Document:

ttph-ex1013_17.htm

		
	

	
Tetraphase Pharmaceuticals, Inc.

480 Arsenal Street, Suite 110

Watertown, MA 02472

 

 

Exhibit 10.13

 
December 21, 2017
Larry Tsai

[address]

[address]

 

Dear Larry:

On behalf of Tetraphase Pharmaceuticals, Inc. (the "Company"), I am very pleased to present you with this amended and restated offer letter in connection with our offer to promote you to the position of Chief Medical Officer.  The purpose of this letter is to summarize the terms of your continued employment with the Company in this new appointment, should you accept our offer.

	
 
	
1.
	
Employment.  Effective December 29, 2017 (the “Effective Date”), you will be employed to serve on a full-time basis in the position of Chief Medical Officer, reporting directly to me as President and Chief Executive Officer, Tetraphase Pharmaceuticals, Inc.   As Chief Medical Officer, you will have such duties and responsibilities as are customary for such position and such other duties and responsibilities as may be assigned to you by the Company.  You agree to continue to devote your full business time, best efforts, skill, knowledge, attention, and energies to the advancement of the Company's business and interests and to the performance of your duties and responsibilities as an employee of the Company.  

	
 
	
2.
	
Base Compensation.  As of the Effective Date, your base salary will be increased to the rate of $15,577 per bi-weekly pay period (equivalent to an annualized rate of $405,000), less all applicable federal, state, and local taxes and withholdings, such base salary to be paid in installments in accordance with the Company’s standard payroll practices.  Such base salary may be adjusted from time to time in accordance with normal business practices and in the sole discretion of the Company.

	
 
	
3.
	
Bonus.  If the Board of Directors approves an annual bonus for fiscal year 2018 or any fiscal year thereafter, you may be eligible for a discretionary retention and performance bonus award of up to 40% of your annualized base salary in such year (the “Target Bonus”).  The bonus award, if any, will be based on both individual and corporate performance and will be determined by the Board of Directors of the Company in its sole discretion.  In any event, in order to be eligible for and to earn a bonus, if any, you must be an active employee of the Company on the date such bonus is distributed, as it also serves as an incentive to remain employed by the Company.  Any bonus that the Board determines to be payable for a fiscal year will be paid before March 15th of the next fiscal year.

	
 
	
4.
	
Benefits.  You will continue to participate in any and all benefit programs that the Company establishes and makes available to its employees from time to time, provided that you are eligible under (and subject to all provisions of) the plan documents governing those programs.  Such benefits may include: participation in group medical and dental insurance programs, term life insurance, long-term disability insurance and participation in the Company's 401(k) plan.  The 

 

 

 

 

	
 
		
benefits made available by the Company, and the rules, terms, and conditions for participation in such benefit programs, may be changed by the Company at any time and from time to time without advance notice (other than as required by such programs or under law).  With respect to vacation time, you will begin to accrue vacation at 1.67 days/month or the equivalent of a maximum of 4 weeks per calendar year.  Vacation may be taken at such times as may be approved by the Company.  Your accrual and use of vacation time will also be subject to any and all vacation policies and procedures that the Company establishes from time to time.

	
 
	
5.
	
Stock Incentive Program.  You will continue to be eligible to participate in the Company's stock incentive program.  In connection with your acceptance of this promotion and subject to approval by the Company's Board of Directors, the Company will grant to you an option to purchase 150,000 shares of the Company's Common Stock (subject to adjustment for stock splits, combinations, or other recapitalizations) which will vest (i.e., become exercisable) 6.25% of the shares every three-months, subject to your continued employment by the Company.  The option exercise price will be equal to the fair market value of one share of Common Stock on the date of grant of the option as determined by the Company's Board of Directors.  In addition, if you accept this offer of promotion to Chief Medical Officer and also subject to approval of the Board of Directors, the Company will grant you 40,000 Performance Based Restricted Stock Units (PRSUs).  The option grant and the PRSUs will be issued pursuant to the Company’s 2013 Stock Incentive Plan, the stock option agreement covering the option and the Performance Based Restricted Stock Unit agreement covering the PRSUs.

	
 
	
6.
	
At-Will Employment.  This letter shall not be construed as an agreement, either express or implied, to continue to employ you for any stated term, and shall in no way alter the Company’s policy of employment at will, under which both you and the Company remain free to terminate the employment relationship at any time, for any reason, with or without cause, and with or without notice.  Although your job duties, title, compensation and benefits, as well as the Company's personnel policies and procedures, may change from time to time, the "at-will" nature of your employment may only be changed by a written agreement signed by you and the principal executive officer of the Company, which expressly states the intention to modify the at-will nature of your employment.  Similarly, nothing in this letter shall be construed as an agreement, either express or implied, to pay you any compensation or grant you any benefit beyond the end of your employment with the Company, except to the extent explicitly set forth in Section 7 hereof. 

	
 
	
7.
	
