424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-220448

LOGO

PROSPECTUS/OFFER TO EXCHANGE

INVITAE CORPORATION

Offer by Invitae Corporation

to Exchange Each Outstanding Series F Warrant to Acquire Shares of Common Stock

of

COMBIMATRIX CORPORATION

for

Shares of Common Stock of Invitae Corporation

subject to the procedures described in this prospectus/offer to exchange and the related letter of transmittal

THE OFFER AND THE WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER 13, 2017, UNLESS EXTENDED.

Invitae Corporation, or Invitae, is offering to exchange for each outstanding Series F warrant to acquire one share of common stock of CombiMatrix Corporation, or CombiMatrix, validly tendered and not withdrawn in the offer, 0.3056 of a share of Invitae common stock, or the Warrant Exchange Ratio, subject to the procedures described in this document and the related letter of transmittal, and with cash issued in lieu of fractional shares of Invitae common stock (which, as may be amended, supplemented or otherwise modified from time to time, constitutes the “Offer”). The Offer is being made pursuant to an Agreement and Plan of Merger and Reorganization, dated July 31, 2017, or the Merger Agreement, pursuant to which Coronado Merger Sub, Inc., a wholly owned subsidiary of Invitae, will merge with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of Invitae, which is referred to as the Merger. The Warrant Exchange Ratio was calculated as the quotient (rounded to the nearest ten-thousandth) obtained by dividing $2.90 by the average closing price for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement, or $9.491, which is referred to in the Merger Agreement as the Invitae Trailing Average Share Value.

Invitae’s obligation to accept for exchange, and to exchange, CombiMatrix Series F warrants for shares of Invitae common stock and cash in lieu of fractional shares of Invitae common stock in the Offer is subject to a number of conditions, which are more fully described in the section entitled “The Offer — Conditions of the Offer” of this prospectus/offer to exchange.

Invitae’s common stock is listed on the NYSE under the symbol “NVTA.” CombiMatrix Series F warrants are listed on the NASDAQ Capital Market under the symbol “CBMXW.”

For a discussion of certain factors that CombiMatrix Series F warrant holders should consider in connection with the Offer, please carefully read the section entitled “Risk Factors” beginning on page 32 of this prospectus/offer to exchange.

Invitae has not authorized any person to provide any information or to make any representation in connection with the Offer other than the information contained in, annexed to or incorporated by reference in this document, and if any person provides any information or makes any representation of this kind, that information or representation must not be relied upon as having been authorized by Invitae.

Neither the Securities and Exchange Commission, or the SEC, nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus/offer to exchange. Any representation to the contrary is a criminal offense.

The date of this prospectus/offer to exchange is October 6, 2017.


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ADDITIONAL INFORMATION

This prospectus/offer to exchange incorporates important business and financial information about Invitae and CombiMatrix from documents that each company has filed with the SEC, including certain documents of CombiMatrix attached as annexes to this prospectus/offer to exchange and certain documents of Invitae incorporated by reference that have not been included in or delivered with this document. This information is available to you without charge upon your oral or written request. You may read and copy documents incorporated by reference in this document, other than certain exhibits to those documents, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also obtain such documents free of charge through the SEC’s website (www.sec.gov) or by requesting them in writing or by telephone from the appropriate company at the following addresses:

 

Invitae Corporation

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Attn.: Investor Relations

 

CombiMatrix Corporation

300 Goddard, Suite 100

Irvine, CA 92618

(949) 753-0624

Attn.: Investor Relations

If you would like to request any documents, please do so by no later than five business days prior to the Expiration Date to receive them before the Expiration Date of the Offer.

You should rely only on information contained in this prospectus/offer to exchange, attached within an annex to this prospectus/offer to exchange, or incorporated by reference into this prospectus/offer to exchange. No one has been authorized to provide you with information that is different from the information contained in, attached as an annex to, or incorporated by reference into, this document. You should not assume that the information contained in, attached as an annex to, or incorporated by reference into, this document is accurate as of any date other than the date of this document, the respective dates of the applicable annexes, or the respective dates of the information incorporated by reference into this document. Neither the mailing of this document to CombiMatrix Series F warrant holders, nor the issuance by Invitae of common stock in connection with the Offer, will create any implication to the contrary. For a listing of certain documents attached as annexes or incorporated by reference into this document, please see the section entitled “Where You Can Find More Information.”

Information on the websites of Invitae or CombiMatrix, or any subsidiary of Invitae or CombiMatrix, is not part of this prospectus/offer to exchange. You should not rely on that information in deciding whether to tender pursuant to the Offer.

ABOUT THIS DOCUMENT

This prospectus/offer to exchange forms a part of a registration statement on Form S-4 (Registration No. 333-220448) filed by Invitae with the Securities and Exchange Commission and constitutes a prospectus of Invitae under Section 5 of the Securities Act, and the rules thereunder, with respect to the shares of Invitae common stock to be issued in the Offer. In addition, it constitutes an offer to exchange with respect to the Offer.

Invitae is not asking you for a proxy and you are requested not to send us a proxy. Invitae is asking that CombiMatrix Series F warrant holders that choose to tender their Series F warrants in the Offer send the documents and/or comply with procedures described in this prospectus/offer to exchange and the related letter of transmittal.

This prospectus/offer to exchange does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this document regarding Invitae has been provided by Invitae and information contained in this document regarding CombiMatrix has been provided by CombiMatrix.


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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS

     1  

PROSPECTUS SUMMARY

     6  

SELECTED HISTORICAL FINANCIAL DATA OF INVITAE

     14  

SELECTED HISTORICAL FINANCIAL DATA OF COMBIMATRIX

     16  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     18  

COMPARATIVE MARKET PRICES AND DIVIDENDS

     27  

Invitae Common Stock

     27  

CombiMatrix Series F Warrants

     28  

Dividends

     28  

COMPARATIVE MARKET VALUE OF SECURITIES

     29  

COMPARATIVE PER SHARE DATA

     30  

RECENT DEVELOPMENTS

     31  

RISK FACTORS

     32  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     37  

INFORMATION ABOUT THE COMPANIES

     38  

BACKGROUND OF THE MERGER AND THE OFFER

     40  

Background of the Merger and the Offer

     40  

Invitae’s Reasons for the Merger and the Offer

     51  

THE OFFER

     53  

Consideration

     53  

Cash Instead of Fractional Shares of Invitae Common Stock

     54  

Distribution of Offer Materials

     54  

Expiration of the Offer

     54  

Extension, Termination and Amendment

     54  

Exchange of CombiMatrix Series F warrants; Delivery of Shares of Invitae Common Stock and Cash Instead of Fractional Shares

     55  

Withdrawal Rights

     56  

Procedure for Tendering

     56  

Exchange Agent

     57  

Information Agent

     58  

Lost or Destroyed Certificates

     58  

Guaranteed Delivery

     58  

Fees and Commissions

     59  

Matters Concerning Validity and Eligibility

     59  

Announcement of Results of the Offer

     59  

Material U.S. Federal Income Tax Consequences of the Offer

     59  

Purpose of the Offer; The Merger; No Dissenter’s Rights

     63  

Effect of the Offer on the Market for CombiMatrix Series F warrants; NASDAQ Capital Market Listing; Registration Under the Exchange Act; Margin Regulations

     64  

Conditions of the Offer

     65  

Certain Legal Matters; Regulatory Approvals

     66  

Interests of Certain CombiMatrix Directors and Officers

     67  

Current Directors and Executive Officers of Invitae

     70  

Board of Directors and Management of Invitae Following Completion of the Merger

     73  

Certain Relationships With CombiMatrix

     73  

Source and Amount of Funds

     74  

Fees and Expenses

     74  

Accounting Treatment

     74  

Stock Exchange Listing

     75  

THE MERGER AGREEMENT

     76  

Structure

     76  

Completion and Effectiveness of the Merger

     76  


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Merger Consideration and Exchange Ratio

     76  

Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis

     80  

Invitae Common Stock

     81  

Procedures for Exchanging CombiMatrix Stock Certificates

     81  

Fractional Shares

     82  

Representations and Warranties

     82  

Covenants; Conduct of Business Pending the Merger

     85  

Non-Solicitation

     86  

Disclosure Documents

     88  

Regulatory Approvals Required for the Merger

     89  

CombiMatrix Stock Options, RSUs and Warrants

     90  

Indemnification and Insurance for CombiMatrix Directors and Officers

     91  

CombiMatrix Transaction Bonus Payout Agreements

     91  

Additional Agreements

     91  

Conditions to the Completion of the Merger

     92  

Termination of the Merger Agreement and Termination Fee

     94  

Amendment

     95  

Expenses

     95  

Special Meeting of CombiMatrix Stockholders

     95  

DESCRIPTION OF INVITAE CAPITAL STOCK

     96  

COMPARISON OF RIGHTS OF INVITAE AND COMBIMATRIX STOCKHOLDERS

     97  

Capitalization

     97  

Voting Rights

     97  

Stockholder Action by Written Consent

     98  

Dividends

     98  

Number of Directors

     98  

Classification of Directors

     99  

Election of Directors

     99  

Removal of Directors

     99  

Vacancies

     100  

Amendments to Certificate of Incorporation

     100  

Amendments to Bylaws

     100  

Annual Meetings of Stockholders

     101  

Special Meetings of Stockholders

     101  

Submission of Stockholder Proposals

     101  

Stockholder Nomination of Director Candidates

     102  

Indemnification and Limitation of Personal Liability of Directors

     103  

Extraordinary Transactions

     103  

LEGAL MATTERS

     105  

EXPERTS

     105  

WHERE YOU CAN FIND MORE INFORMATION

     106  

ANNEX A – MERGER AGREEMENT

     A-1  

ANNEX B – COMBIMATRIX ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2016

     B-1  

ANNEX C – COMBIMATRIX QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017

     C-1  


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QUESTIONS AND ANSWERS

The following questions and answers briefly address some commonly asked questions about the Offer. Invitae urges you to read the remainder of this document carefully. Additional important information is also contained in the Merger Agreement which is attached as Annex A, as well as the letter of transmittal related to the Offer and the other annex to, and the documents incorporated by reference into, this document.

 

Q: Who is offering to acquire my CombiMatrix Series F warrants?

 

A: The Offer is made by Invitae Corporation, or Invitae. Invitae’s mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Invitae’s goal is to aggregate most of the world’s hereditary genetic tests into a single service with higher quality, faster turnaround time and lower pricing than many single gene tests today. Invitae was founded on four core principles: patients should own and control their own genetic information; healthcare professionals are fundamental in ordering and interpreting genetic information; driving down the price of genetic information will increase its clinical and personal utility; and genetic information is more valuable when shared. Invitae utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Invitae currently has more than 20,000 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. Invitae’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions, as well as recently acquired capabilities in preimplantation and carrier screening for inherited disorders. Invitae now provides comprehensive genetic information for every stage of life, from preconception through adult diagnostics.

 

Q: What are the classes and amounts of CombiMatrix warrants that Invitae is offering to acquire in the Offer?

 

A: Invitae is seeking to acquire all issued and outstanding Series F warrants to purchase shares of common stock of CombiMatrix Corporation, or CombiMatrix. As of September 26, 2017, there were CombiMatrix Series F warrants to purchase 2,066,976 shares of CombiMatrix common stock outstanding and held by public warrant holders.

 

Q: What will I receive for my CombiMatrix Series F warrants?

 

A: Invitae is offering to exchange for each outstanding CombiMatrix Series F warrant to acquire one share of CombiMatrix common stock validly tendered pursuant to the Offer and not properly withdrawn, 0.3056 of a share of Invitae common stock, or the Warrant Exchange Ratio, subject to the procedures described in this document and the related letter of transmittal, and with cash issued in lieu of fractional shares of Invitae common stock (which constitutes the “Offer”). The Warrant Exchange Ratio was calculated as the quotient (rounded to the nearest ten-thousandth) obtained by dividing $2.90 by the average closing price of for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement, or $9.491.

Instead of receiving any fractional shares of Invitae common stock to which CombiMatrix Series F warrant holders otherwise would be entitled, tendering CombiMatrix Series F warrant holders will receive a cash payment in lieu of such fractional share equal to the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by $9.491. See the section entitled “The Offer —Cash Instead of Fractional Shares of Invitae Common Stock” for a description of the treatment of fractional shares.

CombiMatrix Series F warrant holders should consider the terms of the CombiMatrix Series F warrants and should obtain current market quotations for shares of Invitae common stock and

 

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CombiMatrix Series F warrants before deciding whether to tender pursuant to the Offer. Please also see the section of this document entitled “Risk Factors.”

 

Q: Will I have to pay any fee or commission to exchange CombiMatrix Series F warrants?

 

A: If you are the registered holder of CombiMatrix Series F warrants and you tender your CombiMatrix Series F warrants in the Offer, you will not have to pay any brokerage fees, commissions or similar expenses. If you hold your CombiMatrix Series F warrants in “street name” through a broker, dealer, commercial bank, trust company or other nominee and your broker or other nominee tenders your CombiMatrix Series F warrants on your behalf, your broker or such other nominee may charge a fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.

 

Q: Why is Invitae offering to acquire my CombiMatrix Series F warrants?

 

A: Pursuant to the Agreement and Plan of Merger and Reorganization, dated as of July 31, 2017, by and among Invitae, Coronado Merger Sub, Inc., or Merger Sub, and CombiMatrix, which is referred to as the Merger Agreement. The successful completion of the Offer, including the satisfaction of the condition to the Offer that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement shall have been validly tendered and not withdrawn prior to the expiration of the Offer, is a precondition to Invitae’s obligation to consummate the Merger. Promptly after completion of the Offer, Invitae intends to consummate a merger of Merger Sub with and into CombiMatrix, with CombiMatrix surviving the Merger (this merger is referred to in this document as the “Merger” and CombiMatrix after the Merger is sometimes referred to as the “surviving corporation”). After the Merger, the surviving corporation will be a wholly owned subsidiary of Invitae and the former CombiMatrix Series F warrant holders will no longer have any direct ownership interest in the surviving corporation.

 

Q: What does the CombiMatrix board of directors recommend?

 

A: The CombiMatrix board of directors has unanimously recommended that the CombiMatrix stockholders vote to approve the Merger. The successful completion of the Offer, including the satisfaction of the condition to the Offer that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement shall have been validly tendered and not withdrawn prior to the expiration of the Offer, is a precondition to Invitae’s obligation to consummate the Merger.

However, neither Invitae, the CombiMatrix board of directors, the information agent, nor the exchange agent for the Offer is making any recommendation to you as to whether you should tender or refrain from tendering your CombiMatrix Series F warrants pursuant to the Offer. You must make your own decision as to whether to tender your CombiMatrix Series F warrants and, if so, how many CombiMatrix Series F warrants to tender. In doing so, you should read carefully the information in this prospectus/offer to exchange and the related letter of transmittal.

 

Q: Is Invitae’s financial condition relevant to my decision to tender CombiMatrix Series F warrants in the Offer?

 

A: Yes. Invitae’s financial condition is relevant to your decision to tender your CombiMatrix Series F warrants because the consideration you will receive if your CombiMatrix Series F warrants are exchanged in the Offer will consist of shares of Invitae common stock. You should therefore consider Invitae’s financial condition as you could become a stockholder of Invitae through the Offer. You also should consider the likely effect that Invitae’s acquisition of CombiMatrix could have on Invitae’s financial condition. This prospectus/offer to exchange contains financial information regarding Invitae and CombiMatrix, as well as pro forma financial information for the proposed combination of Invitae and CombiMatrix, all of which you are encouraged to review.

 

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Q: When does the Offer expire? Can the Offer be extended and, if so, under what circumstances?

 

A: The Offer is scheduled to expire at 12:00 midnight, New York City time, on November 13, 2017, which is referred to as the Initial Expiration Date, unless further extended by Invitae. Any extension, delay, termination, waiver or amendment of the Offer will be followed as promptly as practicable by public announcement thereof to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all CombiMatrix Series F warrants previously tendered and not properly withdrawn will remain subject to the Offer, subject to the rights of a tendering holder to withdraw such holder’s CombiMatrix Series F warrants. “Expiration Date” means the Initial Expiration Date, unless and until Invitae has extended the period during which the Offer is open, in which event the term “Expiration Date” means the latest time and date at which the Offer, as so extended by Invitae, will expire.

Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the SEC, Invitae may from time to time extend the Offer for one or more periods, including if, at the scheduled Expiration Date, any of the conditions of the Offer shall not have been satisfied or waived, until such time as such conditions are satisfied or waived. Invitae shall extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff of the SEC applicable to the Offer.

Any decision to extend the Offer will be made public by an announcement regarding such extension as described under the section entitled “The Offer — Extension, Termination and Amendment.”

 

Q: How do I tender my CombiMatrix Series F warrants?

 

A: To tender CombiMatrix Series F warrants into the Offer, if you are a registered holder of Series F warrants you must deliver the certificates representing your CombiMatrix Series F warrants, together with a completed letter of transmittal and any other documents required by the letter of transmittal, to American Stock Transfer & Trust Company, LLC, the exchange agent for the Offer, not later than the time the Offer expires. The letter of transmittal (and the instructions thereto) is enclosed with this document.

If you hold Series F warrants in “street name” through a broker, dealer, commercial bank, trust company or other nominee, you must give such broker or other nominee instructions to tender your Series F warrants in the Offer within the time period provided by your broker or other nominee. Your broker, dealer, commercial bank, trust company or other nominee may establish a deadline before the expiration of the Offer by which you must provide it with your instructions. Please contact your broker or other nominee for their specific requirements.

For a complete discussion of the procedures for tendering your CombiMatrix Series F warrants, please see the section of this document entitled “The Offer — Procedure for Tendering.”

 

Q: Until what time can I withdraw tendered CombiMatrix Series F warrants?

 

A: If you are a registered holder of Series F warrants, you may withdraw previously tendered CombiMatrix Series F warrants at any time prior to the expiration of the Offer. If you hold Series F warrants in “street name” through a broker, dealer, commercial bank, trust company or other nominee, please contact your broker or other nominee for their specific requirements. Your broker, dealer, commercial bank, trust company or other nominee may establish a deadline prior to the expiration of the Offer by which you must provide it with your instructions to withdraw. For a complete discussion of the procedures for withdrawing your CombiMatrix Series F warrants, please see the section of this document entitled “The Offer — Withdrawal Rights.”

