Item 1.01 Entry into a Material Definitive Agreement.
Agreements with Lincoln Park Capital Fund, LLC
On October 23, 2019, Genocea Biosciences, Inc. (“we” or the “Company”) entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which we have the right to sell to Lincoln Park up to $30,000,000 of shares of our common stock, including the initial purchase of $2,500,000, at a purchase price of $2.587 per share (the “Initial Purchase”), at our discretion over the next 30 months, subject to the conditions and limitations set forth in the Purchase Agreement and as described further below. As consideration for entering into the Purchase Agreement, we agreed to issue 289,966 shares of our common stock to Lincoln Park as a commitment fee (the “Commitment Shares”).
In addition to the Initial Purchase of $2,500,000 of shares of our common stock, under the Purchase Agreement, from time to time on any trading day that we select, we have the right, in our sole discretion, subject to the conditions and limitations in the Purchase Agreement, to direct Lincoln Park to purchase up to 100,000 shares of our common stock (each such purchase, a “Regular Purchase”) over the 30-month term of the Purchase Agreement; provided, however, that such limit may be increased to up to 150,000 shares if the last closing sale price of our common stock is at least $4.50 on the purchase date, and may be increased to up to 200,000 shares if the last closing sale price of our common stock is at least $6.00 on the purchase date (each subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement). The purchase price for shares of common stock to be purchased by Lincoln Park will be the equal to lesser of (i) the lowest sale price on the purchase date, as reported by Nasdaq, or (ii) the arithmetic average of the three lowest closing sale prices for our common stock during the ten trading days prior to the purchase date. Lincoln Park’s obligation under each Regular Purchase shall not exceed $2,000,000; provided that we may agree with Lincoln Park to increase the share limit for any Regular Purchase.
We can also direct Lincoln Park to purchase additional amounts as accelerated purchases (an “Accelerated Purchase”), under certain circumstances and provided that the last closing sale price of our common stock is at least $1.00 per share, in an amount up to the lesser of (i) three times the number of shares purchased pursuant to such Regular Purchase or (ii) 30% of the trading volume on such accelerated purchase date. The purchase price for the additional shares is the lower of:
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the closing sale price for the common stock on the date of sale; and
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ninety-seven percent (97%) of the volume weighted average price of the common stock on the Nasdaq Capital Market on the date of sale.
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In the event we have directed Lincoln Park to purchase shares of our common stock in the full amount available for an Accelerated Purchase, on the date of such Accelerated Purchase (which is the business day following the corresponding Regular Purchase), we may also direct Lincoln Park to purchase an additional amount of our common stock under the same terms set forth above for an Accelerated Purchase.
There is no upper or lower limit on the price per share that Lincoln Park must pay for our common stock under the Purchase Agreement.
Other than as described above, there are no trading volume requirements or restrictions under the Purchase Agreement. We will control the timing and amount of any sales of our common stock to Lincoln Park. We may at any time, in our sole discretion terminate the Purchase Agreement without fee, penalty or cost, upon one trading day written notice.
The Purchase Agreement limits our sales of shares of common stock to Lincoln Park to 5,227,323 shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the Purchase Agreement (which number of shares shall be reduced, on a share-for-share basis, by the number of shares of common stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by the Purchase Agreement under applicable Nasdaq rules (the “Exchange Cap”), unless (i) shareholder approval is obtained to issue more than such amount or (ii) the average price of all applicable sales of our common stock to Lincoln Park under the Purchase Agreement equals or exceeds the average of the closing price of our common stock on the Nasdaq Capital Market for the five business days immediately preceding the signing of the Purchase Agreement, such that issuances and sales of common stock to Lincoln Park under the Purchase Agreement would be exempt from the Exchange Cap limitation under applicable Nasdaq rules.
The Purchase Agreement also prohibits us from directing Lincoln Park to purchase any shares of common stock if those shares, when aggregated with all other shares of our 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 9.99% of the
then total outstanding shares of our common stock, as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 13d-3 thereunder.