Severance Benefits.  Notwithstanding your status as an at-will employee, in the event that the Company (or, as may be applicable, an acquiring or succeeding company) terminates your employment without “Cause,” or you terminate your employment with the Company (or, as may be applicable, an acquiring or succeeding company) for “Good Reason” (each term as defined in Exhibit A and in either case a “Qualifying Termination”), you will be eligible for the benefits outlined in either sub-section A or subsection B (the “Severance Benefits”), subject to the terms set forth in this letter agreement:

(A)If a Qualifying Termination occurs prior to or more than twelve months following a Change in Control Event (as defined in Exhibit A), the Company will provide to you as severance pay an amount equal to twelve (12) months of your then-current base salary (subject to all applicable federal, state and local taxes and withholdings and payable over a twelve -month 

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period in accordance with the Company’s regular payroll practices).  In addition, should you timely elect and be eligible to continue receiving group medical coverage pursuant to applicable “COBRA” law, and so long as the Company can provide such benefit without violating the nondiscrimination requirements of applicable law, the Company will, until the earlier of (x) the date that is twelve (12) months following your termination date and (y) the date you (or, as applicable, your beneficiaries) become eligible for coverage through a new employer, continue to pay the share of the premium for such coverage that is paid by the Company for active and similarly-situated employees who receive the same type of coverage (provided that the Company will not pay more each month than the monthly amount it was paying for your coverage when your employment ended).  The remaining balance of any premium costs shall timely be paid by you on a monthly basis (or such other basis as is required by the Company) for as long as, and to the extent that, you remain eligible for COBRA continuation.  

(B)If a Qualifying Termination occurs upon or during the twelve month period commencing upon a Change in Control Event, the Company will provide to you as severance pay an amount equal to the sum of (i) twelve (12) months of your then-current base salary (subject to all applicable federal, state and local taxes and withholdings and payable over a twelve -month period in accordance with the Company’s regular payroll practices) and (ii) an amount equal to 100% of your then-current annual Target Bonus (subject to all applicable federal, state and local taxes and withholdings and payable in a lump sum).  In addition, should you timely elect and be eligible to continue receiving group medical coverage pursuant to applicable “COBRA” law, and so long as the Company can provide such benefit without violating the nondiscrimination requirements of applicable law, the Company will, until the earlier of (x) the date that is twelve (12) months following your termination date and (y) the date you (or, as applicable, your beneficiaries) become eligible for coverage through a new employer, continue to pay the share of the premium for such coverage that is paid by the Company for active and similarly-situated employees who receive the same type of coverage (provided that the Company will not pay more each month than the monthly amount it was paying for your coverage when your employment ended).  The remaining balance of any premium costs shall timely be paid by you on a monthly basis (or such other basis as is required by the Company) for as long as, and to the extent that, you remain eligible for COBRA continuation.  Further, the vesting of all stock options held by you on the date of termination shall be accelerated, such that such stock options shall become 100% fully vested and exercisable.

Your receipt of severance pay and benefits as set forth in this Section 7 is conditioned upon your full compliance with the Non-Solicitation Agreement (as defined in Section 8 below), your timely execution of a separation and release of claims agreement prepared by and satisfactory to the Company (which will include, at a minimum, a release by you of all releasable claims, non-disparagement and cooperation obligations, and reaffirmation of your continuing obligations under the Non-Solicitation Agreement) (the “Release”), and any applicable revocation period with respect to the Release expiring without revocation within 60 days (or such shorter period as may be directed by the Company) following your termination date.  If the Release has been executed and any applicable revocation period has expired prior to the 60th day following your termination, then the severance payments and benefits shall commence (or in the case of any lump sum payment, be paid) on the first regular pay date after any applicable revocation period has expired (but no earlier than the 30th day following your termination date); provided, however, that if the 60th day following your termination occurs in the calendar year following the 

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calendar year during which your termination occurs, then the severance payments shall commence (or in the case of any lump sum payment, be paid) no earlier than January 1 of such subsequent calendar year. The provision of severance pay and benefits hereunder shall be subject to the terms and conditions set forth in Section 11 hereto. In the event you breach your obligations under the Release or the Non-Solicitation Agreement, you will have no right to receive, and the Company shall not provide to you, any severance pay or benefits following the date of such breach. Such cessation of payments and benefits shall be in addition to, and not in lieu of, any and all other remedies, whether at law or in equity, available to the Company for such breach.

	
 
	
8.
	
Non-Solicitation, Non-Disclosure and Developments Agreement.  As a condition of your continued employment and promotion, you reaffirm your obligations under the Non-Solicitation, Non-Disclosure and Developments Agreement (the “Non-Solicitation Agreement”) which you previously signed in connection with your employment, a copy of which is enclosed with this letter.

	
 
	
9.
	
Company Policies and Procedures.  As an employee of the Company, you remain required to comply with all Company policies and procedures.  Violations of the Company's policies may lead to immediate termination of your employment.  Further, the Company's premises, including all workspaces, furniture, documents, and other tangible materials, and all information technology resources of the Company (including computers, data and other electronic files, and all internet and email) remain subject to oversight and inspection by the Company at any time.  Company employees should have no expectation of privacy with regard to any Company premises, materials, resources, or information.

	
 
	
10.
	