 

Q: How do I withdraw previously tendered CombiMatrix Series F warrants?

 

A:

To withdraw previously tendered CombiMatrix Series F warrants, if you are a registered holder of Series F warrants you must deliver a written or facsimile notice of withdrawal with the required information to the

 

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  exchange agent while you still have the right to withdraw. If you tendered CombiMatrix Series F warrants by giving instructions to a broker, dealer, commercial bank, trust company or other nominee, you must instruct the broker or other nominee to arrange for the withdrawal of your CombiMatrix Series F warrants. Please contact your broker, dealer, commercial bank, trust company or other nominee for their specific requirements. For a complete discussion on the procedures for withdrawing your CombiMatrix Series F warrants, including the applicable deadlines for effecting withdrawals, please see the section of this document entitled “The Offer — Withdrawal Rights.”

 

Q: When and how will I receive the Offer consideration in exchange for my tendered CombiMatrix Series F warrants?

 

A: Invitae will exchange all validly tendered and not properly withdrawn CombiMatrix Series F warrants promptly after the Expiration Date, subject to the terms of the Offer and the satisfaction or waiver of the conditions to the Offer, as set forth in the section of this document entitled “The Offer — Conditions of the Offer.” Invitae will deliver the consideration for your validly tendered and not properly withdrawn CombiMatrix Series F warrants by depositing the stock and cash consideration therefor with the exchange agent, which will act as your agent for the purpose of receiving the Offer consideration from Invitae and transmitting such consideration to you if you are a registered Series F warrant holder. In all cases, an exchange of tendered CombiMatrix Series F warrants will be made only after timely receipt by the exchange agent of certificates for such CombiMatrix Series F warrants and a properly completed and duly executed letter of transmittal and any other required documents for such CombiMatrix Series F warrants. If you hold CombiMatrix Series F warrants in “street name” through a broker, dealer, commercial bank, trust company or other nominee, you should contact your broker or other nominee for information on receiving the Offer consideration.

 

Q: Will the CombiMatrix Series F warrants that are not tendered in the Offer continue to be eligible for trading on the NASDAQ Capital Market?

 

A: In connection with the completion of the Offer and the Merger, CombiMatrix and Invitae intend to make the appropriate filings to delist any remaining unexchanged CombiMatrix Series F warrants from trading on the NASDAQ Capital Market, presuming any such unexchanged warrants will qualify for delisting. The CombiMatrix Series F warrants that are not validly tendered in the Offer, if any, and that remain outstanding and unexercised at the time of the Merger will be assumed by Invitae and converted into warrants to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to reflect the Merger Exchange Ratio. Invitae does not intend to list such warrants for trading on any national stock exchange. Please see the sections entitled “Risk Factors — The liquidity of the CombiMatrix Series F warrants that are not exchanged will be reduced” and “The Offer – Effect of the Offer on the Market for CombiMatrix Series F warrants; NASDAQ Capital Market Listing; Registration Under the Exchange Act; Margin Regulations.

 

Q: How does this Offer impact the closing of the Merger?

 

A: One of the closing conditions for Invitae in the Merger Agreement is that at least 90% of the Series F warrants outstanding immediately prior to the date of the Merger Agreement must have been validly tendered pursuant to this Offer prior the closing of the Merger; therefore, if sufficient holders of outstanding CombiMatrix Series F warrants do not participate in this Offer, Invitae will have the right not to consummate the Merger with CombiMatrix.

 

Q: How does this Offer impact the consideration payable to CombiMatrix stockholders in the Merger?

 

A:

The per share value of the consideration payable in the Merger to the holders of CombiMatrix common stock will be reduced to the extent that more shares of CombiMatrix common stock or Series F warrants are outstanding as of the closing of the Merger. Therefore, to the extent that CombiMatrix Series F warrants are

 

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  not tendered in the Offer, the per share value of the Merger consideration will be reduced. For example, the estimated Merger Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 trading days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative $0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Merger Exchange Ratio represented $8.60 in value for each share of CombiMatrix common stock. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Merger Exchange Ratio would be reduced to 0.84, representing $8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Offer of at least 90% as described in this prospectus/offer to exchange, the Merger Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. See the sections entitled “The Merger Agreement — Merger Consideration and Exchange Ratio” and “The Merger Agreement — Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis” for additional factors that may affect the Merger Exchange Ratio.

 

Q: Where can I find more information about Invitae and CombiMatrix?

 

A: You can find more information about Invitae and CombiMatrix from various sources described in the section of this document entitled “Where You Can Find More Information.”

 

Q: Who can help answer my questions?

 

A: If you have any questions about the Offer or if you need additional copies of this document, you should contact Advantage Proxy, Inc., Invitae’s information agent for this Offer:

ADVANTAGE PROXY, INC.

PO Box 13581

Des Moines, WA 98198

Telephone: (877) 870-8565 (toll free); (206) 870-8565 (collect)

Email: ksmith@advantageproxy.com

 

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PROSPECTUS SUMMARY

The following is a summary which highlights selected information contained in this document. It may not contain all of the information that is important to you. You are urged to carefully read this entire document and the other documents which are annexes to this prospectus/offer to exchange or incorporated herein by reference in order to fully understand the Offer, including the sections entitled “Where You Can Find More Information” on page 106 and “Risk Factors” on page 32.

The Offer (See page 53)

Under the terms of the Offer, each CombiMatrix Series F warrant holder will receive, for each outstanding CombiMatrix Series F warrant to acquire one share of CombiMatrix common stock validly tendered and not withdrawn in the Offer, 0.3056 of a share of Invitae common stock, or the Warrant Exchange Ratio, subject to the procedures described in this document and the related letter of transmittal, and with cash issued in lieu of fractional shares of Invitae common stock (which constitutes the “Offer”). The Warrant Exchange Ratio was calculated as the quotient (rounded to the nearest ten-thousandth) obtained by dividing $2.90 by the average closing price of for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement, or $9.491, which is referred to in the Merger Agreement as the Invitae Trailing Average Share Value.

Instead of receiving any fractional shares of Invitae common stock to which CombiMatrix Series F warrant holders otherwise would be entitled, tendering CombiMatrix Series F warrant holders will receive a cash payment in lieu of such fractional share equal to the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by $9.491. See the section entitled “The Offer — Cash Instead of Fractional Shares of Invitae Common Stock” for a description of the treatment of fractional shares.

Invitae’s Reasons for the Merger and the Offer (See page 51)

Invitae’s board of directors concluded that the Merger Agreement, the Merger, the stock issuance in connection therewith and the other transaction documents and the transactions contemplated thereby or undertaken in connection therewith, including the Offer, are advisable and in the best interests of Invitae and its stockholders because, among other factors, the transaction provides Invitae with a unique opportunity to expand its business by acquiring a clinical molecular diagnostic laboratory whose focus is on pre-implantation genetic screening, prenatal diagnosis, miscarriage analysis and pediatric developmental disorders.

Purpose of the Offer; The Merger (See page 63)

Pursuant to the Merger Agreement, the successful completion of the Offer, including the satisfaction of the condition to the Offer that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement shall have been validly tendered and not withdrawn prior to the expiration of the Offer, is a precondition to Invitae’s obligation to consummate the Merger. Promptly after completion of the Offer, Invitae intends to consummate a merger of Merger Sub with and into CombiMatrix, with CombiMatrix surviving the Merger as a wholly owned subsidiary of Invite. After the Merger, the former CombiMatrix Series F warrant holders will no longer have any direct ownership interest in the surviving corporation. See the sections entitled “Background of the Merger and the Offer” and “The Merger Agreement” for a more detailed description of the events leading up to the proposed Merger and Offer and the terms and conditions of the Merger Agreement.

In the Merger, the CombiMatrix Series F warrants held by warrant holders that do not participate in the Offer will be assumed by Invitae in accordance with their terms and converted into warrants to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such

 



 

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warrants being adjusted appropriately to reflect the merger exchange ratio, or the Merger Exchange Ratio, as described below.

Under the terms of the Offer, each CombiMatrix Series F warrant holder will receive, for each outstanding CombiMatrix Series F warrant to acquire one share of CombiMatrix common stock validly tendered and not withdrawn in the Offer a fraction of a share of Invitae common stock equal to Warrant Exchange Ratio, subject to the procedures described in this document and the related letter of transmittal.

Material U.S. Federal Income Tax Consequences of the Offer (See page 59)

Invitae and CombiMatrix intend the Offer, together with the Merger, to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Code. In general, and subject to the qualifications and limitations set forth in the section entitled “The Offer – Material U.S. Federal Income Tax Consequences of the Offer,” if the Offer, together with the Merger, qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the material U.S. federal income tax consequences to U.S. Holders (as defined in the section entitled “The Offer – Material U.S. Federal Income Tax Consequences of the Offer”) of CombiMatrix Series F warrants will be as follows:

 

    a CombiMatrix Series F warrant holder will not recognize gain or loss upon the exchange of CombiMatrix Series F warrants for Invitae common stock pursuant to the Offer, except with respect to cash received in lieu of a fractional share of Invitae common stock as described below;

 

    a CombiMatrix Series F warrant holder who receives cash in lieu of a fractional share of Invitae common stock in the Offer will recognize capital gain or loss in an amount equal to the difference between the amount of cash received in lieu of a fractional share and the warrant holder’s tax basis allocable to such fractional share;

 

    a CombiMatrix Series F warrant holder’s aggregate tax basis for the shares of Invitae common stock received in the Offer (including any fractional share interest for which cash is received) will equal the warrant holder’s aggregate tax basis in the CombiMatrix Series F warrants surrendered in the Offer; and

 

    the holding period of the shares of Invitae common stock received by a CombiMatrix Series F warrant holder in the Offer will include the holding period of the shares of CombiMatrix Series F warrants surrendered in exchange therefor.

Tax matters are very complicated, and the tax consequences of the Offer to a particular CombiMatrix Series F warrant holder will depend on such warrant holder’s circumstances. Accordingly, you are strongly urged to consult your tax advisor for a full understanding of the tax consequences of the Offer to you, including the applicability and effect of federal, state, local and non-U.S. income and other tax laws.

Conditions That Must Be Satisfied or Waived for the Offer to Occur (See page 65)

Invitae currently expects to complete the Offer in the fourth quarter of 2017. However, as more fully described in this document, the obligations of Invitae to complete the Offer are conditioned upon a number of items being satisfied or, where legally permissible, waived, including the following:

 

    CombiMatrix Series F warrant holders must have validly tendered and not withdrawn prior to the expiration of the Offer a number of CombiMatrix Series F warrants that is at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement; provided that Invitae has offered shares of Invitae common stock with a value of at least $2.90 per CombiMatrix Series F warrant (based on the Invitae Trailing Average Share Value). This 90% requirement is referred to as the “minimum tender”;

 



 

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    the registration statement on Form S-4, of which this document is a part, must have been declared effective by the SEC in accordance with the Securities Act of 1933, or the Securities Act, and must not be subject to any stop order or proceeding, or any proceeding threatened by the SEC, seeking a stop order;

 

    the holders of a majority of the outstanding CombiMatrix common stock must have approved the proposal to adopt the Merger Agreement;

 

    there must not have been issued any temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Offer by any court of competent jurisdiction or other governmental entity of competent jurisdiction that remains in effect, and there must be no law, statute, rule, regulation, ruling or decree in effect which has the effect of making the consummation of the Offer illegal;

 

    any waiting period applicable to the consummation of the Merger and the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or HSR Act, must have expired or been terminated, and there must not be in effect any voluntary agreement by any party to the Merger Agreement and the U.S. Federal Trade Commission, the U.S. Department of Justice or any foreign governmental body, pursuant to which such party has agreed not to consummate the Merger or the Offer for any period of time;

 

    there must not be any legal proceeding pending or threatened by an official of a government or governmental entity in which such government or governmental entity indicates that it intends to conduct any legal proceeding or take any other action (i) challenging or seeking to restrain or prohibit the consummation of the Offer or any of the other transactions contemplated by the Merger Agreement, (ii) relating to the Offer or any of the other transactions contemplated by the Merger Agreement and seeking to obtain from Invitae, Merger Sub or CombiMatrix any material damages or other relief, (iii) seeking to materially prohibit or limit the ability to vote, transfer, receive dividends or otherwise exercise ownership rights with respect to any Invitae common stock to be issued in the Offer, (iv) that would materially affect the right or ability of Invitae or CombiMatrix to own the assets or operate their businesses, or (v) seeking to compel Invitae or CombiMatrix to dispose of or hold separate any material assets as a result of the Offer or any of the other transactions contemplated by the Merger Agreement;

 

    the shares of Invitae common stock to be issued in Offer must be approved for listing on the NYSE as of the effective time of the Merger;

 

    all conditions to closing under the Merger Agreement shall have been satisfied or waived, other than those conditions which by their nature are only capable of being satisfied as of closing and other than the consummation of the Offer; and

 

    the Merger Agreement shall not have been terminated in accordance with its terms.

Subject to the provisions of the Merger Agreement, the conditions to the Offer are for the sole benefit of Invitae and may be asserted by Invitae regardless of the circumstances or may be waived by Invitae, by express and specific action to that effect, in whole or in part at any time and from time to time on or prior to the Expiration Date, except that the conditions relating to receipt of any approvals from any governmental entity may be asserted at any time prior to Invitae’s acceptance of CombiMatrix Series F warrants for exchange pursuant to the Offer.

Expiration of the Offer (See page 54)

The Offer is scheduled to expire at 12:00 midnight, New York City time, on November 13, 2017, which is the Initial Expiration Date, unless further extended by Invitae. Any extension, delay, termination, waiver or amendment of the Offer will be followed as promptly as practicable by public announcement thereof to be made

 



 

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no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. “Expiration Date” means the Initial Expiration Date, unless and until Invitae has extended the period during which the Offer is open, in which event the term “Expiration Date” means the latest time and date at which the Offer, as so extended by Invitae, will expire.

Extension, Termination and Amendment (See page 54)

Subject to the provisions of the Merger Agreement and the applicable rules and regulations of the SEC, Invitae may from time to time extend the Offer for one or more periods, including if, at the scheduled Expiration Date, any of the conditions of the Offer shall not have been satisfied or waived until such time as such conditions are satisfied or waived. Invitae shall extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff of the SEC applicable to the Offer.

Invitae will effect any extension, termination, amendment or delay by giving oral or written notice to the exchange agent and by making a public announcement as promptly as practicable thereafter as described under the section entitled “The Offer — Extension, Termination and Amendment.” In the case of an extension, any such announcement will be issued no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which require that any material change in the information published, sent or given to CombiMatrix Series F warrant holders in connection with the Offer be promptly disseminated to warrant holders in a manner reasonably designed to inform them of such change) and without limiting the manner in which Invitae may choose to make any public announcement, Invitae assumes no obligation to publish, advertise or otherwise communicate any such public announcement of this type other than by issuing a press release over the news wire. During any extension, CombiMatrix Series F warrants previously tendered and not properly withdrawn will remain subject to the Offer, subject to the right of each CombiMatrix Series F warrant holder to withdraw previously tendered CombiMatrix Series F warrants.

Subject to applicable SEC rules and regulations, Invitae also reserves the right at any time or from time to time on or prior to the Expiration Date to waive any condition identified as subject to waiver in the section entitled “The Offer — Conditions of the Offer” by giving oral or written notice of such waiver to the exchange agent.

No subsequent offering period will be available following the expiration of the Offer.

Withdrawal Rights (See page 56)

Tendered CombiMatrix Series F warrants may be withdrawn at any time prior to the Expiration Date by registered holders of Series F warrants. If Series F warrants are held in “street name” through a broker, dealer, commercial bank, trust company or other nominee, the warrant holder should contact the broker or other nominee for their specific requirements as they may establish a deadline before the expiration of the Offer by which withdrawal instructions must be provided. Additionally, if Invitae has not agreed to accept the CombiMatrix Series F warrants for exchange on or prior to November 13, 2017, CombiMatrix Series F warrant holders may thereafter withdraw their CombiMatrix Series F warrants from tender at any time after such date until Invitae accepts the CombiMatrix Series F warrants for exchange. Once Invitae accepts CombiMatrix Series F warrants for exchange pursuant to the Offer, all tenders not previously withdrawn become irrevocable.

 



 

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Procedure for Tendering (See page 56)

To validly tender CombiMatrix Series F warrants pursuant to the Offer, registered holders of CombiMatrix Series F warrants must:

 

    deliver a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other required documents, and certificates for CombiMatrix Series F warrants to American Stock Transfer & Trust Company, LLC, the exchange agent for the Offer, at its address set forth on the back cover of this document, all of which must be received by the exchange agent prior to the Expiration Date; or

 

    comply with the guaranteed delivery procedures set forth in the section entitled “The Offer — Guaranteed Delivery.”

CombiMatrix Series F warrant holders who hold such warrants in “street name” through a broker, dealer, commercial bank, trust company or other nominee, and who desire to tender their CombiMatrix Series F warrants pursuant to the Offer, should instruct their broker or other nominee to tender their Series F warrants in the Offer prior to the Expiration Date and within the time period provided by the broker or other nominee. The broker, dealer, commercial bank, trust company or other nominee may establish a deadline before the expiration of the Offer by which you must provide it with instructions to tender. Please contact your broker or other nominee for their specific requirements.

Exchange of CombiMatrix Series F warrants; Delivery of Shares of Invitae Common Stock and Cash Instead of Fractional Shares (See page 55)

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), promptly following the Expiration Date, Invitae will accept for exchange, and will exchange, all CombiMatrix Series F warrants validly tendered and not withdrawn prior to the Expiration Date. Invitae will deliver the consideration for your validly tendered and not properly withdrawn CombiMatrix Series F warrants by depositing the stock and any cash consideration therefor with the exchange agent, which will act as your agent for the purpose of receiving the Offer consideration from Invitae and transmitting such consideration to you if you are a registered Series F warrant holder.

