrant and the Common Stock Warrant each
provide that (1) the Company may not effect the exercise any such warrant, and a holder will not be entitled to exercise any portion of any such warrant, if, upon giving effect to such exercise, (a) the aggregate number of shares of the
Companys common stock beneficially owned by the holder (together with its affiliates) would exceed 4.99% of the number of shares of the Companys common stock outstanding immediately after giving effect to the exercise, or (b) the
combined voting power of the Companys securities beneficially owned by the holder (together with its affiliates) would exceed 4.99% of the combined voting power of all of the Companys securities then outstanding immediately after giving
effect to the exercise, as such percentage ownership is determined in accordance with the terms of such warrant, which percentage may be changed at the holders election to a higher or lower percentage not in excess of 9.99% upon 61 days
notice to the Company subject to the terms of such warrants, and (2) that such warrants may not be exercised to the extent that such exercise would result in the Purchaser and its affiliates beneficially owning more than 19.99% of the
outstanding common stock or outstanding voting power of the Company (including shares of common stock issuable upon exercise of the Common Stock Warrants and Pre-Funded Warrants held by them).
In addition, in certain circumstances, upon a fundamental transaction, the holder of Common Stock Warrants will have the right to require us to repurchase
such warrants at their fair value using the Black Scholes option pricing formula; provided that (1) such holder may not require us or our successor entity to repurchase such warrants for the Black Scholes value in connection with a fundamental
transaction that is not approved by our board of directors, and therefore not within our control, and (2) in the event that the alternate consideration payable to holders of the Companys common stock in such fundamental transaction
consists of equity securities of the successor or acquirer that are quoted or listed on a nationally recognized securities exchange, then the holder of the warrants shall only be entitled to receive the same type or form of consideration (and in the
same proportion), determined in accordance with the Black Scholes option pricing formula.
The securities are being issued pursuant to an effective
registration statement on Form S-3 that the Company filed with the Securities and Exchange Commission (SEC) on January 25, 2018 (File
No. 333-222699), and a base prospectus and prospectus supplement thereunder.
The Purchase Agreement contains
customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Purchaser, including for liabilities arising under the Securities Act of 1933, as amended, other
obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Purchase Agreement were made only for the purposes of such agreement and as of specific dates, were solely for the benefit of the
parties to such agreement, and may be subject to limitations agreed upon by the contracting parties.