Item 1.01 Entry into a Material Definitive Agreement.
On October 21, 2019, Entasis Therapeutics Holdings Inc. (the Company), entered into a common stock purchase agreement (the Purchase Agreement) with Aspire Capital Fund, LLC, an Illinois limited liability company (Aspire Capital), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20.0 million of shares of the Companys common stock, par value $0.001 per share (the Common Stock), over the 30-month term of the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company agreed to issue to Aspire Capital 104,167 shares of Common Stock (the Commitment Shares) on October 21, 2019.
Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital (the Registration Rights Agreement), pursuant to which the Company agreed to file with the Securities and Exchange Commission (the SEC) a prospectus supplement to the Companys effective shelf registration statement on Form S-3 (File No. 333-234041), registering all of the shares of Common Stock that may be offered to Aspire Capital from time to time, including the Commitment Shares.
Under the Purchase agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a Purchase Notice), directing Aspire Capital (as principal) to purchase up to 50,000 shares of the Companys Common Stock per business day, up to $20.0 million of the Companys Common Stock in the aggregate at a per share price (the Purchase Price) equal to the lesser of:
· the lowest sale price of the Companys Common Stock on the purchase date; or
· the arithmetic average of the three (3) lowest closing sale prices for the Companys Common Stock during the ten (10) consecutive trading days ending on the trading day immediately preceding the purchase date.
The Company and Aspire Capital also may mutually agree to increase the number of shares that may be sold to as much as an additional 2,000,000 shares per business day.
In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount equal to 50,000 shares, the Company also has the right, in its sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a VWAP Purchase Notice) directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of the Companys Common Stock traded on its principal market on the next trading day (the VWAP Purchase Date), subject to a maximum number of shares the Company may determine. The purchase price per share pursuant to such VWAP Purchase Notice is generally 97% of the volume-weighted average price for the Companys Common Stock traded on its principal market on the VWAP Purchase Date.
The Purchase Price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the period(s) used to compute the Purchase Price. The Company may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed.
The Purchase Agreement provides that the Company and Aspire Capital shall not effect any sales under the Purchase Agreement on any purchase date where the closing sale price of the Companys Common Stock is less than $0.25. There are no trading volume requirements or restrictions under the Purchase Agreement, and the Company will control the timing and amount of sales of the Companys Common Stock to Aspire Capital.
The Purchase Agreement provides that the number of shares that may be sold pursuant to the Purchase Agreement will be limited to 2,626,165 shares, including the Commitment Shares (the Exchange Cap), which represents 19.99% of the Companys outstanding shares of Common Stock as of October 21, 2019, unless stockholder approval is obtained to issue more than 19.99%. This limitation will not apply if, at any time the Exchange Cap is reached and at all times thereafter, the average price paid for all shares issued under the Purchase Agreement is equal to or greater than $5.75, which was the the closing sale price immediately preceding the execution of the Purchase Agreement. The Company is not required or permitted to issue any shares of Common Stock under the Purchase Agreement if such issuance would breach its obligations under the rules or regulations of The Nasdaq Global Market.
Aspire Capital has no right to require any sales by the Company, but is obligated to make purchases from the Company as directed by the Company in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future funding, rights of first refusal, participation rights, penalties
or liquidated damages in the Purchase Agreement. The Purchase Agreement may be terminated by the Company at any time, at its discretion, without any cost to the Company. Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of the Companys Common Stock during any time prior to the termination of the Purchase Agreement. Any proceeds from the Company receives under the Purchase Agreement are expected to be used for working capital and general corporate purposes.
The foregoing is a summary description of certain terms of the Purchase Agreement and the Registration Rights Agreement and, by its nature, is incomplete. Copies of the Purchase Agreement and Registration Rights Agreement are filed herewith as Exhibits 10.1 and 4.1, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. All readers are encouraged to read the entire text of the Purchase Agreement and the Registration Rights Agreement.
The Company is filing the opinion of its counsel, Cooley LLP, relating to the legality of the shares of Common Stock offered and sold pursuant to the Purchase Agreement, as Exhibit 5.1 hereto.
Item 9.01 Financial Statements and Exhibits.