Other Agreements and Governing Law.  You represent that you are not bound by any employment contract, restrictive covenant or other restriction preventing you from continuing employment with or carrying out your responsibilities for the Company hereunder, or which is in any way inconsistent with the terms of this letter.  Please note that this amended and restated offer letter is your formal offer of continued employment and supersedes any and all prior or contemporaneous agreements, discussions and understandings, whether written or oral, relating to the subject matter of this letter or your employment with the Company, including without limitation the previous offer letter between you and the Company dated March 14, 2014.  The resolution of any disputes under this letter will be governed by Massachusetts law.

	
 
	
11.
	
Section 409A of the Code.  

Subject to the provisions in this Section 11, any severance payments or benefits under this letter will begin only upon the date of your “separation from service” (determined as set forth below) which occurs on or after the date of termination of your employment. The following rules shall apply with respect to distribution of the payments and benefits, if any, to be provided to you under this letter. 

(a) It is intended that each installment of the severance payments and benefits provided under this letter shall be treated as a separate “payment” for purposes of Section 409A of the Internal Revenue Code and the guidance issued thereunder (“Section 409A”). Neither you nor the Company will have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A. 

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(b) The determination of whether and when your separation from service from the Company has occurred shall be made and in a manner consistent with and based on the presumptions set forth in, Treasury Regulation Section 1.409A-1(h). Solely for purposes of this paragraph, “Company” shall include all persons with whom the Company would be considered a single employer under Section 414(b) and 414(c) of the Internal Revenue Code. 

(c) If, as of the date of your separation from service from the Company, you are not a “specified employee” (within the meaning of Section 409A), then each installment of the severance payments and benefits provided under this letter shall be made on the dates and terms set forth in this letter. 

(d) If, as of the date of your separation from service from the Company, you are a “specified employee” (within the meaning of Section 409A), then: 

(i) Each installment of the severance payments and benefits due under this letter that, in accordance with the dates and terms set forth herein, will in all circumstances, regardless of when your separation from service occurs, be paid within the short-term deferral period (as defined under Section 409A) shall be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A and shall be paid on the dates and terms set forth in this letter; and 

(ii) Each installment of the severance payments and benefits due under this letter that is not described in Section 11(d)(i) and that would, absent this subsection, be paid within the six-month period following your separation from service from the Company shall not be paid until the date that is six months and one day after such separation from service (or, if earlier, your death), with any such installments that are required to be delayed being accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following your separation from service and any subsequent installments, if any, being paid in accordance with the dates and terms set forth herein; provided, however, that the preceding provisions of this sentence shall not apply to any installment of payments or benefits if and to the maximum extent that that such installment is deemed to be paid under a separation pay plan that does not provide for a deferral of compensation by reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary separation from service). Any installments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of your second taxable year following the taxable year in which the separation from service occurs. 

(e) All reimbursements and in-kind benefits provided under this letter shall be made or provided in accordance with the requirements of Section 409A to the extent that such reimbursements or in-kind benefits are subject to Section 409A, including, where applicable, the requirements that (i) any reimbursement is for expenses incurred during your lifetime (or during a shorter period of time specified in your offer letter), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred and (iv) the right to reimbursement is not subject to set off or liquidation or exchange for any other benefit. 

(f) Notwithstanding anything herein to the contrary, the Company makes no representation or warranty and shall have no liability to you or to any other person if the payments and benefits 

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provided in this letter are determined to constitute deferred compensation subject to Section 409A but that do not satisfy an exemption from, or the conditions of, that section.

 

If you agree with the terms of your continued employment in connection with your appointment to the position of Chief Medical Officer, as set forth herein, please sign the enclosed duplicate of this letter in the space provided below and return it to me.  This offer is effective through December 28, 2017.  If you do not accept this offer by such date, it will be deemed revoked.   

On behalf of Tetraphase Pharmaceuticals, Inc.

Guy Macdonald
President and Chief Executive Officer 

 

The foregoing correctly sets forth the terms of my continued at-will employment by the Company.  I am not relying on any representations pertaining to my employment other than those set forth above.

 

		
	
/s/ Larry Tsai                                        
Larry Tsai
	
Date: December 27, 2017                          

	
 
	
 

 

 

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EXHIBIT A

Definitions

For the purposes of this amended and restated offer letter:

(1)  “Cause” shall mean: (a) a good faith finding by the Board of Directors of the Company in its sole discretion that you have (i) failed or refused to substantially perform your assigned duties for the Company, or failed or refused to comply in any material respect with the Company’s material policies or procedures, which failure or violation is not cured (provided that the Company deems that such failure or violation is curable) within 20 days following written notice from the Company to you specifying the duties not performed or the nature of the violation, (ii) engaged in dishonesty, gross negligence or misconduct, or (iii) breached any employment agreement, confidentiality agreement, non-solicitation agreement, or other agreement entered into between you and the Company; or (b) your conviction of, or the entry of a pleading of guilty or nolo contendere by you to, any crime involving dishonesty or moral turpitude or any felony.

