Item 1.01 Entry into a Material Definitive Agreement.
Promissory Notes and Promissory Note Warrants
On
February 21, 2023, Gelesis Holdings, Inc. (the “Company”), Gelesis, Inc., a subsidiary of the Company (the “Co-Issuer”
and together with the Company, the “Issuers”), Gelesis 2012, Inc. and Gelesis, LLC, subsidiaries of the Issuers (together
the “Guarantors”’ and collectively with the Issuers , the “Note Parties”), entered into a Note and Warrant
Purchase Agreement, dated as of February 21, 2023 (the “NPA”), by and among the Note Parties and PureTech Health LLC
(the “Initial Investor”) pursuant to which, for a cash purchase price of $5.0 million, (i) the Notes Issuers issued a short
term convertible senior secured note of the Company in the aggregate principal amount of $5.0 million (the “Initial Note”)
to the Initial Investor and (ii) the Company issued to the Initial Investor warrants (the “Warrants”) to purchase 23,688,047
shares of common stock, par value $0.0001, of the Company (the “Common Stock”).
General Terms of the Notes
The Initial Note bears interest at a rate of 12%
per annum, and matures on July 31, 2023, unless earlier converted or the maturity is extended as described below. The Initial Note is
guaranteed by the Guarantors and contain customary anti-dilution adjustment provisions. Pursuant to certain security agreements, each
dated February 21, 2023 (the “Security Agreements”), entered into by the Note Parties, as grantors, and the Initial Investor,
in its capacity as secured party, the Note is secured by a first-priority lien on substantially all assets of the Company and the Guarantors,
including without limitation, intellectual property, regulatory filings and product approvals, clearances and marks worldwide (other than
the equity interests in, and assets held by, Gelesis S.r.l., a subsidiary of the Company) and a pledge of 100% of the Note Parties’
equity in the Co-Issuer and the Guarantors.
The NPA contains certain covenants that restrict
the ability of the Notes Issuers and their subsidiaries to, among other things, incur indebtedness, place liens on assets, transfer assets
to subsidiaries of the Notes Issuers (other than other Note Parties), transfer ownership of, or exclusively license or grant exclusive
rights to use, certain intellectual property, dispose of any tangible or intangible assets, properties or businesses, or engage in certain
fundamental transactions, subject, in each case, to certain exceptions. The NPA also contains certain representations and warranties of
the Notes Issuers, and certain customary events of default, including a failure by the Notes Issuers to pay amounts due thereunder.
Additional Notes; Other Investor Notes
Pursuant to the NPA, the Initial Investor has
agreed, upon the request of the Notes Issuers, to purchase from the Notes Issuers an additional $5.0 million principal amount of short
term convertible senior secured notes identical to the Initial Note (the “Additional Notes”) if: (i) the Company and the Initial
Investor, in its sole discretion, agree upon a satisfactory over-the-counter (“OTC”) operating plan for the Company; (ii)
the Company successfully completes and submits a usability study with respect to the OTC reclassification of its Plenity product; (iii)
the Company receives the approval of its stockholders to certain transactions on or prior to July 31, 2023; and (iv) other commercially
reasonable customary conditions are satisfied. In connection with the sale of the Additional Notes, the Company will issue to the Initial
Investor additional Warrants to purchase a number of shares of Common Stock equal to the principal amount of Additional Notes sold multiplied
by a factor of 1.7 and divided by the conversion price for such Additional Notes.
Pursuant to the NPA, the Notes Issuers may offer
and sell additional short term convertible senior secured notes identical to the Initial Note to other investors in an aggregate principal
amount of up to $40.0 million (the “Other Investor Notes”) without the Initial Investor’s consent at any time prior
to March 31, 2024. The NPA provides that Other Investor Notes will rank pari passu with the Initial Note and the Additional Notes
and otherwise have the same terms as the Initial Note, including the benefit of all liens granted with respect to the Initial Note.
Pursuant to the NPA, in the event that the Company
sells Other Investor Notes, the Initial Investor will be entitled to participation rights to purchase additional Other Investor Notes
that are incremental to the notes sold to other investors up to such aggregate principal amount as would allow the Initial Investor to
maintain up to a 23% ownership percentage of the total original principal amount of the sum of the Initial Note, the Additional Notes
and the Other Investor Notes. The Initial Note, the Additional Notes and the Other Investor Notes (including any such notes issued to
the Initial Investor pursuant to its participation right) are hereafter referred to as the “Notes”.
Extension of Maturity
The NPA provides that if the Company receives
(i) the approval of its stockholders to certain transactions as described below on or prior to July 31, 2023, and (ii) proceeds from the
sale of Other Investor Notes of at least $10.0 million prior to July 31, 2023, the maturity date of the Notes will be extended to March
31, 2024.
Conversion
of the Notes
The NPA provides that the Notes are not convertible,
and the Warrants are not exercisable, until the Company receives stockholder approval for the issuance of the shares of Common Stock issuable
upon conversion of the Notes and the exercise of the Warrants (the “Stockholder Approval”) in accordance with the terms thereof.
