Item 1.01. Entry into a Material Definitive Agreement.
On June 17, 2014, in connection with a previously announced private offering,
TetraLogic Pharmaceuticals Corporation (the "Company") entered into a purchase
agreement (the "Purchase Agreement") with Nomura Securities International, Inc.
as representative for the initial purchasers named therein (the "Initial
Purchasers") relating to the sale by the Company of $47,000,000 in aggregate
principal amount of its 8% convertible senior notes due 2019 (the "Notes") in a
private placement to "qualified institutional buyers" in the United States as
defined in Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"). The Purchase Agreement contains customary representations,
warranties and covenants by the Company together with customary closing
conditions. Under the terms of the Purchase Agreement, the Company has agreed
to indemnify the Initial Purchasers against certain liabilities. The offering
of the Notes was completed on June 23, 2014, in accordance with the terms of the
The sale of the Notes generated net proceeds of approximately $44 million after
deducting the Initial Purchasers' discount and commission and the estimated
offering expenses payable by the Company. The Company intends to use the net
proceeds from this offering to finance clinical and preclinical development
activities for its product candidates, potential future in-licensing and for
working capital and general corporate purposes, which may include payment of
interest and acquisitions.
The Notes were issued pursuant to an Indenture, dated June 23, 2014 (the
"Indenture"), between the Company and U.S. Bank National Association, as
trustee. The Notes will mature on June 15, 2019, unless earlier converted or
repurchased. The Company will pay interest on the Notes at an annual rate of 8%
payable in cash semiannually in arrears on June 15 and December 15 of each year,
beginning on December 15, 2014.
Prior to the close of business on the business day immediately preceding
February 15, 2019, holders may convert all or a portion of their Notes only
under the following circumstances: (1) during any fiscal quarter commencing
after December 31, 2014 if, for at least 20 trading days (whether or not
consecutive) during the 30 consecutive trading day period ending on the last
trading day of the immediately preceding fiscal quarter, the last reported sale
price of the Company's common stock on such trading day is greater than or equal
to 100% of the applicable conversion price on such trading day; (2) during the
five consecutive business day period immediately following any ten consecutive
trading day period (the "measurement period") in which, for each trading day of
that measurement period, the trading price per $1,000 principal amount of Notes
for such trading day was less than 98% of the product of the last reported sale
price of the Company's common stock on such trading day and the applicable
conversion rate on such trading day, or (3) upon the occurrence of specified
corporate transactions. On and after February 15, 2019 until the close of
business on the business day immediately preceding the maturity date, holders
may convert all or a portion of their Notes at any time, regardless of the
The conversion rate for the Notes will initially equal 148.3019 shares of the
Company's common stock per $1,000 principal amount of Notes (which is equivalent
to an initial conversion price of approximately $6.74 per share of common
stock). The conversion rate will be subject to adjustment upon the occurrence
of certain specified events but will not be adjusted for accrued and unpaid
interest. In addition, upon the occurrence of a make-whole fundamental change,
the Company will, in certain circumstances, increase the conversion rate by a
number of additional shares for a holder that elects to convert its Notes in
connection with such make-whole fundamental change, except that the conversion
rate shall not exceed 163.1321 shares per $1,000 principal amount of Notes.
Upon conversion of a Note, the Company will deliver for each $1,000 principal
amount of converted Notes a number of shares of its common stock equal to the
conversion rate together with cash in lieu of any fractional share. However, if
the Company receives stockholder approval under the rules of the NASDAQ Global
Market, it will settle conversions of Notes through payment or delivery, as the
case may be, of cash, shares of its common stock or a combination thereof, at
the Company's election.
On or after December 31, 2014, if, for at least 20 trading days (whether or not
consecutive) during the 30 consecutive trading day period ending within five
trading days prior to a conversion date the last reported sale price of the
Company's common stock exceeds the applicable conversion price on each such
trading day, the Company will, in addition to the other consideration payable or
deliverable in connection with such conversion, make an interest make-whole
payment to the converting holder through the earlier of (i) the date that is
three years after the conversion date and (ii) the maturity date if the notes
had not been so converted, using a discount rate equal to 2%. The Company will
satisfy this payment obligation in shares of its common stock without any cash
payment in lieu of fractional shares except that if it obtains stockholder
approval under the rules of the NASDAQ Global Market, it may elect to make this
payment either in cash or in shares of its common stock. Until the Company
receives stockholder approval under the rules of the NASDAQ Global
Market, the number of shares it may deliver in connection with a conversion of
Notes may not exceed 163.1321 shares per $1,000
principal amount of Notes,
subject to adjustments. Notwithstanding the foregoing, the Company will not
make this interest make-whole payment to a holder who converts its Notes in
connection with a make-whole fundamental change described above.
The Company may not redeem the Notes prior to the maturity date. No sinking
fund is provided for the Notes.
Upon the occurrence of a fundamental change, holders may require the Company to
purchase all or a portion of their Notes for cash at a price equal to 100% of
the principal amount of the Notes to be purchased plus any accrued and unpaid
interest, if any, to, but excluding, the fundamental change purchase date.
The Notes will be the Company's general unsecured and unsubordinated obligations
and will rank senior in right of payment to all of the Company's indebtedness
that is expressly subordinated in right of payment to the Notes; rank equal in
right of payment to any of the Company's existing and future indebtedness and
other liabilities that are not so subordinated; be effectively subordinated to
any of the Company's future secured indebtedness to the extent of the value of
the assets securing such indebtedness; and rank structurally junior to all
indebtedness and other liabilities of the Company's subsidiaries.
The Indenture also contains certain covenants limiting the Company's ability to
. . .
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report is incorporated
herein by reference.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 of this Current Report on Form 8-K is
incorporated herein by reference.
The Notes and underlying common stock issuable upon conversion of the Notes have
not been and will not be registered under the Securities Act, and may not be
offered or sold in the United States
absent registration or an applicable
exemption from such registration requirements.
Item 9.01(d). Financial Statements and Exhibits.
4.1 Indenture, dated as of June 23, 2014, between TetraLogic
and U.S. Bank National Association
, as Trustee.
4.2 Form of 8% Convertible Senior Notes due 2019.