(2)  “Change in Control Event” shall mean

(a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership of any capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 promulgated under the Exchange Act) 50% or more of the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control Event: (i) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), or (ii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or 

(b) the consummation of a merger, consolidation, reorganization, recapitalization or statutory share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership of the Outstanding Company Voting Securities immediately prior to such Business Combination: 

provided that, where required to avoid additional taxation under Section 409A, the event that occurs must also be a “change in the ownership or effective control of a corporation, or a change in the 

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ownership of a substantial portion of the assets of a corporation” as defined in Treasury Regulation Section 1.409A-3(i)(5). 

 

(3)  “Good Reason” shall occur if a Cause event has not occurred or has not been cured, to the extent curable, and if (x) you provide written notice to the Company of the event or change you consider to constitute “Good Reason” within 30 calendar days following its occurrence, (y) you provide the Company with a period of at least 30 calendar days to cure the event or change, and (z) the “Good Reason” persists following the cure period, and you actually resign within 60 calendar days following the event or change. An event or change constituting “Good Reason” shall be limited to any of the following that occur without your prior written consent: (a) a material diminution of your duties, authority or responsibilities, provided, however, that the assignment of different duties to you by the Company involving a reasonably comparable level of responsibility shall not, by itself, constitute “Good Reason,” and provided, further, that a change in your duties, authority or responsibilities solely as a result of the Company’s acquisition by or merger with another entity, if you continue to have a comparatively senior role relative to the Company or its successor following such event, shall not, by itself, constitute “Good Reason”; (b) a material diminution in your base compensation, or (c) the relocation of the principal place at which you provide services to the Company by at least 50 miles and to a location such that your daily commuting distance is increased.  

 

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Exhibit 10.22

 

Confidential Materials omitted and filed separately with the 

Securities and Exchange Commission. Double asterisks denote omissions.

 

 
 
 

Fourth Amendment to License Agreement

This Fourth Amendment to License Agreement (this “Fourth Amendment”) is entered into as of this 5th day of December, 2017 (the “Fourth Amendment Effective Date”), by and between Tetraphase Pharmaceuticals, Inc., a Delaware corporation, with its principal place of business at 480 Arsenal Street, Suite 110, Watertown, MA 02472 (“Licensee”) and President and Fellows of Harvard College, Richard A. and Susan F. Smith Campus Center, Suite 727, 1350 Massachusetts Avenue, Cambridge, MA 02138 (“Harvard”).

WHEREAS, the parties entered into a License Agreement as of August 3, 2006 (as previously amended, the “License Agreement”), pursuant to which Harvard granted to Licensee an exclusive license under Harvard Patent Rights and Harvard’s interest in Joint Patent Rights (as such terms are defined in the License Agreement);

WHEREAS, on January 31, 2007, the parties amended the License Agreement (the “First Amendment”) to include a new patent application [**] under Harvard Patent Rights;

WHEREAS, on April 6, 2010, the parties amended the License Agreement (the “Second Amendment”) to include the Additional Patent Application (as defined in the Second Amendment) under Harvard Patent Rights; 

WHEREAS, the parties agreed in a letter dated June 2, 2010 to include [**] for all purposes of the License Agreement as Additional Patent Rights (as defined in the Second Amendment);

WHEREAS, on February 18, 2011, the parties amended the License Agreement (the “Third Amendment”) to include [**] under Additional Patent Rights; and

WHEREAS, the parties wish to amend Licensee’s payment obligations under the License Agreement to assist Licensee in its efforts to enter into one or more partnerships for the development and/or commercialization of products based on the Harvard Patent Rights;

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

	
 
	
1.
	
Capitalized terms used in this Fourth Amendment that are not defined herein shall have the meanings set forth in the License Agreement.

 

	
 
	
2.
	
Section 1.3 of the License Agreement is replaced in its entirety with the following:

1.3.  “Combination Product” shall mean a pharmaceutical preparation that includes one or more Non-Covered Components in addition to one or more Covered Components.  All references to Licensed Product or Royalty Product, as applicable, in this Agreement shall be deemed to include Combination Product.

 

 

 

 

	
 
	
3.
	
Section 1.4 of the License Agreement is replaced in its entirety with the following:

1.4.  “Covered Component” shall mean any compound (or part thereof) the production, making, use, sale or importation of which (a) falls within the scope of a Valid Claim or (b) would infringe any claim (other than any claim that has at any time been rejected by any patent examiner) made at any time in any patent or patent application within the Licensed Patent Rights as if such claim were as of such time a Valid Claim. 

	
 
	
4.
	
Section 1.13 of the License Agreement is hereby replaced in its entirety with the following: 

1.13.  “Infringed Patent” shall mean an issued and unexpired patent (a) that has not been abandoned, held invalid, revoked, held or rendered unenforceable or lost through interference and (b) the claims of which would be infringed by Licensee’s practice of the Harvard Patent Rights and/or Joint Patent Rights in the making, using, offering for sale, selling or importation of Licensed Products or Royalty Products, as applicable.

	
 
	
5.
	