The NPA provides that the Company will use its reasonable best efforts to obtain the Stockholder Approval at the first annual general
meeting of its stockholders following the issuance of the Initial Note, which, pursuant to the terms of the NPA, must be held no later
than July 31, 2023.
The
NPA provides that following receipt of the Stockholder Approval (i) the Initial Note will be convertible at the option of the Initial
Investor, in whole or in part, into a number of shares of Common Stock equal to (x) the outstanding principal amount of the Initial
Note being converted plus accrued and unpaid interest divided by (y) a conversion price of $0.2744 per share of Common Stock, subject
to adjustment and (ii) the Warrants will become exercisable for a purchase price of $0.2744 per share of Common Stock, subject to adjustment.
The
NPA provides that the Notes will be convertible at the option of the Company, in whole but not in part (“Company Conversion”),
(i) following receipt of the Stockholder Approval on or prior to July 31, 2023, (ii) subject to the receipt by the Company prior
to July 31, 2023 of aggregate gross proceeds equal to or exceeding $30,000,000 from any financing, or series of related financings (including
the sale of Other Investor Notes), (iii) if the average of the last reported sale price of the Common Stock for the immediately preceding
five scheduled trading days is greater than or equal to 300% of the applicable conversion price, (iv) the Common Stock is then listed
on the New York Stock Exchange and (v) a registration statement under the Securities Act of 1933, as amended (the “Securities Act”),
registering for resale the shares of Common Stock issuable upon conversion of the Notes and the exercise of the Warrants is then effective.
Such conversion of the Notes at the option of the Company will cause the conversion of all Notes then outstanding into a number of shares
of Common Stock equal to (x) the outstanding principal amount of the Notes plus accrued and unpaid interest divided by (y) the applicable
conversion price; provided, however, that with respect to Notes held by the Initial Investor, the conversion price for Company Conversion
of the Initial Note and the Additional Notes will be the lower of the conversion price applicable in case of the Initial Investor’s
optional conversion of the Initial Note and the conversion price applicable in case of the Initial Investor’s optional conversion
of the Additional Notes.
Optional
Redemption
The NPA provides that the Company may redeem the
Notes at any time for cash, at its option, upon at least 20 days’ notice at a redemption price equal to (i) 120% of the principal
amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the redemption date is
on or prior to June 30, 2023 and (ii) 130% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but
excluding, the redemption date, if the redemption date is after June 30, 2023. The Company may not redeem less than 100% of the Initial
Note and the Additional Notes.
Most Favored Investor Provision
The NPA provides that during the terms of the
Initial Note and the Additional Notes, any term of any indebtedness, debt or equity-linked debt security incurred or issued by the Note
Parties after the issuance of the Initial Note that is more favorable than the terms of the Initial Note or the Additional Notes (including
warrant coverage) will, at the option of the Initial Investor, automatically be incorporated into the Initial Note, the Additional Notes
and/or the Warrants (including warrant coverage).
Amendments
and Waivers
The NPA provides that amendments and waivers of
any term of the NPA, the Notes, the guaranty of the Notes or the Security Agreement require the written consent of the Company and the
holders of a majority in principal amount of Notes outstanding from time to time; provided that, that no such amendment, waiver or consent
will, without consent of each holder of Notes directly and adversely affected thereby: (i) reduce the principal amount of or extend the
maturity date of any Note; (ii) reduce the rate of interest or postpone the stated time for payment of principal or interest of any Note
(except as otherwise permitted under the NPA); (iii) impair the right of any holder to receive payment on, or with respect to, any Note
or impair the right to initiate suit for the enforcement of any delivery or payment on, or with respect to, any Note; (iv) change the
ranking of any Note in any manner adverse to the rights of the affected holder; (v) grant any lien senior to the lien securing the Notes
except as expressly provided for in the Security Agreement; (vi) release the guaranty; (vii) subordinate or release the lien securing
the Notes except as expressly provided for in the Security Agreement; (viii) change the Conversion Price or any other terms of conversion
of the Notes or the redemption price or any other terms of redemption of the Notes; or (ix) waive compliance with or modify the provisions
governing amendments and waivers in a manner adverse to any investor.
Neither the Notes nor the Warrants have been or
will be registered under the Securities Act, and are sold in reliance on the exemption from registration provided by Section 4(a)(2) of
the Securities Act and/or Regulation D promulgated thereunder, and on similar exemptions under applicable state laws. The NPA provides
for registration rights with respect to all shares of Common Stock issuable upon conversion of the Notes and upon exercise of the Warrants
pursuant to which the Company is required to file a shelf registration statement under the Securities Act to register such shares for
resale.
The foregoing descriptions of the NPA, the Notes,
the Warrants and the Security Agreements do not purport to be complete and are qualified in their entirety by the full text of such agreements,
which are attached as exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 to this Report and incorporated herein by reference.