Comparative Market Price Data and NASDAQ Capital Market Listing (See pages 27 and 64)

Shares of Invitae common stock are listed on the NYSE under the symbol “NVTA.” The CombiMatrix Series F warrants are currently listed on the NASDAQ Capital Market under the symbol “CBMXW.” However, in connection with the completion of the Offer and the Merger, CombiMatrix and Invitae intend to make the appropriate filings to delist any remaining unexchanged CombiMatrix Series F warrants from trading on the NASDAQ Capital Market, presuming any such unexchanged warrants will qualify for delisting. The CombiMatrix Series F warrants that are not validly tendered in the Offer, if any, and that remain outstanding and unexercised at the time of the Merger will be assumed by Invitae in accordance with their terms and converted into a warrant to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to reflect the Merger Exchange Ratio. It is currently anticipated that, at the closing of the Merger, the Merger Exchange Ratio would be between approximately 0.91 and 0.84 shares of Invitae common stock. The Merger Exchange Ratio is determined pursuant to a formula in the Merger Agreement and described in this prospectus/offer to exchange, and the estimate of the Merger Exchange Ratio is subject to adjustment. For example, the estimated Merger Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 trading days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative

 



 

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$0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Merger Exchange Ratio represented $8.60 in value for each share of CombiMatrix common stock. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Merger Exchange Ratio would be reduced to 0.84, representing $8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Offer of at least 90% as described in this prospectus/offer to exchange, the Merger Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. See the sections entitled “The Merger Agreement — Merger Consideration and Exchange Ratio” and “The Merger Agreement — Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis” for additional factors that may affect the Merger Exchange Ratio. Invitae does not intend to list such warrants for trading on any national stock exchange.

On July 31, 2017, the date of the public announcement of Invitae’s proposal to acquire CombiMatrix, the closing sales price of Invitae common stock on the NYSE was $9.28 and the closing sales price of CombiMatrix Series F warrants on the NASDAQ Capital Market was $1.25. On September 29, 2017 the last practicable trading day before the date of this document, the closing sales price of Invitae common stock on the NYSE was $9.37 and the closing sales price of CombiMatrix Series F warrants on the NASDAQ Capital Market was $2.50. CombiMatrix Series F warrant holders should obtain current market quotations for Invitae common stock and CombiMatrix Series F warrants before deciding whether to tender CombiMatrix Series F warrants in the Offer.

See the sections entitled “Comparative Market Prices and Dividends” and “The Offer – Effect of the Offer on the Market for CombiMatrix Series F warrants; NASDAQ Capital Market Listing; Registration Under the Exchange Act; Margin Regulations.

Regulatory Approvals (See page 89)

Invitae is not aware of any governmental license or regulatory permit that appears to be material to CombiMatrix’s business that might be adversely affected by Invitae’s acquisition of CombiMatrix Series F warrants pursuant to the Offer or, except as described below, of any approval or other action by any government or governmental administrative or regulatory authority or agency, domestic or foreign, that would be required for Invitae’s acquisition or ownership of CombiMatrix Series F warrants pursuant to the Offer. Pursuant to the Merger Agreement, Invitae and CombiMatrix have agreed to cooperate and use commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Merger Agreement, including the Offer. Invitae must comply with applicable federal and state securities laws and the rules and regulations of the NYSE in connection with the issuance of shares of Invitae common stock upon completion of the Offer and the filing of this prospectus/offer to exchange and other documents with the SEC.

The Merger Agreement also provides that CombiMatrix and Invitae will file any notification and report forms required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and respond as promptly as practicable to any inquiries or requests received from the Federal Trade Commission or the Department of Justice for information or documentation or any inquiries or requests received from any other governmental body in connection with antitrust or competition matters.

 



 

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Interests of Certain CombiMatrix Directors and Officers (See page 67)

In considering whether to tender your CombiMatrix Series F warrants, you should recognize that some of the members of management and of the CombiMatrix board of directors may have interests in the Merger and the Offer that differ from, or are in addition to, their interests as CombiMatrix stockholders. These interests include:

 

    the rights of certain of CombiMatrix’s executive officers to receive payments or other benefits, including the conversion of certain stock options and restricted stock unit awards, acceleration of the vesting of certain equity awards, and severance payments due upon termination of employment in connection with the Merger;

 

    the rights of certain of CombiMatrix’s executive officers and directors to receive payments pursuant to the CombiMatrix Transaction Bonus Plan in connection with the Merger;

 

    the consulting agreements entered into between Invitae and Messrs. McDonough and Burell providing for their continued service to CombiMatrix following the closing of the Merger; and

 

    the continued indemnification of CombiMatrix’s directors and officers after the completion of the Merger for acts or omissions that occurred in their capacity as directors or officers prior to the closing of the Merger.

These interests are further described in the section entitled “The Offer — Interests of Certain CombiMatrix Directors and Officers.”

Comparison of Rights of Invitae and CombiMatrix Stockholders (See page 97)

Upon the completion of the Merger and the Offer, CombiMatrix Series F warrant holders who tender in the Offer will become holders of Invitae common stock. The rights associated with Invitae common stock are different from the rights associated with CombiMatrix common stock. The differences are described in more detail in the section entitled “Comparison of Rights of Invitae and CombiMatrix Stockholders.”

The Companies

Invitae Corporation (See page 38)

Invitae’s mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Invitae’s goal is to aggregate most of the world’s hereditary genetic tests into a single service with higher quality, faster turnaround time and lower pricing than many single gene tests today. Invitae was founded on four core principles: patients should own and control their own genetic information; healthcare professionals are fundamental in ordering and interpreting genetic information; driving down the price of genetic information will increase its clinical and personal utility; and genetic information is more valuable when shared. Invitae utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Invitae currently has more than 20,000 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. Invitae’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions, as well as recently acquired capabilities in preimplantation and carrier screening for inherited disorders. Invitae now provides comprehensive genetic information for every stage of life, from preconception through adult diagnostics.

Invitae common stock is currently listed on the New York Stock Exchange under the symbol “NVTA.”

 



 

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CombiMatrix Corporation (See page 38)

CombiMatrix is a family health-focused clinical molecular diagnostic laboratory specializing in pre-implantation genetic screening, prenatal diagnosis, miscarriage analysis, and pediatric developmental disorders. CombiMatrix strives to provide best-in-class clinical laboratory support to healthcare professionals, allowing them to maximize the clinical utility of their patients’ test results and to optimize patient care. CombiMatrix’s testing focuses on advanced technologies, including single nucleotide polymorphism, or SNP, chromosomal microarray analysis, next-generation sequencing, fluorescent in situ hybridization, or FISH, and high resolution chromosome analysis (also referred to as karyotyping). CombiMatrix’s approach to testing is to offer sophisticated technology along with high quality clinical support to its ordering physicians and their patients. CombiMatrix also owns a one-third minority interest in Leuchemix, Inc., a private drug development company focused on developing a series of compounds to address a number of oncology-related diseases.

CombiMatrix was originally incorporated in October 1995 as a California corporation. In September 2000, CombiMatrix was reincorporated as a Delaware corporation. In August 2007, CombiMatrix became publicly traded on NASDAQ under the symbol “CBMX,” where it is currently listed and traded. The CombiMatrix Series F warrants are listed on NASDAQ under the symbol “CBMXW.” Following completion of the Merger, the CombiMatrix common stock and the CombiMatrix Series F warrants will cease trading on NASDAQ and CombiMatrix will file the appropriate forms with the Securities and Exchange Commission to suspend its reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Coronado Merger Sub, Inc. (See page 39)

Coronado Merger Sub, Inc., or Merger Sub, is a wholly owned subsidiary of Invitae and was formed solely for the purpose of carrying out the Merger. In the Merger, Merger Sub will merge with and into CombiMatrix and Merger Sub will cease to exist. Merger Sub has engaged in no business activities to date and it has no material assets or liabilities of any kind, other than those incident to its formation and those incurred in connection with the Merger.

Questions about the Offer

CombiMatrix Series F warrant holders should contact Advantage Proxy, Inc., Invitae’s information agent for the Offer, at the following telephone number and email address with any questions about the Offer, or to request additional copies of this document or other documents:

ADVANTAGE PROXY, INC.

PO Box 13581

Des Moines, WA 98198

Telephone: (877) 870-8565 (toll free); (206) 870-8565 (collect)

Email: ksmith@advantageproxy.com

 



 

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SELECTED HISTORICAL FINANCIAL DATA OF INVITAE

Set forth below are highlights from Invitae’s consolidated financial data as of and for the periods indicated. The historical consolidated financial data presented below for each of the five fiscal years through the period ended December 31, 2016 are derived from the selected financial data included in Invitae’s Annual Report on Form 10-K for the year ended December 31, 2016. The historical consolidated financial data for the six months ended June 30, 2017 are derived from the unaudited condensed consolidated financial statements included in Invitae’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

Invitae’s unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP on the same basis as its audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal, recurring adjustments, necessary for the fair presentation of those unaudited interim condensed consolidated financial statements. Invitae’s historical results are not necessarily indicative of the results that may be expected in any future period, and the results for the six months ended June 30, 2017 are not necessarily indicative of results to be expected for the full year ending December 31, 2017 or any other period.

The selected historical consolidated financial data below should be read in conjunction with the section entitled “Risk Factors” and Invitae’s audited annual and unaudited condensed consolidated financial statements and related notes that have been incorporated into this document by reference. See the section entitled “Where You Can Find More Information.

 

    Six Months
Ended

June 30,
2017
    Year Ended December 31,  
      2016     2015     2014     2013     2012  
    (unaudited)     (in thousands, except share and per share data)  

Consolidated Statements of Operations Data:

           

Revenue

  $ 24,674     $ 25,048     $ 8,378     $ 1,604     $ 148     $ —    

Costs and operating expenses:

           

Cost of revenue

    19,819       27,878       16,523       5,624       667       —    

Research and development

    21,362       44,630       42,806       22,063       16,039       5,557  

Selling and marketing

    24,092       28,638       22,479       8,669       2,431       —    

General and administrative

    14,813       24,085       16,047       12,600       5,764       3,004  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and operating expenses

    80,086       125,231       97,855       48,956       24,901       8,561  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (55,412     (100,183     (89,477     (47,352     (24,753     (8,561

Other income (expense), net

    (540 )     348       (94     (79     (26     2  

Interest expense

    (1,389     (421     (211     (61     (59     (43
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before taxes

    (57,341     —         —         —         —         —    

Income tax benefit

    (1,856     —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (55,485   $ (100,256   $ (89,782   $ (47,492   $ (24,838   $ (8,602
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (55,485   $ (100,256   $ (89,782   $ (47,492   $ (24,989   $ (9,014
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

  $ (1.30   $ (3.02   $ (3.18   $ (56.14   $ (36.13   $ (14.18
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing net loss per common share, basic and diluted

    42,808,175       33,176,305       28,213,324       846,027       691,731       635,705  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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     As of
June 30,

2017
    As of December 31,  
       2016     2015     2014     2013     2012  
     (unaudited)     (in thousands)  

Consolidated Balance Sheet Data:

            

Cash and cash equivalents

   $ 27,673     $ 66,825     $ 73,238     $ 107,027     $ 43,070     $ 21,801  

Working capital

     66,551       87,047       120,433       102,020       41,577       21,043  

Total assets

     139,208       130,651       156,676       128,778       53,103       25,973  

Capital lease obligations

     3,997       1,575       3,164       3,535       2,001       1,215  

Debt

     38,975       12,102       7,040       —         —         —    

Convertible preferred stock

     —         —         —         202,305       86,574       36,755  

Accumulated deficit

     (330,703     (275,218     (174,962     (85,180     (37,688     (12,850

Total stockholders’ equity (deficit)

     67,164       99,074       138,376       (83,576     (37,280     (12,759

 



 

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SELECTED HISTORICAL FINANCIAL DATA OF COMBIMATRIX

Set forth below are highlights from CombiMatrix’s consolidated financial data as of and for the periods indicated. The historical consolidated financial data presented below for each of the five fiscal years through the period ended December 31, 2016 are derived from the consolidated financial statements included in CombiMatrix’s Annual Reports on Form 10-K for the five years ended December 31, 2016 included as Annex B to this prospectus/offer to exchange. The historical consolidated financial data for the six months ended June 30, 2017 are derived from the unaudited interim financial statements included in CombiMatrix’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 included as Annex C to this prospectus/offer to exchange.

CombiMatrix’s unaudited interim financial statements have been prepared in accordance with U.S. GAAP on the same basis as its audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal, recurring adjustments, necessary for the fair presentation of those unaudited interim consolidated financial statements. CombiMatrix’s historical results are not necessarily indicative of the results that may be expected in any future period, and the results for the six months ended June 30, 2017 are not necessarily indicative of results to be expected for the full year ending December 31, 2017 or any other period.

The selected historical consolidated financial data below should be read in conjunction with the section entitled “Risk Factors” and CombiMatrix’s audited annual and unaudited interim consolidated financial statements and related notes that are included within Annex B and Annex C attached to this document. See the section entitled “Where You Can Find More Information.

 

    Six Months
Ended

June 30,
2017
    Year Ended December 31,  
      2016     2015     2014     2013     2012  
    (unaudited)     (in thousands, except share and per share data)  

Consolidated Statements of Operations Data:

           

Revenues:

           

Diagnostic services

  $ 7,972     $ 12,696     $ 9,941     $ 7,893     $ 6,204     $ 4,975  

Clinical trial support services

    —         —         —         —         —         195  

Royalties

    56       173       147       149       163       180  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    8,028       12,869       10,088       8,042       6,367       5,350  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

           

Cost of services

    3,140       5,787       5,444       4,432       3,527       2,702  

Research and development

    170       493       466       725       1,011       1,400  

Sales and marketing

    2,038       4,569       4,979       4,349       2,764       2,596  

General and administrative

    3,519       6,013       5,540       7,176       5,206       5,378  

Patent amortization and royalties

    50       100       100       114       254       266  

Impairment of cost-basis investment

    —         —         97       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    8,917       16,962       16,626       16,796       12,762       12,342  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

    (889     (4,093     (6,538     (8,754     (6,395     (6,992
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expenses):

           

Interest income

    11       22       16       23       5       1  

Interest expense

    (10     (69     (79     (84     (356     (179

Warrant derivative gains (charges)

    —         —         —         152       2,804       (2,357

Warrant modification charge

    —         —         —         (44     —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income (expense)

    1       (47     (63     47       2,453       (2,535
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (888   $ (4,140   $ (6,601   $ (8,707   $ (3,942   $ (9,527
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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    Six Months
Ended

June 30,
2017
    Year Ended December 31,  
      2016     2015     2014     2013     2012  
    (unaudited)     (in thousands, except share and per share data)  

Series A convertible preferred stock dividends

  $ —       $ —       $ —       $ —       $ (247   $ (123

Series C convertible preferred stock dividends

    —         —         —         —         (27     —    

Deemed dividend from issuing Series A convertible preferred stock

    —         —         —         —         —         (617

Deemed dividend from issuing Series B convertible preferred stock

    —         —         —         —         (417     —    

Deemed dividend from issuing Series C convertible preferred stock

    —         —         —         —         (1,213     —    

Deemed dividend from issuing Series D convertible preferred stock

    —         —         —         —         (6,367     —    

Deemed dividend from issuing Series F convertible preferred stock and warrants

    —         (1,877     —         —         —         —    

Deemed dividend paid for right to repurchase Series E convertible preferred stock

    —         (656     —         —         —         —    

Deemed dividend from issuing and modifying Series E convertible preferred stock and warrants

    —         890       (1,058     —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

  $ (888   $ (5,783   $ (7,659   $ (8,707   $ (12,213   $ (10,267
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net loss per share attributable to common stockholders

  $ (0.31   $ (3.27   $ (9.22   $ (11.84   $ (46.49   $ (141.44
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted weighted average common shares outstanding

    2,838,521       1,768,090       830,835       735,305       262,731       72,588  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     As of
June 30,

2017
    As of December 31,  
       2016     2015     2014     2013     2012  
     (unaudited)     (in thousands)  

Consolidated Balance Sheet Data:

            

Cash, cash equivalents and short-term investments

   $ 3,022     $ 3,727     $ 3,901     $ 5,240     $ 14,036     $ 2,372  

Working capital surplus (deficit)

     5,597       6,062       5,417       6,642       13,927       (1,442

Total assets

     8,119       8,478       7,922       8,632       16,832       5,180  

Total liabilities

     2,167       1,984       2,066       1,512       2,168       5,905  

Convertible preferred stock

     —         —         —         —         —         394  

Accumulated deficit

     (103,534     (102,589     (96,806     (89,147     (80,440     (68,227

Total stockholders’ equity (deficit)

     5,952       6,494       5,856       7,120       14,664       (1,119

 



 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined balance sheet as of June 30, 2017 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2016 and the six months ended June 30, 2017 are based on the separate historical consolidated financial statements of Invitae and CombiMatrix after giving effect to the Merger.

The unaudited pro forma condensed combined balance sheet as of June 30, 2017 combines the balance sheet of Invitae as of June 30, 2017 with the balance sheet of CombiMatrix as of June 30, 2017. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 combines Invitae’s results of operations for the year ended December 31, 2016 with CombiMatrix’s results of operations for the year ended December 31, 2016. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2017 combines Invitae’s results of operations for the six months ended June 30, 2017 with CombiMatrix’s results of operations for the six months ended June 30, 2017.

The unaudited pro forma condensed combined balance sheet as of June 30, 2017 assumes the Merger and related events had been consummated on June 30, 2017. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2016 and the six months ended June 30, 2017 give pro forma effect to the Merger and related events as if they had been consummated on January 1, 2016, the beginning of Invitae’s 2016 fiscal year. The historical financial information has been adjusted to give effect to pro forma adjustments that are (i) directly attributable to the Merger, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined entity’s consolidated results. The unaudited pro forma condensed combined statements of operations do not include the impact of any operating synergies that may result from the Merger.

