CFRX ContraFect Corporation

On June 26, 2023, ContraFect Corporation, a Delaware corporation (the “Company”), entered into an inducement offer to exercise common stock purchase warrants (the “Inducement Agreement”) with a certain institutional investor (the “Holder”) to purchase up to an aggregate of 7,034,883 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”). The Inducement Agreement provided the Holder with the opportunity to exercise all of (i) the Class A Common Stock Purchase Warrant issued to the Holder on December 14, 2022, (ii) Class B Common Stock Purchase Warrant issued to the Holder on December 14, 2022 and (iii) the Common Stock Purchase Warrant issued to Holder on March 2, 2023 (collectively, the “Existing Warrants”) held by the Holder, each at a reduced exercise price from $4.00 to $1.36 per underlying share, which is equal to the most recent closing price of the Company’s Common Stock on The Nasdaq Capital Market prior to the execution of the Inducement Agreement.

In consideration for exercising the Existing Warrants held by the Holder (the “Warrant Exercise”), at an exercise price equal to $1.36 per underlying share, the Company offered to issue the Holder or its designee (i) a new unregistered Class C Common Stock Purchase Warrant (the “Class C Warrant”) to purchase up to 1,406,977 shares of Common Stock, at an exercise price equal to $1.36 per underlying share and (ii) a new unregistered Class D Common Stock Purchase Warrant (the “Class D Warrant” and together with the Class C Warrant, the “New Warrants”) to purchase up to 5,627,906 shares of Common Stock, at an exercise price equal to $1.36 per underlying share (such shares of Common Stock issuable upon exercise of the New Warrants, the “New Warrant Shares”).

The proceeds to the company from the exercise of the existing warrants are $9.6 million, prior to deducting fees to the financial advisor and estimated expenses. The company intends to use the net proceeds to support ongoing enrollment of patients in the Phase 1b/2 clinical study of intra-articular exebacase for the treatment of chronic prosthetic joint infections of the knee, filing of the Investigational New Drug application and subsequent Phase 1 clinical study of CF-370, the first engineered lysin targeting Gram-negative pathogens, working capital and general corporate purposes.

Maxim Group LLC acted as the exclusive financial advisor to the Company for the Warrant Exercise and the Private Placement (defined below).

The shares of Common Stock issuable upon exercise of Existing Warrants were registered pursuant to an effective registration statement on Form S-3 (Registration No. 333-269673). The New Warrants were sold in a private placement (the “Private Placement”), exempt from registration pursuant to Section 4(a)(2) and/or Rule 506 of the Securities Act of 1933, as amended (the “Securities Act”).

Each New Warrant will be exercisable only following Stockholder Approval (as described below) and will expire on the fifth anniversary of the date on which such New Warrant becomes exercisable. The Class D Warrant contains standard adjustments to the exercise price including for stock splits, stock dividend, rights offerings and pro rata distributions, and, until the date that is 18 months after the date upon which the Class D Warrant first become exercisable, include full ratchet anti-dilutive adjustment rights in the event the Company issues shares of Common Stock or Common Stock equivalents in the future with a value less than the then effective exercise price of the Class D Warrant, subject to certain customary exceptions, and further subject to a minimum exercise price of $0.3625 per share. The New Warrants also include certain rights upon “fundamental transactions” as described in the New Warrants, including the right of the holder thereof to receive from the Company or a successor entity the same type or form of consideration (and in the same proportion) that is being offered and paid to the holders of Common Stock in such fundamental transaction in the amount of the Black Scholes value (as described in such New Warrants) of the unexercised portion of the applicable New Warrants on the date of the consummation of such fundamental transaction.

The New Warrants include cashless exercise rights to the extent the shares of Common Stock underlying the New Warrants are not registered under the Securities Act. In addition, the Class C Warrant includes certain alternative cashless exercise rights on or after the date upon which the Class C Warrant first becomes exercisable.

Under the Inducement Agreement, the Company agreed to hold a special meeting of shareholders by no later than October 24, 2023 for the purpose of obtaining such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market (or any successor entity) from the Company’s shareholders with respect to the transactions contemplated in the Inducement Agreement (the “Shareholder Approval”).

Under the terms of the New Warrants, a holder will not be entitled to exercise any portion of any such warrant, if, upon giving effect to such exercise, the aggregate number of shares of Common Stock beneficially owned by the holder (together with its affiliates, any other persons acting as a group together with the holder or any of the holder’s affiliates, and any other persons whose beneficial ownership of Common Stock would or could be aggregated with the holder’s for purposes of Section 13(d) or Section 16 of the Securities Exchange Act of 1934, as amended) would exceed 9.99% of the number of shares of Common Stock 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 increased at the holder’s election upon 61 days’ notice to the Company subject to the terms of such warrants, provided that such percentage may in no event exceed 19.99%.