Section 1.22 of the License Agreement is replaced in its entirety with the following:

1.22.  “Net Sales” shall mean the gross amount billed or invoiced by or on behalf of

Licensee, its Affiliates and Sublicensees (in each case, the “Invoicing Entity”) on sales, leases or other transfers of Licensed Products or Royalty Products, as applicable, less the following to the extent applicable on such sales, leases or other transfers of Licensed Products or Royalty Products, as applicable, and not previously deducted from the gross invoice price: (a) customary trade, quantity, and cash discounts to the extent actually allowed and taken; (b) amounts actually repaid or credited by reason of rejection or return of any previously sold, leased or otherwise transferred Licensed Products or Royalty Products, as applicable, and uncollectible portions of billed or invoiced amounts with respect to any previously sold, leased or otherwise transferred Licensed Products or Royalty Products, as applicable; (c) rebates, chargebacks, retroactive price reductions, allowances and fees actually paid or credited to customers, wholesalers, distributors, third party payors, governmental agencies, administrators and contractees with respect to Licensed Products or Royalty Products, as applicable, sold, leased or otherwise transferred; (d) transportation, freight and insurance charges that are paid by or on behalf of the Invoicing Entity; and (e) to the extent separately stated on purchase orders, invoices, or other documents of sale, any sales, value added or similar taxes, custom duties or other similar governmental charges levied directly on the production, sale, transportation, delivery, or use of a Licensed Product or Royalty Product, as applicable, that are paid by or on behalf of the Invoicing Entity, but not including any tax levied with respect to income; provided that:

 

(i)  in any transfers of Licensed Products or Royalty Products, as applicable, among an Invoicing Entity, Affiliates of such Invoicing Entity and Sublicensees, not for the purpose of resale by any such Affiliate or Sublicensee, Net Sales shall be equal to the fair market value of the Licensed Products or Royalty Products, as applicable, so transferred, assuming an arm’s length transaction made in the ordinary course of business; and

 

 

 

 

 

(ii)  in the event that an Invoicing Party receives non-monetary consideration for any Licensed Products or Royalty Products, as applicable, or in the case of transactions not at arm’s length with a non-Affiliate of such Invoicing Entity that is not a Sublicensee, Net Sales shall be calculated based on the fair market value of such consideration or transaction, assuming an arm’s length transaction made in the ordinary course of business.

 

Sales of Licensed Products or Royalty Products, as applicable, by an Invoicing Party to an Affiliate of such Invoicing Party or to a Sublicensee for resale by such Affiliate or Sublicensee shall not be deemed Net Sales and Net Sales shall be determined based on the gross amount invoiced or billed by such Affiliate or Sublicensee on resale to an independent third party purchaser.

 

In the event that a Licensed Product or Royalty Product, as applicable, is sold in any country in the form of a Combination Product, Net Sales of such Combination Product will be adjusted by multiplying actual Net Sales of such Combination Product (i.e., Net Sales as determined above without regard to this paragraph) in such country by the fraction A/(A+B), where A is the average invoice price in such country, of a Licensed Product or Royalty Product, as applicable, containing the same strength of Covered Component(s) that is included in such Combination Product sold without the Non-Covered Components, if sold separately in such country, and B is the average invoice price of the Non-Covered Component(s) that is included in such Combination Product in such country, if sold separately in such country. If, in a specific country, either the Covered Component(s) or the Non-Covered Component(s) is not sold separately, the relative value of the Covered Component(s) and the Non-Covered Component(s) in the Combination Product shall be negotiated in and agreed upon in good faith by the parties in order to determine the appropriate ratio for calculating Net Sales with respect to such Combination Product in such country.

 

	
 
	
6.
	
Section 1.30 of the License Agreement is replaced in its entirety with the following:

 

1.30.  “Sublicense” shall mean: (a) any right granted, license given, or agreement entered into by Licensee to or with any other person or entity (or by a Sublicensee to or with a further Sublicensee permitted by Section 4.2.2.4) under or with respect to or permitting any use of any of the Licensed Patent Rights, or otherwise permitting the development, manufacture, marketing, distribution, use and/or sale of Licensed Products or Royalty Products; (b) any option or other right granted by Licensee to any other person or entity (or by a Sublicensee to a further Sublicensee permitted by Section 4.2.2.4) to negotiate for or receive any of the rights described under clause (a); or (c) any standstill or similar obligation undertaken by Licensee toward any other person or entity (or by a Sublicensee toward a further Sublicensee permitted by Section 4.2.2.4) not to grant any of the rights described in clause (a) or (b) to any third party; in each case regardless of whether such grant of rights, license given or agreement entered into is referred to or is described as a sublicense. For clarity, “Sublicense” does not include any implied license that may be deemed to be granted as part of a sale of a Licensed Product.

 

 

 

 

 

	
 
	
7.
	
A new Section 1.34 is hereby added to the License Agreement as follows:

1.34.  “Licensee Valid Claim” shall mean: (a) a claim of an issued and unexpired patent owned by Licensee, excluding any Joint Patent Rights, that has not been (i) held permanently revoked, unenforceable, unpatentable or invalid by a decision of a court or governmental body of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, (ii) rendered unenforceable through disclaimer or otherwise, (iii) abandoned, or (iv) lost through an interference proceeding; or (b) a pending claim of a pending patent application owned by Licensee (in a particular country), excluding any Joint Patent Rights, that (i) has been asserted and continues to be prosecuted in good faith, (ii) has not been abandoned or finally rejected without the possibility of appeal or refiling and (iii) has not remained un-issued for a period of five or more years from the date of issuance of the first substantive patent office action considering the patentability of such claim by the applicable patent office in such country.

	
 
	
8.
	
A new Section 1.35 is hereby added to the License Agreement as follows:

1.35.  “Royalty Product” shall mean any product that contains, as an active pharmaceutical ingredient, (a) eravacycline, TP-271 or TP-6076 or (b) any compound, other than eravacycline, TP-271 or TP-6076, the composition or synthesis of which would infringe any claim (other than any claim that has at any time been rejected by any patent examiner) made at any time in any patent or patent application within the Licensed Patent Rights as if such claim were as of such time a Valid Claim.  For the avoidance of doubt, each Royalty Product shall also be deemed a Licensed Product for so long as (and only for so long as) the manufacture, use, offer for sale, sale or importation of such Royalty Product would infringe a Valid Claim.

	
 
	
9.
	
A new Section 1.36 is hereby added to the License Agreement as follows:

1.36.  “First Commercial Sale” shall mean the first sale for end use or consumption of a product in a country after the granting of all approvals from the relevant Regulatory Authority(ies) necessary to market and sell such product in such country.

	
 
	
10.
	
Section 6.4.1 of the License Agreement is replaced in its entirety with the following:

6.4.1.Royalties.  

6.4.1.1.  As partial consideration for the license granted hereunder, Licensee shall pay Harvard an amount equal to the following percentages of any Net Sales of Licensed Products, and Royalty Products that are not Licensed Products, in the United States and its districts, territories and possessions (the “US Territory”), made by Licensee and/or its Affiliates or Sublicensees:

(a)[**] percent ([**]%) of Net Sales made on Licensed Products; and

(b)[**] percent ([**]%) of Net Sales made on Royalty Products that are not Licensed Products.

 

 

 

 

6.4.1.2.  As partial consideration for the license granted hereunder, Licensee shall pay Harvard an amount equal to the following percentages of (y) Net Sales of Licensed Products in each country outside of the US Territory (the “Ex-US Territory”) made by Licensee and/or its Affiliates (but not Sublicensees):

(a)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Licensed Products up to [**] U.S. Dollars ($[**]);

(b)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Licensed Products in excess of [**] U.S. Dollars ($[**]) up to [**] U.S. Dollars ($[**]);

(c)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Licensed Products in excess of [**] U.S. Dollars ($[**]) up to [**] U.S. Dollars ($[**]); and

(d)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Licensed Products in excess of [**] U.S. Dollars ($[**]).

6.4.1.3.  As partial consideration for the license granted hereunder, Licensee shall pay Harvard an amount equal to the following percentages of (y) Net Sales of Royalty Products that are not Licensed Products in each country in the Ex-US Territory made by Licensee and/or its Affiliates (but not Sublicensees):    

(a)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Royalty Products that are not Licensed Products up to [**] U.S. Dollars ($[**]);

(b)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Royalty Products that are not Licensed Products in excess of [**] U.S. Dollars ($[**]) up to [**] U.S. Dollars ($[**]);

(c)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Royalty Products that are not Licensed Products in excess of [**] U.S. Dollars ($[**]) up to [**] U.S. Dollars ($[**]); and

(d)[**] percent ([**]%) of that portion of calendar year annual Net Sales of Royalty Products that are not Licensed Products in excess of [**] U.S. Dollars ($[**]).

6.4.1.4.  With respect to each Royalty Product (other than Licensed Products) containing eravacycline, royalties will be payable under Sections 6.4.1.1(b) and 6.4.1.3, as applicable, until the date fifteen (15) years after the First Commercial Sale of the first Royalty Product in the first country, after which no royalties shall be due on Net Sales of Royalty Products containing eravacycline.  With respect to each Royalty Product (other than Licensed Products) containing any compound other than eravacycline (and not containing eravacycline), royalties will be payable under Sections 6.4.1.1(b) and 6.4.1.3, as applicable, on a country-by-country basis until the fifth anniversary of the expiration of the last Licensee Valid Claim that covers the composition of the first Royalty Product containing such compound in such country, after which no royalties shall be due on Net Sales of such Royalty Product in such country.  With respect to each Licensed Product, 

 

 

 

 

including each Royalty Product that is also a Licensed Product, royalties will be payable under Sections 6.4.1.1(a) and 6.4.1.2 on a country-by-country basis for so long as the making, using or selling of such Licensed Product is covered by a Valid Claim in the country in which such Licensed Product is made, used or sold, after which no royalties shall be due on such Licensed Product (except, if such Licensed Product is also a Royalty Product, to the extent set forth in the first two sentences of this Section 6.4.1.4).  For clarity, no milestones will be due under Section 6.3 with respect to any Royalty Product that is not a Licensed Product. 