The Merger will be accounted for as an acquisition by Invitae, and Invitae was determined to be the accounting acquirer. See the section entitled “The Offer — Accounting Treatment” for more information. In summary, Invitae has concluded that Invitae is the accounting acquirer based on its evaluation of the facts and circumstances of the acquisition. The purpose of the Merger is for Invitae to acquire the business of CombiMatrix so that Invitae can expand its products and services offerings. Invitae is the larger of the two entities and will be the operating company within the combining companies. Invitae’s board members will continue to hold all of the seats on the Invitae board of directors and CombiMatrix stockholders do not have any board appointment rights. Invitae’s senior management will be continuing as the senior management of the combined company.

The completion of the Merger is subject to various closing conditions, including, among others, (i) approval by the CombiMatrix stockholders of the proposal to approve and adopt the Merger Agreement, or the Merger Proposal, (ii) completion of the Offer (which may be completed at the same time as the Merger is completed), which requires the participation by holders of at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement, (iii) the accuracy of the representations and warranties of CombiMatrix and Invitae, (iv) the performance by CombiMatrix and Invitae in all material respects of their respective obligations under the Merger Agreement, (v) the effectiveness of the registration statements for the issuance of shares of Invitae common stock in the Merger and Offer, (vi) the repurchase by CombiMatrix of all of its outstanding Series A, Series B, Series C, Series E and PIPE warrants, and (vii) receipt of NYSE listing approval for the shares of Invitae common stock to be issued in the Merger and Offer.

The unaudited pro forma condensed combined financial statements assume that (i) the Merger Proposal is approved by 100% of the CombiMatrix stockholders, (ii) none of the CombiMatrix Series A, Series B, Series C, Series D, Series E, Series F or PIPE warrants are exercised; and (iii) all other Merger-related transactions (e.g., the outstanding CombiMatrix Series F preferred stock is converted into Invitae common stock; the outstanding

 



 

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CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants are repurchased; and the Offer for CombiMatrix Series F warrants is accepted by 100% of such warrant holders) are consummated.

The unaudited pro forma condensed combined financial statements are presented for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily indicative of what Invitae’s financial position or results of operations actually would have been had Invitae completed the Merger with CombiMatrix as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company. You should read this information together with the following:

 

    the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

    the separate historical unaudited condensed consolidated financial statements of Invitae as of and for the six months ended June 30, 2017 included in Invitae’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which are incorporated by reference into this document;

 

    the separate historical audited condensed consolidated financial statements of Invitae as of and for the year ended December 31, 2016 included in Invitae’s Annual Report on Form 10-K for the year ended December 31, 2016, which are incorporated by reference into this document;

 

    the separate historical unaudited consolidated financial statements of CombiMatrix as of and for the six months ended June 30, 2017 included in CombiMatrix’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, which are attached to this document as Annex C; and

 

    the separate historical audited consolidated financial statements of CombiMatrix as of and for the year ended December 31, 2016 included in CombiMatrix’s Annual Report on Form 10-K for the year ended December 31, 2016, which are attached to this document as Annex B.

The unaudited pro forma condensed combined financial information has been compiled in a manner consistent with the accounting policies adopted by Invitae. Invitae believes these accounting policies are similar in most material respects to those of CombiMatrix. Upon completion of the Merger, or as more information becomes available, Invitae will perform a more detailed review of the CombiMatrix accounting policies. As a result of that review, differences could be identified between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements.

 



 

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INVITAE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

JUNE 30, 2017

(in thousands)

 

     Invitae     CombiMatrix     Pro Forma     Note      Pro Forma  
     (Historical)     (Historical)     Adjustments     No.      Combined  

Assets

           

Current assets:

           

Cash and cash equivalents

   $ 27,673     $ 3,022     $ (459     (A)      $ 30,236  

Marketable securities

     47,699       —         —            47,699  

Accounts receivable

     2,556       4,006       —            6,562  

Prepaid expenses and other current assets

     8,278       538       —            8,816  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current assets

     86,206       7,566       (459        93,313  
  

 

 

   

 

 

   

 

 

      

 

 

 

Property and equipment, net

     27,664       523       —            28,187  

Restricted cash

     4,997       —         —            4,997  

Intangible assets, net

     6,467       —         19,154       (B)        25,621  

Goodwill

     13,477       —         16,493       (A)(C)        29,970  

Other assets

     397       30       —            427  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total assets

   $ 139,208     $ 8,119     $ 35,188        $ 182,515  
  

 

 

   

 

 

   

 

 

      

 

 

 

Liabilities and stockholders’ equity

           

Current liabilities:

           

Accounts payable

   $ 5,123     $ 716     $ —          $ 5,839  

Accrued liabilities

     12,715       1,204       4,313       (E)(F)        18,232  

Capital lease obligation, current portion

     1,817       —         —            1,817  

Debt, current portion

     —         49       —            49  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current liabilities

     19,655       1,969       4,313          25,937  
  

 

 

   

 

 

   

 

 

      

 

 

 

Capital lease obligation, net of current portion

     2,180       72       —            2,252  

Debt, net of current portion

     38,975       —         —            38,975  

Other long-term liabilities

     11,234       126       5,850       (G)        17,210  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities

     72,044       2,167       10,163          84,374  
  

 

 

   

 

 

   

 

 

      

 

 

 

Stockholders’ equity:

           

Preferred stock

     —         —         —            —    

Common stock

     4       15       (12     (H)(I)        7  

Accumulated other comprehensive loss

     (38     —         —            (38

Additional paid-in capital

     397,901       109,471       (77,409     (H)(I)        429,963  

Accumulated deficit

     (330,703     (103,534     102,446       (D)(H)(I)        (331,791
  

 

 

   

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

     67,164       5,952       25,025          98,141  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and stockholder’s equity

   $ 139,208     $ 8,119     $ 35,188        $ 182,515  
  

 

 

   

 

 

   

 

 

      

 

 

 

 



 

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INVITAE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

(in thousands except per share data)

 

     Invitae     CombiMatrix     Pro Forma     Note      Pro Forma  
     (Historical)     (Historical)     Adjustments     No.      Combined  

Revenue:

           

Test revenue

   $ 25,048     $ 12,696     $ —          $ 37,744  

Other revenue

     —         173       —            173  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total revenue

     25,048       12,869       —            37,917  
  

 

 

   

 

 

   

 

 

      

 

 

 

Costs and operating expenses:

           

Costs of revenue

     27,878       5,787       759       (J)        34,424  

Research and development

     44,630       493       4       (J)        45,127  

Selling and marketing

     28,638       4,569       1,708       (J)        34,915  

General and administrative

     24,085       6,113       37       (J)        30,235  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total costs and operating expenses

     125,231       16,962       2,508          144,701  
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from operations

     (100,183     (4,093     (2,508        (106,784

Other income (expense), net

     348       22       —            370  

Interest expense

     (421     (69     —            (490
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss before taxes

     (100,256     (4,140     (2,508        (106,904

Income tax benefit

     —         —         —            —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss

   $ (100,256   $ (4,140   $ (2,508      $ (106,904
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss per share, basic and diluted

   $ (3.02          $ (2.92
  

 

 

          

 

 

 

Shares used in computing net loss per share, basis and diluted

     33,176,305         3,476,733       (I)        36,653,038  
  

 

 

          

 

 

 

 



 

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INVITAE CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2017

(in thousands except per share data)

 

     Invitae     CombiMatrix     Pro Forma     Note      Pro Forma  
     (Historical)     (Historical)     Adjustments     No.      Combined  

Revenue:

           

Test revenue

   $ 23,287     $ 7,972     $ —          $ 31,259  

Other revenue

     1,387       56       —            1,443  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total revenue

     24,674       8,028       —            32,702  
  

 

 

   

 

 

   

 

 

      

 

 

 

Costs and operating expenses:

           

Costs of revenue

     19,819       3,140       379       (J)        23,338  

Research and development

     21,362       170       2       (J)        21,534  

Selling and marketing

     24,092       2,038       855       (J)        26,985  

General and administrative

     14,813       3,569       (378     (J)(K)        18,004  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total costs and operating expenses

     80,086       8,917       858          89,861  
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from operations

     (55,412     (889     (858        (57,159

Other income (expense), net

     (540     11       —            (529

Interest expense

     (1,389     (10     —            (1,399
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss before taxes

     (57,341     (888     (858        (59,087

Income tax benefit

     (1,856     —         —            (1,856
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss

   $ (55,485   $ (888   $ (858      $ (57,231
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss per share, basic and diluted

   $ (1.30          $ (1.24
  

 

 

          

 

 

 

Shares used in computing net loss per share, basis and diluted

     42,808,175         3,476,733       (I)        46,284,908  
  

 

 

          

 

 

 

 



 

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NOTES TO UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

1. Description of Transaction and Basis of Presentation

Description of Transaction

On July 31, 2017, Invitae Corporation, (“Invitae”) entered into an Agreement and Plan of Merger and Reorganization (“Merger Agreement”) with CombiMatrix Corporation, (“CombiMatrix”), pursuant to which, among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Coronado Merger Sub, Inc., a wholly owned subsidiary of Invitae, will merge with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of Invitae (the “Merger”). The CombiMatrix Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Invitae is considered to be the acquiring company for accounting purposes in this transaction.

The completion of the Merger is subject to various closing conditions, including, among others, (i) approval by the CombiMatrix stockholders of the Merger Proposal, (ii) completion of the Offer (which may be completed at the same time as the Merger is completed), which requires the participation by holders of at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement, (iii) the accuracy of the representations and warranties of CombiMatrix and Invitae, (iv) the performance by CombiMatrix and Invitae in all material respects of their respective obligations under the Merger Agreement, (v) the effectiveness of the registration statements for the issuance of shares of Invitae common stock in the Merger and Offer, (vi) the repurchase by CombiMatrix of all of its Series A, Series B, Series C, Series E and PIPE warrants, and (vii) receipt of NYSE listing approval for the shares of Invitae common stock to be issued in the Merger and Offer.

The unaudited pro forma condensed combined financial statements assume that (i) the Merger Proposal is approved by 100% of the CombiMatrix stockholders, (ii) none of the CombiMatrix Series A, Series B, Series C, Series D, Series E, Series F or PIPE warrants are exercised, and (iii) all other Merger-related transactions (e.g., the CombiMatrix Series F preferred stock is converted into Invitae common stock; the CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants are repurchased; and the Offer for CombiMatrix Series F warrants is accepted by 100% of such warrant holders) are consummated.

Basis of Presentation

The accompanying unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the Securities and Exchange Commission (SEC) and are intended to show how the Merger might have affected the historical financial statements if the Merger had been completed on January 1, 2016 for the purposes of the condensed combined statements of operations, and as of June 30, 2017 for purposes of the condensed combined balance sheet. Both Invitae and CombiMatrix’s historical audited and unaudited financial statements were prepared in accordance with U.S. GAAP and are presented in thousands of U.S. dollars. The historical CombiMatrix financial statements included within the unaudited pro forma condensed combined balance sheet and statements of operations include certain reclassifications that were made to conform CombiMatrix’s financial statement presentation to that of Invitae.

The unaudited pro forma condensed combined statements of operations also include certain acquisition accounting adjustments, including items expected to have a continuing impact on the results of the combined company, such as increased amortization expense on acquired intangible assets. The unaudited pro forma condensed combined statements of operations do not include the impacts of any operating synergies that may result from the Merger or any related restructuring costs that may be contemplated.

 



 

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Based on the terms of the Merger, Invitae is deemed to be the acquiring company for accounting purposes and the transaction represents a business combination pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations.

The proposed transaction is accounted for using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets and liabilities of CombiMatrix, including identifiable intangible assets, are recorded based on their estimated fair values as of the date of the closing of the proposed transaction. Goodwill is calculated as the difference between the estimated acquisition consideration and fair values of identifiable net assets acquired. Invitae has not completed a full, detailed valuation analysis necessary to determine the fair values of CombiMatrix’s identifiable assets to be acquired and liabilities to be assumed. As of the date of this prospectus/offer to exchange, the valuation studies necessary to estimate the fair values of the assets acquired and liabilities assumed have been performed based on publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions, as there are limitations on the type of information that can be exchanged between Invitae and CombiMatrix at this time. Until the Merger is complete, all the relevant information will not be known. Differences between preliminary estimates and the final acquisition accounting will occur. For purposes of these unaudited pro forma combined condensed financial statements, the acquisition consideration is estimated assuming the 30-day trailing average closing price of $9.49 for Invitae’s common stock on July 31, 2017, the date the Merger Agreement was executed, assuming that the transaction closed on July 31, 2017. Total consideration transferred as of this date is estimated to be $31.5 million. Total acquisition consideration is estimated to be $31.0 million, which excludes post-combination expense of $488,000. The pro forma adjustments described below were developed based on Invitae’s management’s assumptions and estimates, including assumptions relating to the consideration paid and the fair value of the identifiable assets acquired and liabilities assumed from CombiMatrix. The amounts of the acquisition consideration, assets acquired and liabilities assumed that will be used in acquisition accounting will be based on their respective fair values as determined at the time of closing, and may differ significantly from these preliminary estimates.

2. Preliminary Purchase Price

The estimated preliminary consideration for the acquisition is as follows (in thousands):

 

Estimated fair value of total acquisition consideration transferred

   $ 31,465  

Less: post-combination share-based expense attributable to outstanding and unexercised stock options and outstanding restricted stock units

     (488
  

 

 

 

Estimated total acquisition consideration

   $ 30,977  
  

 

 

 

The fair value of the total acquisition transferred is calculated using the closing price of Invitae’s common stock on July 31, 2017. Invitae will issue approximately 2,845,100 shares of common stock in exchange for CombiMatrix’s (i) common stock, (ii) outstanding and unexercised in-the-money stock options and outstanding restricted stock. Invitae will also issue approximately 631,633 shares of common stock in exchange for CombiMatrix’s Series F warrants.

The estimated fair values of outstanding in-the-money stock options and restricted stock units is approximately $33,000 and $1.1 million, respectively, of which $25,000 and $463,000, respectively, will be recognized as expenses immediately upon the closing of the transaction.

 



 

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The fair value of the assets acquired and liabilities assumed, assuming the Merger has closed on June 30, 2017, are summarized below (in thousands):

 

Cash and cash equivalents

   $ 2,563  

Accounts receivable, net

     4,006  

Fixed assets

     523  

Other assets

     568  

Intangible assets

     19,154  

Total liabilities

     (6,480

Deferred tax liability

     (5,850
  

 

 

 

Estimated total purchase price of net assets acquired

     14,484  

Excess of acquisition consideration over fair value of net assets acquired

     16,493  
  

 

 

 

Estimated total acquisition consideration

   $ 30,977  
  

 

 

 

The application of the acquisition method of accounting is dependent upon the completion of a full, detailed valuation analysis that has yet to be completed. The estimated values of the assets acquired and liabilities assumed will remain preliminary until after closing of the transaction, at which time Invitae management will determine the fair values of assets acquired and liabilities assumed. The final determination of the purchase price allocation is anticipated to be completed as soon as practicable after completion of the transaction and will be based on the fair values of the assets acquired and liabilities assumed as of the transaction closing date. The final amounts allocated to assets acquired and liabilities assumed could differ significantly from the amounts presented in the unaudited pro forma condensed combined financial statements for the reasons described in Note 1.

3. Pro Forma Adjustments

Pro forma adjustments are necessary to reflect the acquisition consideration exchanged and to adjust amounts related to the tangible and intangible assets and liabilities of CombiMatrix to a preliminary estimate of their fair values, and to reflect the impact on the statements of operations of the proposed transaction as if the companies had been combined during the periods presented therein. The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:

 

  (A) To reflect the repurchase of CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants as a condition of the consummation of the Merger.

 

  (B) To reflect the estimated fair value of CombiMatrix intangible assets acquired, which includes the following:

 

Intangible Asset    Estimated Useful Life (Years)  

Trade name

     3  

Patent licensing agreement

     10  

Technology

     5  

Customer relationships

     10  

 

  (C) To reflect goodwill, which is calculated as the difference between the fair value of the consideration paid and the values assigned to the identifiable tangible and intangibles assets acquired and liabilities assumed.

 

  (D) To reflect estimated transaction costs at June 30, 2017 that are expected to be incurred prior to the transaction closing and that have not yet been incurred (see note 4).

 

  (E) To reflect the assumed transaction bonus payable by Invitae in the amount of $2,618,000 to certain executives of CombiMatrix following the consummation of the Merger.

 



 

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  (F) To reflect the assumed severance payments payable by Invitae in the amount of $530,000 to certain executives of CombiMatrix following their termination after the consummation of the Merger.

 

  (G) To reflect the deferred tax liability related to the acquired intangible assets.

 

  (H) To reflect the elimination of CombiMatrix’s historical equity consisting of common stock, paid-in capital, and accumulated deficit.

 

  (I) To reflect the issuance of Invitae common stock in the Merger, including the fair value of post-combination expense in relation to stock options, restricted stock units and warrants (see note 2).

 

  (J) To reflect the amortization of intangibles acquired.

 

  (K) To reflect the elimination of transaction costs recorded in the historical statements of operations in the amount of $396,000 as these are directly attributable to the transaction and non-recurring.

4. Non-recurring Transaction Costs

Invitae and CombiMatrix have incurred, and Invitae will continue to incur, certain non-recurring transaction expenses in connection with the proposed Merger. Non-recurring transaction expenses incurred by Invitae and CombiMatrix were $396,000 during the six months ended June 30, 2017 and are reflected as an adjustment to reduce general and administrative expenses in the pro forma condensed combined statement of operations as they are non-recurring and directly attributable to the Merger. Neither Invitae nor CombiMatrix incurred any transaction costs related to this Merger in the year ended December 31, 2016. The pro forma condensed combined balance sheet as of June 30, 2017 includes an adjustment of $600,000 to accrued liabilities and accumulated deficit for transaction expenses expected to be incurred by Invitae subsequent to June 30, 2017. These transaction expenses are not reflected in the pro forma condensed combined statement of operations for the six months ended June 30, 2017, as they are not expected to have a continuing impact on operations. Estimated transaction expenses of CombiMatrix, which had not been incurred as of June 30, 2017, are expected to be $565,000 and have been included in assumed liabilities as of June 30, 2017 in the unaudited pro forma condensed combined balance sheet.

