connection with the first closing under the Third SPA, on May 3, 2021, Entasis issued and sold to ISO 3,731,025 Shares and warrants to purchase 3,731,025 Shares, with each Share and warrant being issued and sold as a unit, for a per unit price of $2.00. The Third SPA also allowed ISO to acquire an additional 6,268,975 Shares and additional warrants to purchase 6,268,975 Shares, subject to satisfaction of certain conditions set forth in the Third SPA, including that the Third SPA and the transactions contemplated thereby be approved by the stockholders of Entasis as may be required by the applicable rules and regulations of Nasdaq Stock Market LLC.
The exercise price and the number of Shares issuable upon exercise of each warrant is subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting Shares. Each warrant issued to ISO is exercisable from the date of issuance and has a term of five years and an initial exercise price of $2.00.
In connection with the Third SPA, Entasis entered into a Registration Rights Agreement (the “Third Registration Rights Agreement”) with ISO. Pursuant to the Third Registration Rights Agreement, Entasis agreed to prepare and file a registration statement with the SEC for purposes of registering the resale of the Shares, the Shares issuable upon exercise of the warrants, the warrants and any Shares issued as a dividend or other distribution with respect to the Shares or Shares issuable upon exercise of the warrants under the Third SPA.
At a special meeting of Entasis stockholders held on June 10, 2021, Entasis’ stockholders approved the issuance of Shares and warrants to ISO in the second tranche of the private placement. On June 11, 2021, Entasis issued to ISO 6,268,975 Shares and warrants to acquire an additional 6,268,975 Shares.
The foregoing summaries of the Third SPA, warrants and the Third Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the Third SPA, Form of Common Stock Purchase Warrant and the Third Registration Rights Agreement, copies of which are filed as exhibits (d)(6), (d)(16), and (d)(10), respectively, to the Schedule TO filed with the SEC, which are incorporated herein by reference.
Fourth Securities Purchase Agreement and Fourth Registration Rights Agreement.
On February 17, 2022, ISO entered into a securities purchase agreement (the “Fourth SPA”) with Entasis, pursuant to which Entasis issued and sold to ISO a convertible promissory note (the “Convertible Note”). The Convertible Note is convertible at maturity at the election of Entasis or ISO into Shares at a conversion price of $1.48 per Shares and warrants to purchase an equal number of Shares with an exercise price of $1.48 per Share. The Convertible Note will also be convertible at the option of ISO if Entasis engages in certain capital markets transactions, asset sales or royalty transactions. If Entasis is acquired prior to the maturity date of the Convertible Note, the Convertible Note will be payable in cash at the time of such acquisition. The Convertible Note will mature on August 18, 2022 and bears interest at a rate of 0.59% per annum to, but excluding, the date of repayment or conversion of the Convertible Note. From and including the date of maturity, if not converted, the Convertible Note will bear interest at a rate of 10.00% per annum to, but excluding, the date of repayment or conversion of the Convertible Note.
The Convertible Note and the warrants will have provisions that preclude conversion or exercise, respectively, if such conversion or exercise would result in the issuance of more than 19.99% of Entasis’ currently outstanding Shares in the aggregate prior to obtaining stockholder approval. ISO agreed to vote its eligible shares in favor of the transaction.
The Fourth SPA contains customary representations and warranties as well as certain operating covenants applicable to Entasis until the closing.
The Fourth SPA also extended the terms of warrants beneficially owned by Parent that were issued on each of April 22, 2020, June 11, 2020, September 1, 2020, May 3, 2021 and June 11, 2021 by two years to, respectively, April 22, 2027, June 11, 2027, September 1, 2027, May 3, 2028 and June 11, 2028.
As part of the transactions contemplated by the Fourth SPA, ISO entered into a Registration Rights Agreement, dated as of February 18, 2022, with Entasis (the “Fourth Registration Rights Agreement”), pursuant to which, among other things, Entasis has agreed to prepare and file with the SEC, a registration statement with respect to the resale of the Shares and the warrants issuable upon conversion of the Convertible Note and the Shares issuable upon exercise of the warrants.