Graf Acquisition Corp. IV (NYSE:GFOR) announced in an 8-K this afternoon that it has entered into a warrant subscription agreement with certain unnamed investors ahead of its completion vote to combine with NKGen Biotech.

Under this agreement, the investors have committed to purchasing a total of 1,999,998 warrants at a cost of $1.00 per warrant and can be exercised for cash within a five-year window beginning on the closing date.

Notably, the exercise price of these warrants are laddered and will undergo periodic adjustments.  One-third will be initially exercisable at $10.00, another one-third at $12.50, and the remaining one-third at $15.00.

However, the exercise price of each tranche will be subject to adjustment every 180 days (the “Reset Exercise Price”) after the Closing Date with downside protection to $5.00. The First Tranche will be reset to either the lower of the VWAP during the 30 day period immediately prior to the Reset Date and the exercise price on the previous Reset Date, or, $5.00 (the “Downside Protection Threshold Price”), whichever is higher. The exercise price of the Second Tranche will be reset to 125% of the Reset Price and the exercise price of the Third Tranche will be reset to 150% of the Reset Price.

Additionally, beginning on the date that is 180 days after the Closing Date, if New NKGen issues shares of Common Stock or securities that are convertible into or exercisable for shares of Common Stock at an effective price per share less than the existing Reset Price, subject to certain carve-outs, then the exercise price will be reset upon the consummation of such dilutive offering.

Investors also have the option to request a cashless exchange of their warrants in the event the Test Price or Dilutive Offering Reset Price is less than the Downside Protection Threshold Price but is greater than or equal to $1.50. However, the company may choose to repurchase the warrants for $1.75 in cash per warrant if the Investor demands the Downside Protection.

This new funding comes as Graf IV is set to reconvene its shareholder completion vote tomorrow, September 20,  at 10 am ET. Graf IV has been working diligently to shore up financing for this combination with NKGen and today’s warrant ladder is a new twist on SPAC backstops. It will be interesting to see if other SPACs replicate this structure going forward.

The $160 million combination was initially announced in April of this year. Santa Ana, California-based NKGen has five pharmaceutical formulas that have each reached some stage of Phase I and Phase II clinical trials seeking potential therapies for cancer and neurodegenerative conditions like Parkinson’s and Alzheimer’s.