The transaction bonus costs are not reflected in the pro forma condensed combined statement of operations for the year ended December 31, 2016 and the six months ended June 30, 2017, as these costs will not impact Invitae’s consolidated statement of operations in the periods following the acquisition date.

 



 

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COMPARATIVE MARKET PRICES AND DIVIDENDS

CombiMatrix Series F warrant holders are advised to obtain current market quotations for Invitae common stock and CombiMatrix Series F warrants. The market price of Invitae common stock and CombiMatrix Series F warrants will fluctuate between the date of this document and the expiration of the Offer. No assurance can be given concerning the market price of Invitae common stock or CombiMatrix Series F warrants before or after the expiration of the Offer.

Invitae Common Stock

Invitae common stock is listed on the NYSE under the symbol “NVTA.” Prior to February 12, 2015, there was no public market for Invitae’s common stock. Invitae’s fiscal year ends on December 31 of each year. The following table shows the high and low reported intraday sales prices per share of Invitae common stock as reported on the NYSE.

 

     Sales Price Per Share  
         High              Low      

Fiscal year ended December 31, 2015

     

First Quarter

   $ 22.35      $ 16.30  

Second Quarter

   $ 17.43      $ 10.50  

Third Quarter

   $ 15.48      $ 6.58  

Fourth Quarter

   $ 10.10      $ 6.46  

Fiscal year ended December 31, 2016

     

First Quarter

   $ 11.25      $ 5.66  

Second Quarter

   $ 11.85      $ 7.14  

Third Quarter

   $ 9.84      $ 7.22  

Fourth Quarter

   $ 9.50      $ 5.76  

Fiscal year ended December 31, 2017

     

First Quarter

   $ 11.30      $ 7.95  

Second Quarter

   $ 11.88      $ 8.17  

On July 31, 2017, the date of the public announcement of the Merger Agreement, the high and low sales prices of shares of Invitae common stock as reported on the NYSE were $9.56 and $9.26, respectively. On September 29, 2017, the latest practicable trading day before the date of this prospectus/offer to exchange, the high and low sales prices of shares of Invitae common stock as reported on the NYSE were $9.37 and $9.14, respectively. As of September 26, 2017, there were 69 stockholders of record of Invitae common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

 



 

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CombiMatrix Series F Warrants

CombiMatrix Series F warrants are listed on the NASDAQ Capital Market under the symbol “CBMXW.” CombiMatrix’s fiscal year ends on December 31 of each year. The following table shows the high and low reported intraday sales prices of CombiMatrix Series F warrants as reported on the NASDAQ Capital Market since the original issuance and listing of the CombiMatrix Series F warrants in connection with CombiMatrix’s March 24, 2016 underwritten public offering.

 

     Sales Price Per Share  
         High                Low      

Fiscal year ended December 31, 2016

       

First Quarter

   $ 1.01        $ 0.55  

Second Quarter

   $ 1.34        $ 0.01  

Third Quarter

   $ 1.35        $ 0.09  

Fourth Quarter

   $ 1.05        $ 0.25  

Fiscal year ended December 31, 2017

       

First Quarter

   $ 1.31        $ 0.43  

Second Quarter

   $ 1.84        $ 0.66  

On July 31, 2017, the date of the public announcement of the Merger Agreement, the high and low sales prices of CombiMatrix Series F warrants as reported on the NASDAQ Capital Market were $1.30 and $1.10, respectively. On September 29, 2017, the last practicable trading day before the date of this document, the high and low sales prices of CombiMatrix Series F warrants as reported on the NASDAQ Capital Market were $2.50 and $2.49, respectively. As of September 26, 2017, there was one holder of record of CombiMatrix Series F warrants, and that holder was The Depository Trust Company. The actual number of holders of CombiMatrix Series F warrants is greater than this number of record holders and includes warrant holders who are beneficial owners but whose warrants are held in “street name” by brokers, dealers, commercial banks, trust companies and other nominees.

Dividends

Neither Invitae nor CombiMatrix has paid or declared any cash dividends on their common stock, and neither anticipates paying cash dividends on its common stock for the foreseeable future. Both Invitae and CombiMatrix currently expect to retain any future earnings to fund operations and expand their businesses. Notwithstanding the foregoing, any determination to pay cash dividends subsequent to the Merger will be at the discretion of Invitae’s board of directors and will depend upon a number of factors, including its results of operations, financial condition, capital requirements, future prospects, contractual restrictions, general business conditions, restrictions imposed by applicable law and other factors Invitae’s board of directors deems relevant. In addition, the terms of Invitae’s loan agreement prohibit the payment of dividends.

 



 

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COMPARATIVE MARKET VALUE OF SECURITIES

Invitae common stock is listed on the NYSE under the symbol “NVTA.” CombiMatrix common stock is listed on the NASDAQ Capital Market under the symbol “CBMX” and CombiMatrix Series F warrants are listed on the NASDAQ Capital Market under the symbol “CBMXW.” The following table shows the closing prices of Invitae common stock, CombiMatrix common stock and CombiMatrix Series F warrants as reported on July 28, 2017, the last trading day prior to public announcement of the Merger, on July 31, 2017, the date of the public announcement of the Merger, and on September 29, 2017, the last practicable date prior to the date of this document. This table also shows the implied value of the Merger consideration proposed for each share of CombiMatrix common stock, which was calculated by multiplying the closing price of Invitae common stock on the relevant date by the estimated Merger Exchange Ratio of 0.91 (i.e., assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Offer).

 

     Closing Price of
Invitae Common
Stock
     Closing Price of
CombiMatrix
Common Stock
     Implied Value of
Merger
Consideration
     Closing Price of
CombiMatrix
Series F
Warrants
 

As of July 28, 2017

   $ 9.51      $ 5.15      $ 8.62      $ 1.35  

As of July 31, 2017

   $ 9.28      $ 4.95      $ 8.41      $ 1.25  

As of September 29, 2017

   $ 9.37      $ 7.50      $ 8.49      $ 2.50  

The market price of Invitae common stock, CombiMatrix common stock and CombiMatrix Series F warrants will fluctuate prior to the Expiration Date and before the Merger is completed, which will affect the implied value of the Merger consideration to CombiMatrix stockholders. You should obtain current market quotations for the shares and CombiMatrix Series F warrants.

 



 

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COMPARATIVE PER SHARE DATA

The following table shows, for the six months ended June 30, 2017 and the year ended December 31, 2016, selected per share information for CombiMatrix common stock and Invitae common stock on a historical and pro forma equivalent basis. Except for the historical information as of and for the year ended December 31, 2016, the information in the table is derived from unaudited information. You should read the data with the historical consolidated financial statements and related notes of Invitae contained in its Annual Report on Form 10-K for the year ended December 31, 2016, which has been incorporated into this document by reference, and the historical financial statements and related notes of CombiMatrix contained in its Annual Report on Form 10-K for the year ended December 31, 2016, attached as Annex B to this prospectus/offer to exchange, as well as the unaudited pro forma condensed combined financial statements and related notes contained in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The following data is not necessarily indicative of future operations of the combined company.

The pro forma equivalent data for CombiMatrix are calculated by multiplying the pro forma combined (loss) income from continuing operations per share, pro forma dividends declared per share and pro forma book value by the estimated Merger Exchange Ratio so that the per share amounts are equated to the respective values for one share of CombiMatrix common stock. The assumed Merger Exchange Ratio is 0.91 shares of Invitae common stock for one share of CombiMatrix common stock. The pro forma condensed combined statement of operations data assumes the Merger, the Offer and related events were consummated on January 1, 2016, the beginning of Invitae’s 2016 fiscal year. The pro forma condensed combined balance sheet data assumes the Merger was consummated June 30, 2017.

 

     CombiMatrix      Invitae  
            Pro Forma             Pro Forma  
     Historical      Equivalent      Historical      Combined  

(Loss) Income from Continuing Operations Per Share

           

Basic

           

Six Months Ended June 30, 2017

   $ (0.31    $ (1.13    $ (1.30    $ (1.24

Year Ended December 31, 2016

   $ (3.27    $ (2.66    $ (3.02    $ (2.92

Diluted

           

Six Months Ended June 30, 2017

   $ (0.31    $ (1.13    $ (1.30    $ (1.24

Year Ended December 31, 2016

   $ (3.27    $ (2.66    $ (3.02    $ (2.92

Cash Dividends Declared Per Share

           

Six Months Ended June 30, 2017

     None        None        None        None  

Year Ended December 31, 2016

     None        None        None        None  

Book Value Per Share

           

June 30, 2017

   $ 2.04      $ 3.23      $ 1.54      $ 3.55  

 



 

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RECENT DEVELOPMENTS

Invitae Private Placement

On August 3, 2017, Invitae closed a private placement to certain accredited investors, in which it sold 5,188,235 shares of common stock at a price of $8.50 per share, and 3,458,823 shares of Series A convertible preferred stock at a price of $8.50 per share, for gross proceeds of approximately $73.5 million and estimated net proceeds of $68.8 million. The Series A convertible preferred stock is a non-voting common stock equivalent, and conversion of the Series A convertible preferred stock is prohibited if the holder exceeds a specified threshold of voting security ownership. The Series A convertible preferred stock is convertible into common stock on a one-for-one basis, subject to adjustment for events such as stock splits, combinations and the like.

Acquisition of Good Start Genetics, Inc. by Invitae

On July 31, 2017, Invitae, Bueno Merger Sub, Inc., a wholly owned subsidiary of Invitae, and Good Start Genetics, Inc., a privately-held Delaware corporation, or Good Start, entered into a merger agreement pursuant to which Good Start would become a wholly owned subsidiary of Invitae. The acquisition closed on August 4, 2017. Consideration for the Good Start acquisition consisted of approximately $40.0 million, including approximately $16.0 million in shares of Invitae common stock, or approximately 1.69 million shares, subject to a hold back of approximately 25% of such amount for up to 13 months to cover potential indemnification liabilities, cash of up to approximately $18.4 million, which was paid to retire certain Good Start debt and the payment or assumption of approximately $5.6 million in pre-closing and closing-related liabilities and obligations of Good Start.

 



 

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RISK FACTORS

In addition to the other information included in and incorporated by reference into this document, including the risk factors and other information set forth in the Quarterly Report on Form 10-Q of Invitae for the quarter ended June 30, 2017, the Annual Report on Form 10-K of Invitae for the fiscal year ended December 31, 2016, the Quarterly Report on Form 10-Q of CombiMatrix for the quarter ended June 30, 2017 attached as Annex C to this prospectus/offer to exchange, and the Annual Report on Form 10-K of CombiMatrix for the fiscal year ended December 31, 2016 attached as Annex B to this prospectus/offer to exchange, and the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risk factors before deciding whether to tender CombiMatrix Series F warrants in the Offer. For further discussion of these and other risk factors, please see Invitae’s and CombiMatrix’s periodic reports and other documents incorporated by reference into this document. See the section entitled “Where You Can Find More Information” in this prospectus/offer to exchange.

Risks Related to the Offer

The completion of the proposed Merger is subject to a number of conditions that are outside the control of Invitae and CombiMatrix, and there can be no assurance that the proposed Merger will be completed in a timely manner or at all. If the Merger is not consummated, Invitae’s and CombiMatrix’s businesses could suffer materially and their respective stock prices could decline.

The consummation of the proposed Merger between Invitae and CombiMatrix is subject to a number of closing conditions, including but not limited to (i) the approval by CombiMatrix’s stockholders and (ii) completion of this Offer, which requires (a) a minimum participation level by holders of at least 90% of the Series F warrants outstanding immediately prior to the date of the Merger Agreement, unless waived by Invitae, and (b) other closing conditions to the Offer are satisfied. The completion of the Merger is also subject to a number of other conditions, including certain governmental approvals and the absence of a material adverse effect upon either party. There is no assurance that all of the conditions will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or will be delayed, and Invitae and CombiMatrix may lose some or all of the intended benefits of the Merger.

If the proposed Merger is not consummated, Invitae and CombiMatrix may be subject to a number of material risks, and each of their respective businesses and stock prices could be adversely affected, as follows:

 

    Invitae and CombiMatrix have each incurred and expect to continue to incur significant expenses related to the proposed Merger even if the Merger is not consummated;

 

    If the Merger Agreement is terminated under certain circumstances, CombiMatrix may be required to pay Invitae a termination fee of $1,400,000 (net of expense reimbursement previously paid);

 

    If the Merger Agreement is terminated under certain circumstances, either party may be required to reimburse the other party for various expenses incurred in connection with the Merger up to a maximum of $400,000;

 

    If the Merger Agreement is terminated under circumstances that require CombiMatrix to pay Invitae a termination fee and/or expense reimbursement, CombiMatrix may not have sufficient funds to make such payments to Invitae; or

 

    The market price of Invitae’s or CombiMatrix’s common stock may decline to the extent that the current market price reflects a market assumption that the proposed Merger will be completed.

The liquidity of the CombiMatrix Series F warrants that are not exchanged will be reduced.

In connection with the completion of the Offer and the Merger, Invitae and CombiMatrix intend to make the appropriate filings to delist any remaining unexchanged CombiMatrix Series F warrants from trading on the NASDAQ Capital Market, presuming any such unexchanged warrants will qualify for delisting. The

 

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CombiMatrix Series F warrants that are not validly tendered in the Offer, if any, and that remain outstanding and unexercised at the time of the Merger will be assumed by Invitae and converted into warrants to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to reflect the Merger Exchange Ratio. Invitae does not intend to list such warrants for trading on any national stock exchange.

The ability to sell unexchanged warrants which are converted into Invitae warrants will become limited and could cease to exist due to the reduction in the anticipated amount of the warrants outstanding upon completion of the Offer and the delisting of the warrants from the NASDAQ Capital Market. A more limited trading market might adversely affect the liquidity, market price and price volatility of these securities. Even if a market for such warrants develops, these securities may trade at a discount to the price at which the securities would trade if the amount outstanding were not reduced and the securities were not delisted from trading on the NASDAQ Capital Market, depending on the market for similar securities and other factors. There can be no assurance that any market or an active market in the warrants will exist, develop or be maintained or as to the prices at which such warrants may be traded.

The principal form of Offer consideration is shares of Invitae common stock, the price of which is volatile and could fluctuate substantially, whether before or after the consummation of the Merger.

The market price of Invitae common stock that CombiMatrix Series F warrant holders will receive in the Offer may be volatile and could fluctuate substantially due to many factors, including, among other things:

 

    actual or anticipated fluctuations in Invitae’s results of operations;

 

    competition from existing tests or new tests that may emerge;

 

    announcements by Invitae or its competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments;

 

    failure to meet or exceed financial estimates and projections of the investment community or that Invitae provides to the public;

 

    issuance of new or updated research or reports by securities analysts or changed recommendations for Invitae common stock;

 

    Invitae’s focus on long-term goals over short-term results;

 

    the timing of Invitae’s investments in the growth of its business;

 

    actual or anticipated changes in regulatory oversight of Invitae’s business;

 

    additions or departures of key management or other personnel;

 

    disputes or other developments related to Invitae’s intellectual property or other proprietary rights, including litigation;

 

    sale of common stock or other securities in the future;

 

    the trading volume of Invitae common stock;

 

    changes in reimbursement by current or potential payers;

 

    changes in Invitae’s pricing policies or the pricing policies of its competitors; and

 

    general economic and market conditions.

Share price changes may result from a variety of factors, including general market and economic conditions, changes in Invitae’s and CombiMatrix’s respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of Invitae and CombiMatrix.

 

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CombiMatrix Series F warrant holders should obtain current market quotations for Invitae common stock before tendering their Series F warrants in the Offer. In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies whose shares are traded on the stock market. These broad market factors may materially harm the market price of Invitae common stock, regardless of Invitae’s operating performance.

CombiMatrix may not be able to meet its cash requirements beyond August 2018 without obtaining additional capital from external sources and its current outstanding warrants issued in connection with various past preferred stock financings may prevent it from issuing new securities. If CombiMatrix is unable to raise additional capital through future financings or from external sources, it may not be able to continue as a going concern.

As of June 30, 2017, CombiMatrix had $3.0 million in cash and cash equivalents, which it anticipates will meet its cash requirements through and beyond the fourth quarter of 2017. However, in order for CombiMatrix to continue as a going concern beyond that point in the absence of the Merger, it will have to increase revenue and cash reimbursement, continue to control operating expenses and may be required to obtain capital from external sources. CombiMatrix’s ability to continue as a going concern in the absence of the Merger is dependent upon its ability to further implement its business plan, generate sufficient revenues and cash reimbursement and to control operating expenses, of which there can be no assurance.

In order to issue securities at a price below the exercise prices of CombiMatrix’s outstanding warrants issued in connection with its past preferred stock private placement financings, CombiMatrix must obtain the affirmative consent of holders of at least 67% of such outstanding CombiMatrix warrants. If CombiMatrix is unable to obtain the consent of these holders in connection with future financings, CombiMatrix may be unable to raise additional capital on acceptable terms, or at all. If external financing sources are not available in a timely manner or at all, or are inadequate to fund CombiMatrix’s operations, is could experience reduced revenues and cash flows from the sales of its diagnostic services and its ability to launch, market and sell additional services necessary to grow and sustain its operations could be jeopardized.

Some CombiMatrix executive officers and directors have interests in the Merger and Offer that are different from yours.

Executive officers of CombiMatrix negotiated the terms of the Merger Agreement with Invitae, and the CombiMatrix board of directors approved the Merger and recommended that its stockholders vote to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. In considering the information contained in this document, you should be aware that some members of CombiMatrix’s management and certain members of its board of directors have economic interests in the Merger and Offer that are different from yours, including with respect to compensation to be received by certain CombiMatrix directors and executives under the CombiMatrix Transaction Bonus Payout Agreements, and pursuant to certain consulting agreements between Invitae and CombiMatrix’s chief executive officer and chief financial officer. Please see the section entitled “The Offer—Interests of Certain CombiMatrix Directors and Officers.”

The shares of Invitae common stock to be issued to CombiMatrix Series F warrant holders in the Offer will have different rights from shares of CombiMatrix common stock underlying such Series F warrants.

Upon the completion of the Offer, holders of Series F warrants to purchase shares of CombiMatrix common stock that are tendered in the Offer will become Invitae common stockholders and their rights as stockholders will be governed by the organizational documents of Invitae. The rights associated with the CombiMatrix common stock underlying the Series F warrants are different from the rights associated with Invitae common stock. Please see the section entitled “Comparison of Rights of Invitae and CombiMatrix Stockholders.

 

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The unaudited pro forma condensed combined financial information included in this prospectus/offer to exchange is illustrative only and the actual financial condition and results of operations after the Offer and the Merger may differ materially.

The unaudited pro forma condensed combined financial information in this prospectus/offer to exchange is presented for illustrative purposes only and is not necessarily indicative of what Invitae’s actual financial condition or results of operations would have been had the Offer and the Merger been completed on the dates indicated. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the identifiable tangible and intangible CombiMatrix assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this prospectus/offer to exchange is preliminary and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of CombiMatrix as of the date of the completion of the Merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this prospectus/offer to exchange. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

Risks Related to Invitae’s Business and Strategy

Invitae’s success will depend on its ability to use rapidly changing genetic data to interpret test results accurately and consistently, and its failure to do so would have an adverse effect on Invitae’s operating results and business, harm its reputation and could result in substantial liabilities that exceed its resources.

Invitae’s success depends on its ability to provide reliable, high-quality tests that incorporate rapidly evolving information about the role of genes and gene variants in disease and clinically relevant outcomes associated with those variants. Errors, such as failure to detect genomic variants with high accuracy, or mistakes, such as failure to identify, or incompletely or incorrectly identifying, gene variants or their significance, could have a significant adverse impact on Invitae’s business.

In August 2017, a client reported a discrepancy between an Invitae test report and a test report issued by another laboratory for the presence of a single rare variant in the MSH2 gene known as the Boland inversion. This gene is associated with Lynch syndrome, which is a familial cancer syndrome that significantly increases the risk of colorectal and other cancers. Invitae’s assay had reliably detected the Boland inversion event since its first validation. However, during the implementation of an update to the assay, Invitae omitted the components designed specifically to identify the Boland inversion event. As soon as Invitae learned of the error, Invitae quickly rectified it and implemented three new quality checks to ensure this type of error does not happen again. Invitae has identified all potential patients impacted by this incident, and is reanalyzing its previous test results to ensure their accuracy. Invitae expects that less than 50 patients will be affected by this incident. Invitae also expects to complete reanalysis and notification to impacted patients and their clinicians in the fourth quarter of 2017.

Hundreds of genes can be implicated in some disorders, and overlapping networks of genes and symptoms can be implicated in multiple conditions. As a result, a substantial amount of judgment is required in order to interpret testing results for an individual patient and to develop an appropriate patient report. Invitae classifies variants in accordance with published guidelines as benign, likely benign, variants of uncertain significance, likely pathogenic or pathogenic, and these guidelines are subject to change. In addition, it is Invitae’s practice to offer support to clinicians and geneticists ordering Invitae’s tests regarding which genes or panels to order as well as interpretation of genetic variants. Invitae also relies on clinicians to interpret what Invitae reports and to incorporate specific information about an individual patient into the physician’s treatment decision.

The marketing, sale and use of Invitae’s genetic tests could subject Invitae to liability for errors in, misunderstandings of, or inappropriate reliance on, information it provides to clinicians or geneticists, and lead to claims against it if someone were to allege that a test failed to perform as it was designed, if Invitae failed to correctly interpret the test results, or if the ordering physician were to misinterpret test results or improperly rely on them when making a clinical decision. A product liability or professional liability claim could result in

 

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substantial damages and be costly and time-consuming for Invitae to defend. Although Invitae maintains liability insurance, including for errors and omissions, it cannot assure you that such insurance would fully protect Invitae from the financial impact of defending against these types of claims or any judgments, fines or settlement costs arising out of any such claims. Any liability claim, including an errors and omissions liability claim, brought against Invitae, with or without merit, could increase Invitae’s insurance rates or prevent it from securing insurance coverage in the future. Additionally, any liability lawsuit could cause injury to Invitae’s reputation or cause it to suspend sales of its tests. The occurrence of any of these events could have an adverse effect on Invitae’s business, reputation and results of operations.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains or incorporates by reference certain forward-looking statements, including statements about the financial condition, results of operations, earnings outlook and prospects of Invitae and CombiMatrix and the Offer and the proposed Merger, which are subject to numerous assumptions, risks and uncertainties. These forward-looking statements are found at various places throughout this document, including in the section entitled “Risk Factors.” You can find many of these statements by looking for words such as “plan,” “believe,” “expect,” “intent,” “anticipate,” “estimate,” “project,” “potential,” “possible” or other similar expressions. Actual results could differ materially from those contained or implied by such statements for a variety of factors, including:

 

    strategies, prospects, plans, expectations or objectives of management of Invitae or CombiMatrix for future operations of the combined company;

 

    the anticipated operations, financial position, revenues, costs or expenses of Invitae, CombiMatrix or the combined company;

 

    any changes in future economic conditions or performance;

 

    competitive pressures on product pricing and services;

 

    the effect of governmental regulations, including the possibility that there are unexpected delays in obtaining regulatory approvals;

 

    the failure to obtain approval of CombiMatrix’s stockholders;

 

    the failure to complete the Offer;

 

    the effect of any litigation relating to completion of the Merger and the Offer; and/or

 

    other risks discussed and identified in public filings with the Securities and Exchange Commission made by CombiMatrix or Invitae.

All forward-looking statements included in this document are based on information available at the time of this document. These forward-looking statements should not be relied upon as predictions of future events as neither Invitae nor CombiMatrix cannot assure you that the events or circumstances in these statements will be achieved or will occur. Neither Invitae nor CombiMatrix assumes any obligation to update any forward-looking statement.

For additional information about factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, please see the reports that Invitae and CombiMatrix have filed with the Securities and Exchange Commission as described in the section entitled “Where You Can Find More Information.

 

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INFORMATION ABOUT THE COMPANIES

Invitae Corporation

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Invitae’s mission is to bring comprehensive genetic information into mainstream medical practice to improve the quality of healthcare for billions of people. Invitae’s goal is to aggregate most of the world’s hereditary genetic tests into a single service with higher quality, faster turnaround time and lower pricing than many single gene tests today. Invitae was founded on four core principles: patients should own and control their own genetic information; healthcare professionals are fundamental in ordering and interpreting genetic information; driving down the price of genetic information will increase its clinical and personal utility; and genetic information is more valuable when shared. Invitae utilizes an integrated portfolio of laboratory processes, software tools and informatics capabilities to process DNA-containing samples, analyze information about patient-specific genetic variation and generate test reports for clinicians and their patients. Invitae currently has more than 20,000 genes in production and provides a variety of diagnostic tests that can be used in multiple indications. Invitae’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders and other hereditary conditions, as well as recently acquired capabilities in preimplantation and carrier screening for inherited disorders. Invitae now provides comprehensive genetic information for every stage of life, from preconception through adult diagnostics.

Invitae common stock is currently listed on the New York Stock Exchange under the symbol “NVTA.”

CombiMatrix Corporation

300 Goddard, Suite 100

Irvine, CA 92618

(949) 753-0624

CombiMatrix is a family health-focused clinical molecular diagnostic laboratory specializing in pre-implantation genetic screening, prenatal diagnosis, miscarriage analysis, and pediatric developmental disorders. CombiMatrix strives to provide best-in-class clinical laboratory support to healthcare professionals, allowing them to maximize the clinical utility of their patients’ test results and to optimize patient care. CombiMatrix’s testing focuses on advanced technologies, including single nucleotide polymorphism, or SNP, chromosomal microarray analysis, next-generation sequencing, fluorescent in situ hybridization, or FISH, and high resolution chromosome analysis (also referred to as karyotyping). CombiMatrix’s approach to testing is to offer sophisticated technology along with high quality clinical support to its ordering physicians and their patients. CombiMatrix also own a one-third minority interest in Leuchemix, Inc., a private drug development company focused on developing a series of compounds to address a number of oncology-related diseases.

CombiMatrix was originally incorporated in October 1995 as a California corporation. In September 2000, CombiMatrix was reincorporated as a Delaware corporation. In August 2007, CombiMatrix became publicly traded on NASDAQ under the symbol “CBMX,” where it is currently listed and traded. The CombiMatrix Series F warrants are listed on NASDAQ under the symbol “CBMXW.” Following completion of the Merger, the CombiMatrix common stock and the CombiMatrix Series F warrants will cease trading on NASDAQ and CombiMatrix will file the appropriate forms with the Securities and Exchange Commission to suspend its reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

 

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Coronado Merger Sub, Inc.

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Merger Sub is a wholly owned subsidiary of Invitae and was formed solely for the purpose of carrying out the Merger. In the Merger, Merger Sub will merge with and into CombiMatrix and Merger Sub will cease to exist.

 

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BACKGROUND OF THE MERGER AND THE OFFER

Background of the Merger and the Offer

On September 23, 2015, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management and CombiMatrix’s then outside legal counsel Dorsey & Whitney LLP, or Dorsey, at which the CombiMatrix board of directors began evaluating the alternative benefits and risks between raising additional capital to meet CombiMatrix’s future needs and exploring possible partnerships or strategic transactions.

On November 23, 2015, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and CombiMatrix’s then outside legal counsel Dorsey, at which CombiMatrix’s management reported on various potential opportunities for strategic alternatives that they had researched and discussed the feasibility of raising additional capital. The CombiMatrix board of directors authorized CombiMatrix’s management to select and engage an investment bank to assist in pursuing an underwritten registered public offering of common stock to raise additional capital while also authorizing CombiMatrix’s management in parallel to seek and vet all opportunities for potential partnerships or strategic transactions.

On December 2, 2015, the CombiMatrix board of directors adopted the CombiMatrix Transaction Bonus Plan as a form of retention for senior management to actively assist in exploring a strategic transaction, and to motivate and align the participants’ interest in negotiating for and maximizing stockholder value for a strategic transaction.

In January 2016, CombiMatrix’s management engaged in initial high level discussions with Party O regarding potential partnership opportunities or a strategic transaction.

In January 2016, CombiMatrix’s management engaged in initial high level discussions with Party G regarding a potential partnership or strategic transaction. Additional discussions occurred in April and May 2016.

On February 12, 2016, CombiMatrix’s management had an initial meeting with Party A and continued to discuss a potential strategic transaction with Party A over the course of the following month. On April 11, 2016, CombiMatrix received a draft term sheet letter from Party A for a proposed stock-for-stock acquisition for approximately $15 million. CombiMatrix’s management had multiple synergy meetings and calls with Party A in March and April 2016.

In February 2016, CombiMatrix’s management engaged in initial high level discussions with the chief executive officer of Party D regarding a potential partnership or strategic transaction.

In February 2016, CombiMatrix’s management engaged in initial high level discussions with Party C regarding a potential partnership or strategic transaction.

In late March 2016, CombiMatrix’s management began discussions and held a due diligence meeting with Party B regarding a possible partnership or strategic transaction. Discussions regarding a potential commercial partnership with Party B continued throughout the process.

In April 2016, CombiMatrix’s management engaged in initial high level discussions with Party F regarding a potential partnership or strategic transaction.

In April 2016, CombiMatrix’s management engaged in initial high level discussions with Invitae’s President and Chief Operating Officer at the time (now Invitae’s President and Chief Executive Officer) regarding a potential partnership or strategic transaction.

In May 2016, CombiMatrix’s management engaged in initial high level discussions with Party E regarding a potential partnership or strategic transaction, followed by an in-person meeting on June 5, 2016.

 

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None of these eight companies, including Invitae, showed interest in a possible strategic transaction at the time CombiMatrix’s management initially had contacted them. Given the muted responses, CombiMatrix’s management considered the possibility of engaging an investment bank to assist with establishing a competitive process for exploring potential partnerships or strategic transactions.

In early April 2016, CombiMatrix’s management had been in contact with several investment banks to discuss a potential engagement for exploring possible strategic transactions or other business development opportunities.

On April 5, 2016, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and CombiMatrix’s then outside legal counsel Dorsey, at which CombiMatrix’s senior management provided an update on the status of strategic discussions with Party A, Party B, Party C, Party D, Party E, Party F, Party G and Party O, and discussed the benefits of possibly engaging an investment bank to assist with establishing a competitive process for exploring potential partnerships or strategic transactions. The CombiMatrix board of directors authorized CombiMatrix’s management to select and retain an investment bank for the purposes of exploring such possible strategic alternatives, including the potential sale of CombiMatrix.

Shortly after the CombiMatrix board of directors meeting on April 5, 2016, CombiMatrix’s management selected Torreya to serve as CombiMatrix’s financial advisor based upon its reputation and experience with respect to the life sciences industry generally. CombiMatrix’s management and Torreya negotiated the terms of the prospective engagement and, on April 20, 2016, CombiMatrix entered into a written engagement letter with Torreya to assist CombiMatrix in exploring strategic alternatives.

On April 21, 2016, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management, CombiMatrix’s then outside legal counsel Dorsey, and Torreya, at which CombiMatrix’s senior management provided an update on the status of strategic discussions with Party A, Party B, Party C, Party D, Party E, Party F, Party G, Party O and Invitae. Torreya presented an outline of its plan to run a broad sale process for CombiMatrix and laid out a number of potential buyers and a preliminary timeline. Following the board meeting, CombiMatrix’s senior management, with the help of representatives of Torreya, and pursuant to the authorization of the CombiMatrix board of directors granted at its April 5, 2016 meeting, began to explore strategic alternatives, including potential investment and/or partnering activities with a strategic partner or the potential sale of CombiMatrix.

Between May 4, 2016 and September 24, 2016, representatives of Torreya canvassed approximately 100 parties to gauge interest in potential partnerships or strategic transactions, and circulated a form confidentiality agreement. Torreya contacted both financial buyers and strategic buyers during the initial phase of the process; however, the initial phase was acutely focused on strategic interest given the latest strategic discussions at CombiMatrix.

On May 6, 2016, CombiMatrix entered into a confidentiality agreement with Party G. The confidentiality agreement included a standstill provision, but permitted Party G to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 9, 2016, CombiMatrix entered into a confidentiality agreement with Party D. The confidentiality agreement included a standstill provision, but permitted Party D to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 9, 2016, CombiMatrix entered into a confidentiality agreement with Party H. The confidentiality agreement included a standstill provision, but permitted Party H to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 11, 2016, CombiMatrix entered into a confidentiality agreement with Invitae. The confidentiality agreement included a standstill provision, but permitted Invitae to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

 

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On May 19, 2016, CombiMatrix entered into a confidentiality agreement with Party C. The confidentiality agreement included a standstill provision, but permitted Party C to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 24, 2016, CombiMatrix entered into a confidentiality agreement with Party F. The confidentiality agreement included a standstill provision, but permitted Party F to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 27, 2016, CombiMatrix entered into a confidentiality agreement with Party B. The confidentiality agreement included a standstill provision, but permitted Party B to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 28, 2016, CombiMatrix entered into a confidentiality agreement with Party E. The confidentiality agreement included a standstill provision, but permitted Party E to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On May 28, 2016, Party D indicated that it was declining to continue in the sale process due to its need to focus on cleaning up its capital structure.

From June 2016 to September 2016, CombiMatrix’s senior management held several meetings and telephonic conferences with interested parties, which included Party F, Party G, Invitae, Party B and Party I.

On June 1, 2016, CombiMatrix entered into a confidentiality agreement with Party A. The confidentiality agreement included a standstill provision, but permitted Party A to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended June 3, 2016, Torreya sent a process letter to all interested parties requesting them to submit bids for CombiMatrix by June 15, 2016.

On June 6, 2016, CombiMatrix entered into a confidentiality agreement with Party J. The confidentiality agreement included a standstill provision, but permitted Party J to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On June 15, 2016, Party B submitted an all-cash preliminary Indication of Interest, or IOI, providing a valuation range between $10 and $20 million.

On June 15, 2016, Party F submitted a preliminary IOI all-cash offer for $18 million.

On June 15, 2016, Party H submitted a preliminary IOI contemplating a reverse merger at a 90% Party H – 10% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On June 16, 2016, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management, CombiMatrix’s then outside legal counsel Dorsey, and Torreya, to discuss the bids received to date, the remaining interested parties and likely bidders, as well as a general status update on the parties contacted and responses received. The CombiMatrix board of directors authorized that all bidders be allowed into the next round of the process and be granted further access to information in the Virtual Data Room, except for Party E due to concerns about competitive harm and Party H because its offer was not viewed as a serious one.

On June 17, 2016, Party E submitted a first round proposal of $5 million of which $1 million would be placed in an escrow holdback.

On June 19, 2016, both Party C and Party J indicated they were declining to continue in the sale process.

 

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On June 24, 2016, Party G submitted an offer for a reverse merger at a 67% Party G – 33% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

During the week ended June 24, 2016, a representative from Torreya spoke with Party H and Party E, and advised them their offers were not sufficient to enable them to continue into the second round of the process.

On June 30, 2016, Party I illustrated a proposed buyout structure in which Party I would acquire CombiMatrix for a de minimis upfront consideration. A representative from Torreya advised Party I that this upfront consideration would need to move up significantly in order to be considered by CombiMatrix.

On July 5, 2016, Party F provided a letter of intent requesting exclusivity, but maintained the pricing of $18 million in the form of an all-cash transaction.

On July 5, 2016, Invitae provided a preliminary IOI for a stock-for-stock merger valued at two times CombiMatrix’s stated 2015 revenues as disclosed in its most recent Form 10-K, or approximately $20.2 million.

On July 6, 2016, CombiMatrix’s management held a telephonic meeting with Party F to discuss the complexities of its capitalization table, more specifically the impact of the Series F warrants on potential transaction structures.

On July 6, 2016, Party A declined to continue in the sale process because it was unwilling to engage in a competitive process.

On July 13, 2016, CombiMatrix’s management held a telephonic meeting with Party B to discuss its business and financial forecast, as well as additional business-related questions and the impacts of the challenging capitalization table.

On July 14, 2016, Party F responded to CombiMatrix’s request to amend the structure of its offer to include both stock and cash components, however Party F was unable to adjust its initial offer and maintained its position with an $18 million all-cash offer.

On July 23, 2016, CombiMatrix entered into a confidentiality agreement with Party K. The confidentiality agreement included a standstill provision, but permitted Party K to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On July 25, 2016, Party G submitted a revised offer for a reverse merger at a 52.5% Party G – 47.5% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

During the week ended August 5, 2016, Party B advised it declined to further participate in the sale process.

On August 10, 2016, CombiMatrix’s management held an all-day onsite meeting at their offices in Irvine, California with Party G.

On August 16, 2016, CombiMatrix’s management held an all-day meeting at their offices in Irvine, California with Invitae.

On August 19, 2016, CombiMatrix’s senior management sent an email to the CombiMatrix board of directors providing an update on the process, including where the process stood with Invitae. CombiMatrix’s management reported that there were a number of moving parts that needed to transpire ahead of receiving an updated offer, and a potential path forward with Invitae was thus uncertain. Party G and Party F were also still active in the process at that time.

 

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During the week ended August 19, 2016, a representative from Torreya indicated to a senior executive at Party F that CombiMatrix would prefer a cash and stock transaction. Torreya added that CombiMatrix would require a revised proposal with additional consideration in order to consider exclusivity with Party F.

During the week ended August 26, 2016, Invitae’s President and Chief Operating Officer at the time (now Invitae’s President and Chief Executive Officer) contacted CombiMatrix’s chief executive officer and indicated Invitae declined to further participate in the sale process because it was going to focus on other priorities. Both CombiMatrix’s management and representatives from Torreya contacted several parties who had previously been contacted throughout the process across varied stages of stated interest to hone in on the remaining prospective buyers.

During the week ended September 9, 2016, Party L’s chief executive officer notified CombiMatrix’s management that it was not in a position to bid for CombiMatrix at the time. A representative from Torreya contacted Party F and asked if it would move forward for $19 million with exclusivity. Party F’s senior executive said he would respond after communicating internally. A representative for Party G contacted Torreya and indicated it was not able to put together a revised bid and declined to further participate in the sale process at that time because Party G needed to refocus on executing its near-term business plan.

During the week ended September 16, 2016, Invitae’s then President and Chief Operating Officer at the time (now Invitae’s President and Chief Executive Officer) confirmed to Torreya that Invitae was not in a position to move forward in the process at that time. Party F’s senior executive informed a representative from Torreya that Party F declined to further participate in the sale process at that time due to a lack of internal support for a transaction.

During the week ended September 23, 2016, all other interested parties who had put forward IOIs had declined to further participate in the sale process. Torreya presented CombiMatrix’s management additional strategic options on how to move forward in the process, including broadening the call list to additional potential strategic and financial buyers and raising private debt to finance business operations.

From late September 2016 to January 2017, representatives at Torreya contacted approximately 45 additional potential financial buyers, of which approximately 10 entered into confidentiality agreements that included standstill provisions, but permitted such potential financial buyers to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On October 12, 2016, CombiMatrix entered into a confidentiality agreement with Party M. The confidentiality agreement included a standstill provision, but permitted Party M to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended October 21, 2016, CombiMatrix’s management held telephonic conferences with Party N and Party O. Shortly after the call, Party N indicated it declined to further participate in the sale process.

On October 27, 2016, CombiMatrix entered into a confidentiality agreement with Party P. The confidentiality agreement included a standstill provision, but permitted Party P to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On October 28, 2016, CombiMatrix entered into a confidentiality agreement with Party Q. The confidentiality agreement included a standstill provision, but permitted Party Q to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On November 4, 2016, CombiMatrix entered into confidentiality agreements with Party R, Party S, Party T, Party U, and Party V. The confidentiality agreements included a standstill provision, but permitted such companies to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

 

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During the week ended November 4, 2016, CombiMatrix’s management held a telephonic conference with Party P.

During the week ended November 11, 2016, CombiMatrix entered into a confidentiality agreement with Party W. The confidentiality agreement included a standstill provision, but permitted Party W to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended November 18, 2016, CombiMatrix entered into confidentiality agreements with Party X and Party Y. The confidentiality agreements included a standstill provision, but permitted the companies to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period. CombiMatrix management held telephonic conferences with Party X and Party M. Party Q indicated it declined to further participate in the sale process.

During the week ended November 25, 2016, CombiMatrix’s management held a telephonic conference with Party U, a private equity firm.

During the week ended December 2, 2016, CombiMatrix entered into a confidentiality agreement with Party Z. The confidentiality agreement included a standstill provision, but permitted Party Z to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period. CombiMatrix management held a telephonic conference with Party S. Party P and Party O both indicated they declined to further participate in the sale process.

During the week ended December 9, 2016, CombiMatrix management held telephonic conferences with Party Y, Party S and Party U. Party X indicated it declined to further participate in the sale process.

On December 10, 2016, CombiMatrix entered into a confidentiality agreement with Party L. The confidentiality agreement included a standstill provision, but permitted Party L to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On December 13, 2016, CombiMatrix entered into a confidentiality agreement with Party AA. The confidentiality agreement included a standstill provision, but permitted Party AA to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

During the week ended December 16, 2016 CombiMatrix’s management hosted a site visit at their headquarters in Irvine, California with Party U and its portfolio company, Party UP. Party S and Party Y indicated they declined to further participate in the sale process.

During the week ended December 23, 2016, Party L spoke with a representative of Torreya and asked to speak to CombiMatrix’s management at the JP Morgan conference in January 2017. Party F indicated for the final time that there was no interest internally in re-engaging in the sale process.

During the week ended January 6, 2017, a representative from Torreya contacted Invitae and Party B, asking if they would be interested in re-engaging in the sale process. Party Z indicated that it would be able to put together a bid only in the third week of January 2017, shortly after the JP Morgan conference.

During the week ended January 13, 2017, CombiMatrix’s management met informally with Party B and Party L at the JP Morgan conference in San Francisco, California.

During the week ended January 20, 2017, Party Z indicated it would no longer continue in the sale process.

On January 23, 2017, Party U provided a preliminary IOI outlining an all-cash acquisition of CombiMatrix at a $13.5 million valuation. Torreya advised CombiMatrix’s management that in order to maximize the implied

 

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value to stockholders for a transaction with Party U, CombiMatrix could sell off the business in two separate transactions, with an asset sale to Party U in the first step followed by a sale of the remaining public company shell in a second step.

On January 26, 2017 CombiMatrix’s management held a telephonic conference with Party U to discuss the offer and legal implications. In addition, a financial advisor for Party BB contacted a representative of Torreya and indicated Party BB was interested in acquiring a public company shell as a method to go public.

On January 27, 2017 CombiMatrix’s management held a telephonic conference with Party BB to discuss the concept and structure of a sale of a public company shell.

On January 27, 2017, Party U provided a revised preliminary IOI outlining an all-cash acquisition of CombiMatrix at a $15.0 million valuation.

On January 31, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, CombiMatrix’s current outside legal counsel Stradling Yocca Carlson & Rauth, P.C., or Stradling, and Torreya. Torreya provided an update on the process and the current field of bidders. Torreya advised that CombiMatrix make a counter-offer to Party U in tandem with a pending offer from Party BB so that the clearing price of the consolidated transaction would net the stockholders at least $20 million of cash consideration. In addition, Torreya reported on the latest discussions and next steps with Party CC, Party DD, Party BB and Party L. The CombiMatrix board of directors instructed Torreya to send Party L a draft Letter of Intent to begin conversations on a stock-for-stock merger and make a counter-offer to Party U in an effort to reach at least $20 million of cash consideration.

On February 1, 2017, CombiMatrix entered into a confidentiality agreement with Party DD. The confidentiality agreement included a standstill provision, but permitted Party DD to privately and confidentially explore a possible strategic transaction with CombiMatrix during the standstill period.

On February 3, 2017, due to the muted responses from potential buyers and with guidance from the CombiMatrix board of directors, CombiMatrix’s management suspended the sale process with Torreya, but continued to explore on its own strategic options including a range of potential strategic transactions and business development opportunities. CombiMatrix’s management indicated to Torreya, however, that it would need Torreya’s continued support, including fairness opinion services, as CombiMatrix explored potential strategic transactions on its own. CombiMatrix negotiated with Torreya the amendment of the fee terms of the engagement letter. On February 9, 2017, CombiMatrix and Torreya amended the fee terms of their engagement letter pursuant to the agreed upon tail arrangement that if a strategic transaction resulted from a contact CombiMatrix’s management initiated and asked Torreya to assist on, including providing fairness opinion services, Torreya would receive a flat fee instead of success fee compensation calculation based on a percentage of the transaction value.

On February 6, 2017, Party BB provided a preliminary IOI outlining an upfront cash consideration of $1.3 million for the public company shell and 0.5% of the pro-forma equity ownership. Party BB’s offer to buy the public company shell, however, was moot because Party U’s offer was below what the CombiMatrix board of directors thought would be appropriate. Discussions with Party DD and Party L also ended.

On February 13, 2017, Party CC, a privately-held company, submitted an offer for a reverse merger at 83.3% Party CC – 16.7% CombiMatrix equity ownership split, but that required CombiMatrix to find a way to extinguish the Series F warrants through a CombiMatrix exchange offer or eliminate their Black-Scholes buyback provision. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On February 17, 2017, Party CC’s chief executive officer made a presentation to the CombiMatrix board of directors regarding Party CC’s business and prospects.

 

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On February 23, 2017, Invitae re-engaged to explore the possibility of restarting strategic discussions with CombiMatrix when its President and Chief Executive Officer called CombiMatrix’s President and Chief Executive Officer.

On March 6, 2017, Party CC submitted a revised offer for a reverse merger at 77.8% Party CC – 22.2% CombiMatrix equity ownership split, but that required CombiMatrix to find a way to extinguish the Series F warrants through a CombiMatrix exchange offer or to eliminate the Black-Scholes buyback provision contained in such Series F warrants. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On March 10, 2017, Invitae indicated it was preparing to submit a proposal for a potential stock-for-stock merger valuing CombiMatrix at two times 2016 revenue as disclosed in its most recent form 10-K filing, or approximately $25.7 million.

On March 14, 2017, Invitae submitted a preliminary IOI for a stock-for-stock merger valuing CombiMatrix at two times 2016 revenue as disclosed in its most recent form 10-K filing, or approximately $25.7 million.

On March 15, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya provided an analysis and guidance on the current bids from Party CC and Invitae. Torreya advised the CombiMatrix board of directors that the reverse merger opportunity with Party CC was a less attractive value proposition to its stockholders. After consideration of all relevant factors, the CombiMatrix board of directors determined that Invitae’s proposal stood to maximize shareholder value because, among other factors: the total consideration offered by Invitae was higher in management’s and the board of directors’ view; in Party CC’s offer, CombiMatrix’s stockholders would receive a low percentage of the combined entity in a reverse merger and historically reverse mergers have not traded well; unlike Party CC’s offer, Invitae’s offer would not trigger the Black-Scholes buyout provision of CombiMatrix’s Series F warrants and therefore would result in a higher amount of consideration being received by CombiMatrix’s stockholders; there were greater synergies between Invitae’s business and CombiMatrix’s business, presenting better opportunities for post-merger growth; and Party CC was a pre-revenue startup in a different industry space, and the post-merger performance of the combined company would be uncertain. Torreya advised the CombiMatrix board of directors that it should make a counter-offer to Invitae.

On March 20, 2017, Invitae submitted a revised preliminary IOI for a stock-for-stock merger valuing CombiMatrix between $25 million and $30 million plus working capital to be defined.

On March 21, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya presented a valuation analysis of CombiMatrix by analyzing recent comparable transactions, comparable public companies and discounted cash flow valuation methodologies, as well as how Invitae’s latest offer fit relative to CombiMatrix’s implied valuation. Based on input from Torreya, the CombiMatrix board of directors directed CombiMatrix’s management to counter Invitae with a valuation range of $28 million to $33 million plus working capital to be defined.

On March 21, 2017, Invitae submitted a revised preliminary IOI for a stock-for-stock merger valuing CombiMatrix between $28 million and $33 million plus working capital to be defined. CombiMatrix executed the IOI and sent it back to Invitae starting a period of exclusivity expiring April 14, 2017.

On March 24, 2017, CombiMatrix’s management and members of the CombiMatrix board of directors hosted a site visit at their headquarters in Irvine, California with Invitae. A representative of Torreya notified Party CC that CombiMatrix had moved into a period of exclusivity with another party and thus would not be moving forward with Party CC’s offer at this time.

 

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On April 8, 2017, CombiMatrix’s management sent an email to the CombiMatrix board of directors notifying them of CombiMatrix’s first quarter financial results and updating them on the continuing Merger negotiations with Invitae.

From early April 2017 through late May 2017, Invitae and CombiMatrix exchanged several iterations and markups of a revised IOI and respective illustrative transaction terms until the summary of terms was orally agreed upon and an initial draft of the Merger Agreement was provided by Invitae on May 23, 2017. Also during this period Invitae, Invitae’s outside legal counsel Pillsbury Winthrop Shaw Pittman LLP, or Pillsbury, CombiMatrix, Stradling, and other advisors continued to engage in diligence review, as well as exchanged comments on the draft IOI.

On April 13, 2017, Invitae submitted a proposal modifying the IOI that the parties had executed on March 21, 2017, or the Proposal. The Proposal indicated a purchase price for CombiMatrix of $30 million, plus or minus “net cash” (defined broadly as current assets minus total liabilities at closing) to be paid in common stock of Invitae and calculated on a fully diluted basis of CombiMatrix securities, inclusive of outstanding Series F warrants.

On April 14, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and Stradling, to consider the new Proposal submitted by Invitae, which management estimated would translate into net consideration to CombiMatrix common stockholders of approximately $6.10 per share (based on Invitae’s then-current common stock price), or approximately $17.8 million, taking into account the net cash formula in the Proposal and CombiMatrix’s share count on a fully diluted basis. The CombiMatrix board of directors directed CombiMatrix’s management to make a counterproposal that the “fully diluted” shares calculation exclude the outstanding Series F warrants.

On April 18, 2017, Invitae rejected CombiMatrix’s counter-proposal to exclude the Series F warrants from the fully-diluted calculation of the proposed purchase price. The parties discussed alternative solutions to Invitae’s concerns surrounding the Series F warrants and Invitae indicated that it would be open to the possibility of conducting a concurrent tender offer of Invitae common stock for the Series F warrants.

Later on April 18, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and Stradling, in which the CombiMatrix board of directors approved the proposed solution of Invitae making a concurrent tender offer of Invitae common stock for the Series F warrants.

On April 22, 2017, Invitae submitted a revised Proposal that indicated a purchase price for CombiMatrix of $33 million, plus or minus net cash, and included a concurrent tender offer of Invitae common stock for the Series F warrants at a value of $2.90 per warrant, but contained a cap on the purchase price (regardless of how much net cash would be increased by any warrant exercises). CombiMatrix’s management estimated that the Proposal would approximate $8.37 per share of CombiMatrix common stock if no Series F warrants were exercised and $7.33 per share of CombiMatrix common stock if all of the Series F warrants were exercised.

On April 28, 2017, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management and Stradling, in which it authorized management to continue discussions with Invitae. Because the exclusivity period with Invitae had expired on April 14, 2017, the CombiMatrix board of directors further authorized CombiMatrix’s senior management to explore any other strategic alternatives that may become available.

During the week of May 1, 2017, CombiMatrix’s chief executive officer contacted Party U to gauge its interest in revisiting the possible strategic transaction, but Party U expressed no interest in engaging in a bidding war for a strategic transaction.

On May 5, 2017, Invitae submitted a further revised Proposal that indicated a purchase price for CombiMatrix of $25 million, plus or minus net cash, but without a cap, to be paid in common stock of Invitae and calculated on a

 

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fully diluted basis of CombiMatrix securities, but excluding outstanding Series D Warrants and also excluding any Series F warrants tendered in a tender exchange offer. Under the tender offer, Invitae would make a supplemental offer of $2.90 per Series F warrant (approximately an additional $6 million based on Invitae’s then-current common stock price). The purchase price would be subject to a floor of $7.00 per share of common stock (based on Invitae’s then-current common stock price) regardless of how much dilution may occur if Series F warrants are exercised. The revised Proposal also required that the transaction bonus pursuant to CombiMatrix’s Transaction Bonus Plan be paid with restricted stock units for Invitae common stock despite the fact that the transaction bonus is payable in cash pursuant to the terms of the Transaction Bonus Plan.

On May 8, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya presented an updated valuation analysis of CombiMatrix by analyzing recent comparable transactions, comparable public companies and discounted cash flow valuation methodologies, along with a sensitivity analysis of Series F warrants tender versus exercise, as well as how Invitae’s latest offer fit relative to CombiMatrix’s implied valuation. Based on input from Torreya, the CombiMatrix board of directors directed CombiMatrix’s management to make a counteroffer to Invitae for a $27 million purchase price for the CombiMatrix common stock (subject to the net cash adjustment) and a floor of $8.25 per share of CombiMatrix common stock (based on Invitae’s then-current common stock price), or approximately $42 million if all the Series F warrants exercised prior to closing the Merger.

On May 11, 2017, CombiMatrix received an unsolicited IOI by Party K for a reverse merger at a range between 75-81% Party K – 19-25% CombiMatrix equity ownership split. The CombiMatrix board of directors did not view the offer as viable given the potential need for additional capital infusion that presented closing risk.

On May 12, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya. Torreya provided guidance on the IOI received from Party K and concluded that given the historical risk profile of Party K and its current capitalization, Invitae’s offer reflected a superior value proposal for CombiMatrix’s stockholders. However, Torreya also advised that CombiMatrix make a counter proposal back to Party K. Based on input from Torreya, the CombiMatrix board of directors directed CombiMatrix’s management to counter Party K with a $45 million all-cash offer plus a cash buyout of the Series F warrants (based upon the maximum value of the Invitae Proposal being approximately $42 million if all the Series F warrants are exercised prior to closing the Merger), with proof of funds and ability to close within 30 days, and with no exclusivity.

