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Item 1.01
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Entry into a Material Definitive Agreement.
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Merger Agreement
On November 8, 2019, Invitae Corporation (“Invitae”) entered into an Agreement and Plan of Merger (the “Merger Agreement”), with Clear Genetics, Inc., a Delaware corporation (“Clear”), Catalina Merger Sub A Inc., a Delaware corporation and a wholly owned subsidiary of Invitae (“Merger Sub A”), Catalina Merger Sub B LLC, a Delaware limited liability company and a wholly owned subsidiary of Invitae (“Merger Sub B”), and Shareholder Representative Services LLC, solely in its capacity as the representative, agent and attorney-in-fact of the securityholders of Clear, providing for the acquisition of all of the capital stock of Clear by Invitae.
On November 12, 2019, Invitae completed its acquisition of Clear in accordance with the terms of the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub A merged with and into Clear, with Clear becoming a wholly-owned subsidiary of Invitae, promptly followed by Clear merging with and into Merger Sub B, with Merger Sub B continuing as a wholly-owned subsidiary of Invitae and the surviving entity in the mergers (collectively, the “Mergers”). The Mergers, taken together, are intended to qualify for federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
The aggregate consideration in the Mergers for all of the capital stock of Clear was approximately $50.0 million, consisting of approximately $25.0 million in cash and the remainder in Invitae’s common stock, which consideration was subject to adjustment based on the working capital of Clear at the closing of the Mergers, among other things. Invitae will issue an aggregate of 1,462,922 shares of its common stock to the former securityholders of Clear, with such number of shares calculated based upon the average closing price of Invitae’s common stock on the New York Stock Exchange for the twenty (20) trading day period immediately preceding the date of the Merger Agreement. Approximately $0.3 million of the cash consideration and 423,066 shares of the stock consideration are subject to a hold back to satisfy indemnification obligations that may arise in connection with the Merger Agreement.
The shares of Invitae’s common stock issued in the Mergers are being issued in reliance upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933.
In accordance with the terms of the Merger Agreement, Clear obtained a written consent and joinder agreement from all of its securityholders (collectively, the “Consenting Holders”) pursuant to which such Consenting Holders (i) approved the Merger Agreement, the Mergers, and the other transactions and arrangements contemplated by the Merger Agreement, (ii) agreed to the indemnification provisions in the Merger Agreement, (iii) made customary representations and warranties in connection with the acquisition of Invitae’s common stock in the Mergers if such securityholder is receiving Invitae’s common stock pursuant to the Merger Agreement, and (iv) released Invitae from certain claims related to the Mergers.
The obligations of the parties to consummate the Mergers was subject to the satisfaction or waiver of various conditions set forth in the Merger Agreement, including, but not limited to, (i) the accuracy of the representations and warranties of each party contained in the Merger Agreement (subject to certain materiality qualifications), (ii) each party’s compliance with or performance of the covenants and agreements in the Merger Agreement in all material respects, and (iii) entry of offer letters and non-competition agreements with certain employees of Clear.
Registration Rights Agreement
In connection with the Mergers, Invitae entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with certain securityholders of Clear, pursuant to which Invitae agreed to register for resale on Form S-3ASR the shares of Invitae’s common stock issued in the Mergers. The Registration Rights Agreement provides that such registration rights will expire at such time as such shares of Invitae common stock have been disposed of pursuant to the resale registration statement or pursuant to Rule 144 promulgated under the Securities Act of 1933, or as to any holder when all of such holder’s shares may be sold pursuant to Rule 144 without limitation as to manner of sale restrictions or volume limitation.