Verastem,Inc. (NASDAQ:VSTM) Files An 8-K Entry into a Material Definitive AgreementITEM 1.01 — Entry into a Material Definitive Agreement.
On October17, 2018, Verastem,Inc. (the “Company”) closed its previously announced registered direct public offering of $150 million aggregate principal amount of the Company’s 5.00% Convertible Senior Notes due 2048 (the “Notes”). The offering was made to a registration statement on FormS-3 (No.333-226322), which was filed with the Securities and Exchange Commission (the “SEC”) as part of an effective shelf registration statement (the “Registration Statement”) on July24, 2018, as supplemented by a preliminary prospectus supplement filed with the SEC on October11, 2018, and a final prospectus supplement, dated October11, 2018.
The Notes are governed by the terms of a base indenture for senior debt securities (the “Base Indenture”), as supplemented by the first supplemental indenture thereto (the “Supplemental Indenture” and together with the Base Indenture, the “Indenture”), each dated as of October17, 2018, by and between the Company and Wilmington Trust, National Association, as trustee. The Notes are the senior unsecured obligations of the Company and bear interest at a rate of 5.00% per annum, payable semi-annually in arrears on May1 and November1 of each year, beginning on May1, 2019. The Notes will mature on November1, 2048, unless earlier repurchased, redeemed or converted in accordance with their terms.
Subject to the terms of the Indenture, the Notes are convertible into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), together, if applicable, with cash in lieu of any fractional share, at an initial conversion rate of 139.5771 shares of Common Stock per $1,000 principal amount of the Notes, which corresponds to an initial conversion price of approximately $7.16 per share of Common Stock and represents a conversion premium of approximately 15.0% above the last reported sale price of the Common Stock of $6.23 per share on October11, 2018. Upon conversion, converting noteholders will be entitled to receive accrued interest on their converted Notes. To the extent the Company has insufficient authorized but unissued shares to settle conversions in shares of Common Stock, the Company will settle the deficiency in cash.
The Company will have the right, exercisable at its option, to cause all Notes then outstanding to be converted automatically if the “Daily VWAP” (as defined in the Indenture) per share of the Common Stock equals or exceeds 130% of the conversion price on each of at least 20 “VWAP Trading Days” (as defined in the Indenture), whether or not consecutive, during any 30 consecutive VWAP Trading Day period commencing on or after the date the Company first issued the Notes.
The conversion rate is subject to adjustment from time to time upon the occurrence of certain events, including, but not limited to, the issuance of stock dividends and payment of cash dividends, but will not be adjusted for any accrued and unpaid interest.
Prior to November1, 2022, the Company will not have the right to redeem the Notes. On or after November1, 2022, the Company may elect to redeem the Notes, in whole or in part, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any.
Unless the Company has previously called all outstanding Notes for redemption, the Notes will be subject to repurchase by the Company at the holders’ option on each of November1, 2023, November1, 2028, November1, 2033, November1, 2038 and November1, 2043 (or, if any such date is not a business day, on the next business day) at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any.
If a “Fundamental Change” (as defined in the Indenture) occurs at any time, subject to certain conditions, holders may require the Company to purchase all or any portion of their Notes at a purchase price equal to 50% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any, to, but excluding, the “Fundamental Change Repurchase Date” (as defined in the Indenture). If a “Make-Whole Fundamental Change” (as defined in the Indenture) occurs on or before November1, 2022 and a holder elects to convert its Notes in connection with such Make-Whole Fundamental Change, such holder may be entitled to an increase in the conversion rate in certain circumstances as set forth in the Indenture.
The Notes are the Company’s senior, unsecured obligations and will be senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment with the Company’s existing and future indebtedness that is not so subordinated, and effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing such indebtedness. The Notes are structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.
The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared