Item 1.01 Entry into a Material Definitive Agreement
On March 27, 2020, electroCore, Inc. (the “Company”) and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) having an aggregate value of up to $25,000,000 (the “Purchase Shares”), subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”). The Company will control the timing and amount of any sales of shares of Common Stock to Lincoln Park pursuant to the Purchase Agreement.
Over the36-month term of the Purchase Agreement, for up to an aggregate amount of $25,000,000 of shares of Common Stock (subject to certain limitations and conditions), the Company has the right, but not the obligation, from time to time, in its sole discretion, to direct Lincoln Park to purchase up to 200,000 shares (the “Regular Purchase Share Limit”) of the Common Stock (each such purchase, a “Regular Purchase”). The Regular Purchase Share Limit will increase to 250,000 shares if the closing price of the Common Stock on the applicable purchase date is not below $1.00 per share and will further increase to 300,000 shares if the closing price of the Common Stock on the applicable purchase date is not below $1.50 per share. In any case, Lincoln Park’s maximum obligation under any single Regular Purchase will not exceed $1,000,000, unless the Company and Lincoln Park mutually agree to increase the maximum amount of such Regular Purchase. The purchase price for shares of Common Stock to be purchased by Lincoln Park under a Regular Purchase will be equal to the lower of (in each case, subject to the adjustments described in the Purchase Agreement): (i) the lowest sale price for the Common Stock on the applicable purchase date and (ii) the arithmetic average of the three lowest sales prices for the Common Stock during the 10 consecutive trading days prior to the purchase date.
If the Company directs Lincoln Park to purchase the maximum number of shares of Common Stock that the Company may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park to make an “accelerated purchase” and an “additional accelerated purchase”, each of an additional number of shares of Common Stock which may not exceed the lesser of: (i) 300% of the number of shares purchased pursuant to the corresponding Regular Purchase and (ii) 30% of the total number of shares of the Common Stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. The purchase price for such shares will be the lesser of 97% of the volume weighted average price of the Common Stock over a certain portion of the date of sale as set forth in the Purchase Agreement and (ii) the closing sale price of the Common Stock on the date of sale (an “Accelerated Purchase”). Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple Accelerated Purchases on the same trading day.
In addition to the Regular Purchases and Accelerated Purchases described above, the Company may deliver to Lincoln Park, after the30-day anniversary of the commencement date of the Purchase Agreement, a “tranche purchase notice” in accordance with the terms of the Purchase Agreement, whereby the Company may direct Lincoln Park to purchase up to 1,000,000 Purchase Shares at a purchase price equal to 95% of the lower of: (i) the lowest sale price of the Common Stock on that purchase date and (ii) the arithmetic average of the three lowest sales prices for the Common Stock during the 10 consecutive trading days prior to the purchase date (a “Tranche Purchase”). The Company may only deliver a tranche purchase notice to Lincoln Park if at least 30 business days have passed since the most recent Tranche Purchase. The Company may only deliver a total of four tranche purchase notices under the Purchase Agreement, and Lincoln Park will not be obligated to purchase more than $1,000,000 of Common Stock in any individual Tranche Purchase.
The Purchase Agreement also prohibits the Company from directing Lincoln Park to purchase any shares of Common Stock if those shares, when aggregated with all other shares of Common Stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of Common Stock as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule13d-3 thereunder.
Under applicable rules of the Nasdaq Global Select Market, the Company may not issue or sell to Lincoln Park under the Purchase Agreement more than 19.99% of the shares of the Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”) (or 5,991,912 shares, based on 29,959,565 shares outstanding immediately prior to the execution of the Purchase Agreement), unless (i) stockholder approval is obtained or (ii) the issuances and sales of Common Stock pursuant to the Purchase Agreement are not deemed to be “below market” in accordance with the applicable rules of Nasdaq.
The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at its sole discretion, except that, subject to certain exceptions, the Company may not enter into any Variable Rate Transaction unless such Variable Rate Transaction qualifies as an Exempt Issuance (each such term as defined in the Purchase Agreement) during the 36 months after the commencement date of the Purchase Agreement.