The Purchase Agreement does not limit our ability to raise capital from other sources at our sole discretion, provided, however, that we shall not enter into any “Variable Rate Transaction” as defined in the Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities during the 30 months after the date of the Purchase Agreement.
Events of default under the Purchase Agreement include the following:
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the effectiveness of the registration statement lapses for any reason (including, without limitation, the issuance of a stop order), or the prospectus supplement and accompanying prospectus are unavailable for sale by us or the resale by Lincoln Park of our common stock offered thereby, and such lapse or unavailability continues for a period of ten consecutive business days or for more than an aggregate of thirty business days in any 365-day period;
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the suspension of our common stock from trading or the failure of our common stock to be listed on Nasdaq for a period of one business day;
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the delisting of our common stock from Nasdaq; provided, however, that our common stock is not immediately thereafter trading on the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market, the NYSE American, the NYSE Arca, the OTC Bulletin Board, or the OTCQX or OTCQB operated by the OTC Markets Group, Inc. (or nationally recognized successor to any of the foregoing);
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the failure for any reason by the transfer agent to issue shares to Lincoln Park within three business days after the applicable purchase date on which Lincoln Park is entitled to receive such securities;
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any breach of the representations and warranties or covenants contained in the Purchase Agreement or any related agreements with Lincoln Park if such breach would reasonably be expected to have a material adverse effect and such breach is not cured within five trading days;
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our insolvency or our participation or threatened participation in insolvency or bankruptcy proceedings by or against us, as more fully described in the Purchase Agreement;
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if at any time we are not eligible to transfer our common stock electronically via DWAC; or
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if at any time after the commencement date, the Exchange Cap is reached, to the extent it is applicable.
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Lincoln Park does not have the right to terminate the Purchase Agreement upon any of the events of default set forth above. During an event of default, all of which are outside the control of Lincoln Park, shares of our common stock cannot be sold by us or purchased by Lincoln Park under the terms of the Purchase Agreement.
We have the right to terminate the Purchase Agreement at any time, at no cost to us. In the event of bankruptcy proceedings by or against us, the Purchase Agreement will automatically terminate without action of any party.
The Purchase Agreement contains customary representations, warranties and agreements of the Company and Lincoln Park, limitations and conditions to completing future sale transactions, indemnification rights and other obligations of the parties. Actual sales of shares of common stock to Lincoln Park under the Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including (among others) market conditions, the trading price of our common stock and determinations by the Company as to other available and appropriate sources of funding for the Company.
Concurrently with entering into the Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park (the “Registration Rights Agreement”), pursuant to which we agreed to file a prospectus supplement pursuant to Rule 424(b) relating to the sale of the Company’s shares of common stock that have been and may be issued to Lincoln Park under the Purchase Agreement pursuant to the Company’s existing shelf registration statement or a new registration statement and to use our reasonable best efforts to keep such registration statement effective until the earlier of (i) the date on which Lincoln Park shall have sold all the shares under the Purchase Agreement and (ii) the earlier of (A) 180 days following the first day of the month immediately following the 30 month anniversary of the commencement date and (B) the nine months following the termination of the Purchase Agreement.
The offer and sale of the shares under the Purchase Agreement was and will be made pursuant to the Company’s registration statement on Form S-3 (SEC File No. 333-225086), which was declared effective by the SEC on June 5, 2018, and pursuant to the prospectus supplement filed on October 24, 2019.
The Company intends to use the net proceeds from this offering primarily to support the continued advancement of both GEN-009 and GEN-011 as well as for other research and general corporate purposes.
The foregoing description of the terms and conditions of the Purchase Agreement and the Registration Rights Agreement does not purport to be complete and is qualified in their entirety by the full text of the Purchase Agreement and the Registration Rights Agreement, which are attached hereto as Exhibit 99.1 and Exhibit 4.1, respectively, and incorporated herein by reference.
The Company is filing the opinion of its counsel, Ropes & Gray LLP, relating to the legality of the shares of common stock offered and sold pursuant to the Purchase Agreement, as Exhibit 5.1 hereto.