6.4.1.5.  The parties acknowledge that the consideration terms and structure set forth in this Section 6.4.1 (a) were agreed upon for convenience purposes with the intent of compensating Harvard for the rights granted under this Agreement, including with respect to the Licensed Patent Rights and other valuable intellectual property licensed and/or transferred to Licensee, and the key role such rights and intellectual property will have in the activities of Licensee and its ability to enter into strategic relationships and (b) represent the fair market value of such rights as determined and agreed upon by the parties.  For clarity, the terms of this Section 6.4.1 with respect to any Royalty Product shall survive the termination of this Agreement if such termination occurs prior to the end of the applicable royalty period for such Royalty Product.

	
 
	
11.
	
Section 6.4.2 of the License Agreement is hereby deleted in its entirety.

 

	
 
	
12.
	
Section 6.5 of the License Agreement is replaced in its entirety with the following:

6.5.Sublicense Income.  

6.5.1As partial consideration for the license granted hereunder, Licensee shall pay Harvard (a) [**] percent ([**]%) of all Non-Royalty Sublicense Income, in connection with any Sublicense granted with rights to make and/or sell Licensed Products and/or Royalty Products solely in the Ex-US Territory, and (b) [**] percent ([**]%) of payments or other consideration that Licensee or any of its Affiliates receives in connection with a Sublicense that are royalties based on sales, leases or other transfers of Licensed Products or Royalty Products by or on behalf of Sublicensees in the Ex-US Territory (“Ex-US Sublicensee Royalties”).

6.5.2As partial consideration for the license granted hereunder, Licensee shall pay Harvard an amount equal to the following percentages of Non-Royalty Sublicense Income received in connection with any Sublicense granted that includes rights to make and/or sell Licensed Products and/or Royalty Products in the US Territory, whether or not rights are granted in any ex-US Territory:

(a)if Licensee grants such Sublicense prior to the filing of an IND with respect to any Licensed Product or Royalty Product that is the subject of such Sublicense, Licensee shall pay Harvard an amount equal to [**] percent ([**]%) of all Non-Royalty Sublicense Income received in connection with such Sublicense;

 

 

 

 

(b)if Licensee grants such Sublicense after filing of an IND but prior to the Initiation of a Phase II Clinical Trial with respect to any Licensed Product or Royalty Product that is the subject of such Sublicense, Licensee shall pay Harvard an amount equal to [**] percent ([**]%) of all Non-Royalty Sublicense Income received in connection with such Sublicense; and

(c)if Licensee grants a Sublicense after the Initiation of a Phase II Clinical Trial with respect to any Licensed Product or Royalty Product that is the subject of such Sublicense, Licensee shall pay Harvard an amount equal to [**] percent ([**]%) of all Non-Royalty Sublicense Income received in connection with such Sublicense.

6.5.3Notwithstanding anything to the contrary in this Agreement, if Licensee or any of its Affiliates receives a payment constituting Non-Royalty Sublicense Income that is directly attributable to the occurrence of a milestone event described in Section 6.3 or a circumstance substantially equivalent to such milestone event and Licensee has paid or is obligated to pay to Harvard its due share of such Non-Royalty Sublicense Income under this Section 6.5, any amounts paid under Section 6.3 with respect to such milestone may be deducted from Non-Royalty Sublicense Income on which Licensee must pay fees to Harvard under this Section 6.5.

6.5.4Licensee’s obligations under this Section 6.5 with respect to any Sublicense that includes rights to make and/or sell any Royalty Product shall expire on the expiration of Licensee’s royalty payment obligations under Section 6.4.1 with respect to such Royalty Product.  Licensee’s obligations under this Section 6.5 with respect to any Sublicense that includes rights to make and/or sell any Licensed Product that is not a Royalty Product shall expire on expiration of Licensee’s royalty payment obligations under Section 6.4.1 with respect to such Licensed Product.

	
 
	
13.
	
Section 7.1 of the License Agreement is replaced in its entirety with the following:

 

7.1.Reports and Payments.

 

7.1.1.Reports.  Within [**] days after the conclusion of each Calendar Quarter commencing with the first Calendar Quarter in which Net Sales are generated or Non-Royalty Sublicense Income or Ex-US Sublicensee Royalties received, Licensee shall deliver to Harvard a report containing the following information (in each instance, with a Licensed Product-by-Licensed Product or Royalty Product-by-Royalty Product, as applicable, breakdown):

 

(a)the number of units of Licensed Products or Royalty Products, as applicable, sold by Licensee and its Affiliates in the US Territory and Ex-US Territory, and by Sublicensees in the US Territory, for the applicable Calendar Quarter;

 

(b)the gross amount billed for Licensed Products or Royalty Products, as applicable, sold by Licensee and its Affiliates in the US Territory and Ex-US Territory, and by Sublicensees in the US Territory, during the applicable Calendar Quarter;

 

 

 

 

 

(c)a calculation of Net Sales by Licensee and its Affiliates in the US Territory and Ex-US Territory, and by Sublicensees in the US Territory, for the applicable Calendar Quarter, including an itemized listing of applicable deductions; and

 

(d)the total amount payable to Harvard in U.S. Dollars on Net Sales by Licensee and its Affiliates in the US Territory and Ex-US Territory, and by Sublicensees in the US Territory, for the applicable Calendar Quarter, together with the exchange rates used for conversion.

