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EnteroMedics Announces $25.0 million Registered Direct Offering of Convertible Notes

ST. PAUL, Minn., Nov. 5, 2015 /PRNewswire/ -- EnteroMedics Inc. (ETRM), the developer of medical devices using neuroblocking technology to treat obesity, metabolic diseases and other gastrointestinal disorders, today announced it has entered into a securities purchase agreement with four institutional investors to issue $25.0 million of Senior Amortizing Convertible Notes (the "Notes"). The Company currently intends to use the net proceeds from this offering to continue its commercialization efforts for the Maestro Rechargeable System, for clinical and product development activities and for other working capital and general corporate purposes.

The Notes will be payable in monthly installments, will accrue interest at a rate of 7.0% per annum from the date of issuance and will mature 24 months after the initial closing. $1.5 million of the Notes will be funded at the initial closing, and the balance will be funded in two tranches of $11.0 million and $12.5 million which are subject to the shareholders of the Company approving a reverse stock split of the Company's common stock and the approval of the issuance of the securities purchased by the Investors. At each issuance, the Notes may be repaid, at the Company's election, in either cash or shares of the Company's common stock at a discount to the then-current market price. The Notes are also convertible from time to time, at the election of the holders, into shares of the Company's common stock at an initial conversion price of $0.29 per share. Additionally, in connection with each issuance of the Notes, the Company will also issue to the investors warrants to purchase a certain number of shares of common stock equal to approximately 30% of the number of shares that would be issued if the principal were converted. The warrants are callable under certain circumstances. The offering is expected to close on or around November 9, 2015.

The Company intends to hold a Special Shareholder meeting to authorize the Company to carry out a reverse stock split using a conversion ratio within an approved range and to approve the terms of the agreement.

Northland Securities, Inc. acted as exclusive...


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