 

In addition, Licensee shall include in each such report a statement of all Non-Royalty Sublicense Income and Ex-US Sublicensee Royalties and the amounts payable to Harvard in respect thereto for the applicable Calendar Quarter.  Each such report shall be certified on behalf of Licensee as true, correct and complete in all material respects by Licensee’s Chief Financial Officer or an executive level officer with comparable authority.  If no amounts are due to Harvard for any Calendar Quarter, the report shall so state.

7.1.2.Payment for Net Sales.  Within [**] days after the end of each Calendar Quarter, Licensee shall pay Harvard all amounts due with respect to Net Sales, Non-Royalty Sublicense Income and Ex-US Sublicensee Royalties for the applicable Calendar Quarter.

	
 
	
14.
	
Section 7.3 of the License Agreement is replaced in its entirety with the following:

7.3.Records.  Licensee shall maintain, and shall cause its Affiliates and, with respect to the US Territory, Sublicensees to maintain, complete and accurate records of Licensed Products and Royalty Products that are made, used or sold under this Agreement, any amounts payable to Harvard in relation to such Licensed Products and Royalty Products and all Non-Royalty Sublicense Income and Ex-US Sublicensee Royalties received by Licensee and its Affiliates, which records shall contain sufficient information to permit Harvard to confirm the accuracy of any reports or notifications delivered to Harvard under Section 7.1.  Licensee, its Affiliates and/or its Sublicensees, as applicable, shall retain such records relating to a given Calendar Quarter for at least [**] years after the conclusion of that Calendar Quarter, during which time Harvard shall have the right, at its expense, to cause an independent, certified public accountant to inspect such records during normal business hours for the sole purpose of verifying any reports and payments delivered under this Agreement.  Such accountant shall enter into a confidentiality agreement reasonably satisfactory to Licensee and shall not disclose to Harvard any information other than information relating to the accuracy of reports and payments delivered under this Agreement.  The parties shall reconcile any underpayment or overpayment within [**] days after the accountant delivers the results of the audit.  In the event that any audit performed under this Section 7.3 reveals an underpayment in excess of five percent (5%) in any calendar year, the audited entity shall bear the full cost of such audit.  Harvard may exercise its rights under this Section 7.3 [**] per audited entity and only with reasonable prior notice to the audited entity.

	
 
	
15.
	
Section 11.1 of the License Agreement is replaced in its entirety with the following:

 

 

 

 

11.1.Term.  The term of this Agreement shall commence on the Effective Date and, unless earlier terminated as provided in this Article 11, shall continue in full force and effect (a) on a Licensed Product-by-Licensed Product and country-by-country basis until expiration of the last to expire Valid Claim of the Harvard Patent Rights and Joint Patent Rights and (b) on a Royalty Product-by-Royalty Product and country-by-country basis until expiration of Licensee’s royalty payment obligations with respect to such Royalty Product in such country under this Agreement; provided, however, that, once the making, using or selling of any Licensed Product or Royalty Product in any country is not covered by a Valid Claim within the Licensed Patent Rights or a Licensee Valid Claim, as the case may be, the license granted by Harvard to Licensee under Section 4.1 with respect to such Licensed Product or Royalty Product, as applicable, in such country will be perpetual, irrevocable, freely sublicensable and freely transferrable.

	
 
	
16.
	
Section 11.4 of the License Agreement is replaced in its entirety with the following:  

 

11.4.Survival.  The parties’ respective rights, obligations and duties under Articles 7 and 10 and under this Article 11, as well as any rights, obligations and duties which by their nature extend beyond the expiration or termination of this Agreement, shall survive any expiration or termination of this Agreement.  In addition, Licensee’s obligations under Section 6.5 with respect to any Sublicense granted prior to termination of the Agreement that includes rights to make and/or sell any Royalty Product shall survive termination of this Agreement and shall continue in full force and effect until the expiration of Licensee’s royalty payment obligations under Section 6.4.1 with respect to such Royalty Product.  Harvard’s obligations under Section 12.15 shall survive expiration or termination of this Agreement.  The terms of Section 6.4.1 shall survive termination of this Agreement.

 

	
 
	
17.
	
All other terms and conditions of the License Agreement shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to be executed by their duly authorized representatives as of the date first written above.

 

	
President and Fellows of Harvard College
	
 
	
Tetraphase Pharmaceuticals, Inc.
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
By:
	
 
	
/s/ Isaac T. Kohlberg
	
 
	
By:
	
 
	
/s/ Guy Macdonald
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Name:
	
 
	
Isaac T. Kohlberg
	
 
	
Name:
	
 
	
Guy Macdonald
	
 

	
 
	
 
	
 
	
 
	
 
	
 
	
 
	
 

	
Title:
	
 
	
Sr. Associate Provost,
	
 
	
Title:
	
 
	
CEO
	
 

	
Chief Technology Development Officer,
	
 
	
 
	
 

	
Office of Technology Development
	
 
	
 
	
 

	
Harvard University

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