On May 16, 2017, CombiMatrix’s chief executive officer contacted the chief executive officer of Party K and presented the all-cash counterproposal, which Party K ultimately rejected later that week.

From late May 2017 through late July 2017, Invitae and CombiMatrix exchanged several iterations and markups of the draft Merger Agreement until terms were fully agreed upon and the Merger Agreement was signed on July 31, 2017. Also during this period Invitae, Pillsbury, CombiMatrix, Stradling, and other advisors continued to engage in diligence review, as well as exchanged comments on the draft Merger Agreement.

On June 9, 2017, the CombiMatrix board of directors held a telephonic meeting with representatives of CombiMatrix’s senior management and Stradling, and discussed the terms of an interim draft of the Merger Agreement. The CombiMatrix board of directors directed CombiMatrix’s management to negotiate with Invitae to, among other things, reduce the termination fee and expense reimbursement in the Merger Agreement from $2,000,000 and $500,000, respectively, down to $1,000,000 and $300,000, respectively. Later on June 9, 2017, CombiMatrix’s management made a counter-offer to Invitae with a termination fee and expense reimbursement of $1,000,000 and $300,000, respectively.

On June 27, 2017, Invitae agreed to a termination fee and expense reimbursement in the Merger Agreement of $1,400,000 and $400,000, respectively, and on July 18, 2017, Invitae agreed that the termination fee would be reduced by any amount of expense reimbursement already paid.

 

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On July 14, 2017, the CombiMatrix board of directors held a meeting with representatives of CombiMatrix’s senior management, Stradling, and Torreya to discuss an interim draft of the Merger Agreement. The CombiMatrix board of directors directed CombiMatrix’s management to request that Invitae consider shifting a certain amount of Merger consideration from the Series F warrant exchange tender offer to the CombiMatrix common stockholders.

On July 15, 2017, CombiMatrix’s chief executive officer contacted Invitae’s chief executive officer to request that Invitae consider shifting a certain amount of Merger consideration from the Series F warrant exchange tender offer to the CombiMatrix common stockholders. Invitae’s chief executive officer indicated that Invitae was unwilling to shift the consideration between common stockholders and Series F warrant holders.

On July 21, 2017, Invitae opened a discussion with CombiMatrix’s senior management regarding their continued work for CombiMatrix post-Merger and provided an initial draft of consulting agreements for them.

On July 28, 2017, the CombiMatrix board of directors met telephonically, with representatives of CombiMatrix’s senior management, Torreya and Stradling present, to consider the proposed transaction with Invitae. At the meeting, the CombiMatrix board of directors reviewed the key provisions of the near-final draft of the Merger Agreement and ancillary agreements, including structure and timing considerations, the exchange ratio, closing conditions, treatment of stock options, restricted stock units and warrants, the termination provisions and termination fees and circumstances under which the payment of termination fees would be triggered. The CombiMatrix board of directors was made aware of the consulting arrangements that Invitae was offering to CombiMatrix’s chief executive officer and chief financial officer and of their respective financial interests in those arrangements.

During that meeting on July 28, 2017, representatives of Torreya delivered to the CombiMatrix board of directors its oral opinion, which was confirmed by delivery of a written opinion dated July 28, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, matters considered and limits on the review undertaken by Torreya in preparing the opinion, the consideration to be paid in the Merger and in the proposed Offer was fair, from a financial point of view, to CombiMatrix’s common stockholders. The CombiMatrix board of directors directed CombiMatrix’s management to further negotiate the termination fee provision in the Merger Agreement so that the termination fee would not be triggered solely by an unsolicited bid.

Between July 28, 2017 and July 30, 2017, Invitae, Pillsbury, CombiMatrix, Stradling, and other advisors had continued discussions on the terms of the Merger Agreement.

On July 30, 2017, the CombiMatrix board of directors met telephonically, with representatives of CombiMatrix’s senior management, Torreya and Stradling present, to consider the proposed transaction with Invitae. At the meeting, the CombiMatrix board of directors reviewed the revisions made to the near-final draft of the Merger Agreement and ancillary agreements since the versions of July 28, 2017, including Invitae’s agreement that the termination fee would not be triggered solely by an unsolicited bid.

During that meeting on July 30, 2017, representatives of Torreya delivered to the CombiMatrix board of directors its oral opinion, which was confirmed by delivery of a written opinion dated July 30, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, matters considered and limits on the review undertaken by Torreya in preparing the opinion, the consideration to be paid in the Merger and in the proposed Offer was fair, from a financial point of view, to CombiMatrix’s common stockholders.

On July 31, 2017, the parties finalized the Merger Agreement and the Merger Agreement was executed.

On July 31, 2017, after the closing of the markets in the United States, CombiMatrix and Invitae announced the Transaction through separate press releases.

 

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Invitae’s Reasons for the Merger and the Offer

The Invitae board of directors concluded that the Merger Agreement, the Merger, the stock issuance in connection therewith and the other transaction documents, and the transactions contemplated thereby or undertaken in connection therewith, including the Offer, are advisable and in the best interests of Invitae and its stockholders and, accordingly, approved the Merger Agreement, the Merger, the stock issuance in connection therewith and the other transaction documents, and the transactions contemplated thereby or undertaken in connection therewith, including the Offer. In evaluating the transactions, the Invitae board of directors consulted with Invitae’s management and legal advisors, and considered the following material factors that the Invitae board of directors believes favor the transactions:

 

    the transactions would not preclude Invitae from entering into possible future business combination transactions,

 

    the Invitae board of directors’ belief that the Merger Exchange Ratio added certainty to the proposed transactions without subjecting Invitae stockholders to the possibility of excessive dilution,

 

    the requirement that participation in the Offer by at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement is a condition to Invitae’s obligation to proceed with a closing of the Merger,

 

    the fact that CombiMatrix may be required, under certain circumstances, to pay a termination fee to Invitae of $1,400,000 (net of expense reimbursement previously paid) and/or Invitae’s expenses up to $400,000, and

 

    the terms of the Merger Agreement, as described in the section entitled “The Merger Agreement” below, which the Invitae board of directors generally viewed as favorable to Invitae.

In the course of its deliberations regarding the transactions, the Invitae board of directors also identified and considered the following potentially negative factors:

 

    the potential disruption to Invitae’s business that could result from the announcement of the transactions, including the diversion of management and employee attention, employee attrition and the effect on business and customer relationships,

 

    the effect of the public announcement of the transactions on Invitae’s stock price if Invitae stockholders or CombiMatrix stockholders do not view the Merger positively,

 

    the possibility that the transactions might not be completed due to difficulties in satisfying the conditions to the Merger or the occurrence of a material adverse effect on either company’s business,

 

    the risks and costs to Invitae if the transactions do not close, and the potential effect of the resulting public announcement of termination of the Merger Agreement on, among other things, the market price for Invitae common stock, its operating results, its ability to attract and retain key personnel and its ability to complete an alternative transaction,

 

    the fact that Invitae may be required, under certain circumstances, to pay CombiMatrix’s expenses up to $400,000, and

 

    the fact that, subject to compliance with certain obligations under the Merger Agreement, the CombiMatrix board of directors is permitted to change its recommendation to the CombiMatrix stockholders and the CombiMatrix stockholders may fail to approve the Merger Proposal; in addition, the CombiMatrix board of directors may explore and respond to an alternative transaction proposed by a third party that it concludes constitutes, or could reasonably be expected to constitute, a superior proposal.

 

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The foregoing discussion of the information and factors considered by the Invitae board of directors is not intended to be exhaustive, but includes the material factors considered by the Invitae board of directors. In view of the variety of factors considered in connection with its evaluation of the Merger Agreement, the issuance of shares in the Merger and the other transactions contemplated by the Merger Agreement and other transaction documents, the Invitae board of directors did not find it practicable to, and did not, quantify or otherwise assign specific weights to the factors considered in reaching its determination and recommendation. In addition, each of the members of the Invitae board of directors may have given differing weights to different factors. On balance, the Invitae board of directors believed that the positive factors discussed above outweighed the negative factors discussed above.

 

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THE OFFER

Invitae is offering to exchange each outstanding CombiMatrix Series F warrant for shares of Invitae common stock, subject to the conditions contained in this document and the accompanying letter of transmittal. As of September 26, 2017, there were outstanding Series F warrants held by public warrant holders to acquire a total of 2,066,976 shares of CombiMatrix common stock at an exercise price of $5.17 per share, which were originally issued pursuant to common stock purchase warrants as part of an underwritten public offering by CombiMatrix that closed on March 24, 2016.

Pursuant to the Merger Agreement, the successful completion of the Offer, including the satisfaction of the condition to the Offer that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement shall have been validly tendered and not withdrawn prior to the expiration of the Offer, is a precondition to Invitae’s obligation to consummate the Merger. Promptly after completion of the Offer, Invitae intends to consummate the Merger, i.e., a merger of Merger Sub with and into CombiMatrix, with CombiMatrix surviving the merger as a wholly owned subsidiary of Invitae. After the Merger, the former CombiMatrix Series F warrant holders will no longer have any direct ownership interest in the surviving corporation. See the sections entitled “Background of the Merger and the Offer” and “The Merger Agreement” for a more detailed description of the events leading up to the proposed Merger and Offer and the terms and conditions of the Merger Agreement.

The CombiMatrix board of directors has unanimously recommended that the CombiMatrix stockholders vote to approve the Merger. The successful completion of the Offer, including the satisfaction of the condition to the Offer that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement shall have been validly tendered and not withdrawn prior to the expiration of the Offer, is a precondition Invitae’s obligation to consummate the Merger. In connection with the completion of the Offer and the Merger, Invitae and CombiMatrix intend to make the appropriate filings to delist the unexchanged CombiMatrix Series F warrants from trading on the NASDAQ Capital Market. The CombiMatrix Series F warrants that are not validly tendered in the Offer, if any, will be assumed by Invitae in accordance with their terms and converted into warrants to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to reflect the Merger Exchange Ratio. Invitae does not intend to list such warrants for trading on any national stock exchange. See the section entitled “Risk Factors — The liquidity of the CombiMatrix Series F warrants that are not exchanged will be reduced.”

However, neither Invitae, the CombiMatrix board of directors, the information agent, nor the exchange agent for the Offer is making any recommendation to you as to whether you should tender or refrain from tendering your CombiMatrix Series F warrants pursuant to the Offer. You must make your own decision as to whether to tender your CombiMatrix Series F warrants and, if so, how many CombiMatrix Series F warrants to tender. In doing so, you should read carefully the information in this document and the related letter of transmittal.

Consideration

Under the terms of the Offer, each CombiMatrix Series F warrant holder will receive, for each outstanding CombiMatrix Series F warrant to acquire one share of CombiMatrix common stock validly tendered and not properly withdrawn in the Offer, a fraction of a share of Invitae common stock equal to the Warrant Exchange Ratio, which is 0.3056. The Warrant Exchange Ratio was calculated as the quotient (rounded to the nearest ten-thousandth) obtained by dividing $2.90 by the average closing price for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement, or $9.491, which is referred to in the Merger Agreement as the Invitae Trailing Average Share Value.

In addition, instead of receiving any fractional shares of Invitae common stock to which CombiMatrix Series F warrant holders otherwise would be entitled, tendering CombiMatrix Series F warrant holders will receive a cash payment in lieu of such fractional share equal to the dollar amount (rounded to the nearest whole cent), without

 

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interest, determined by multiplying such fraction by $9.491. See the section entitled “The Offer — Cash Instead of Fractional Shares of Invitae Common Stock” for a description of the treatment of fractional shares.

CombiMatrix Series F warrant holders should obtain current market quotations for shares of Invitae common stock and CombiMatrix Series F warrants before deciding whether to tender pursuant to the Offer. See the section entitled “Comparative Market Prices and Dividends” for sales price data. The value of Invitae common stock will fluctuate prior to the Expiration Date as the market price of Invitae common stock changes. Please also see the section of this document entitled “Risk Factors.”

Cash Instead of Fractional Shares of Invitae Common Stock

In lieu of any fractional shares of Invitae common stock that otherwise would be issuable pursuant to the Offer, each CombiMatrix Series F warrant holder who would otherwise be entitled to receive a fraction of a share of Invitae common stock pursuant to the Offer will receive a cash payment in lieu of such fractional share equal to the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by $9.491.

Distribution of Offer Materials

This document, the related letter of transmittal and other relevant materials will be delivered to registered holders of CombiMatrix Series F warrants and to brokers, dealers, commercial banks, trust companies and other nominees whose names appear on CombiMatrix’s warrant holder list or, if applicable, who are listed as participants in a clearing agency’s security position listing, so that they can in turn send these materials to beneficial owners of CombiMatrix Series F warrants who may hold such warrants in “street name.”

Expiration of the Offer

The Offer is scheduled to expire at 12:00 midnight, New York City time, on November 13, 2017, which is the “Initial Expiration Date,” unless further extended by Invitae. “Expiration Date” means the Initial Expiration Date, unless and until Invitae has extended the period during which the Offer is open, in which event the term “Expiration Date” means the latest time and date at which the Offer, as so extended by Invitae, will expire.

Extension, Termination and Amendment

Invitae expressly reserves the right to extend the period of time during which the Offer remains open, at any time or from time to time, by giving notice of such extension to the exchange agent. Invitae and CombiMatrix are required under the Merger Agreement to use their commercially reasonable efforts to complete the Offer at or immediately prior to the closing of the Merger (assuming the 90% threshold is met, in the case of Invitae, and the closing is otherwise ready to occur), and Invitae currently intends to exercise its right to extend the Offer period as necessary until all conditions of the Offer, and all conditions of the Merger (other than those conditions related to the completion of the Offer), have been satisfied or waived. During any such extension, all CombiMatrix Series F warrants previously tendered and not withdrawn will remain subject to the Offer, subject to each tendering CombiMatrix Series F warrant holder’s right to withdraw its CombiMatrix Series F warrant. CombiMatrix Series F warrant holders should read the discussion under the section entitled “The Offer — Withdrawal Rights” for more details.

Subject to the provisions of the Merger Agreement, to the extent legally permissible, Invitae also reserves the right, at any time or from time to time:

 

    to delay acceptance for exchange of any CombiMatrix Series F warrant pursuant to the Offer, or to terminate the Offer and not accept or exchange any CombiMatrix Series F warrants not previously accepted or exchanged, if any of the conditions of the Offer are not satisfied or waived prior to the Expiration Date or to the extent required by applicable laws;

 

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    to extend the Offer from time to time if less than 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement have been validly tendered and not withdrawn at the otherwise scheduled Expiration Date;

 

    to waive any condition, other than as described in the section entitled “The Offer — Conditions of the Offer”; and

 

    to otherwise amend the Offer in any respect consistent with the terms of the Merger Agreement.

In addition, Invitae may terminate the Offer and not exchange CombiMatrix Series F warrants that were previously tendered even if Invitae has accepted, but not paid for, CombiMatrix Series F warrants in the Offer, if at the Expiration Date the conditions of the Offer described below in the section entitled “The Offer — Conditions of the Offer” are not met or waived.

Invitae will effect any extension, termination, amendment or delay by giving oral or written notice to the exchange agent and by making a public announcement as promptly as practicable thereafter. In the case of an extension, any such announcement will be issued no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled Expiration Date. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to CombiMatrix Series F warrant holders in connection with the Offer be promptly disseminated to such warrant holders in a manner reasonably designed to inform them of such change) and without limiting the manner in which Invitae may choose to make any public announcement, Invitae assumes no obligation to publish, advertise or otherwise communicate any such public announcement of this type other than by issuing a press release over the news wire.

If Invitae materially changes the terms of the Offer or the information concerning the Offer, or if Invitae waives a material condition of the Offer, Invitae will extend the Offer to the extent legally required under the Exchange Act. If, prior to the Expiration Date, Invitae changes the percentage of CombiMatrix Series F warrants being sought or the consideration offered, that change will apply to all holders whose CombiMatrix Series F warrants are accepted for exchange pursuant to the Offer. If at the time notice of that change is first published, sent or given to CombiMatrix Series F warrant holders, the Offer is scheduled to expire at any time earlier than the tenth business day from and including the date that such notice is first so published, sent or given, Invitae will extend the Offer until the expiration of that ten business day period. For purposes of the Offer, a “business day” means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time.

No subsequent offering period will be available after the Offer.

Exchange of CombiMatrix Series F warrants; Delivery of Shares of Invitae Common Stock and Cash Instead of Fractional Shares

Invitae has retained American Stock Transfer & Trust Company, LLC as the exchange agent for the Offer to handle the exchange of CombiMatrix Series F warrants for the offer consideration.

Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Invitae will accept for exchange, and will exchange, CombiMatrix Series F warrants validly tendered and not properly withdrawn promptly after the Expiration Date. In all cases, exchanges of CombiMatrix Series F warrants tendered and accepted for exchange pursuant to the Offer will be made only after timely receipt by the exchange agent of certificates for those CombiMatrix Series F warrants, a properly completed and duly executed letter of transmittal, and any other required documents.

For purposes of the Offer, Invitae will be deemed to have accepted for exchange CombiMatrix Series F warrants validly tendered and not properly withdrawn if and when it notifies the exchange agent of its acceptance of those

 

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CombiMatrix Series F warrants pursuant to the Offer. The exchange agent will deliver any shares of Invitae common stock issuable in exchange for CombiMatrix Series F warrants validly tendered and accepted pursuant to the Offer, and cash instead of any fractional shares of Invitae common stock, promptly after receipt of such notice. The exchange agent will act as the agent for tendering CombiMatrix Series F warrant holders for the purpose of receiving shares of Invitae common stock and cash from Invitae and transmitting such stock and cash to the tendering CombiMatrix Series F warrant holders. CombiMatrix Series F warrant holders will not receive any interest on any cash that Invitae pays in the Offer, even if there is a delay in making the exchange.

If Invitae does not accept any tendered CombiMatrix Series F warrants for exchange pursuant to the terms and conditions of the Offer for any reason, Invitae will return certificates for such unexchanged CombiMatrix Series F warrants without expense to the tendering warrant holder.

Withdrawal Rights

CombiMatrix Series F warrant holders can withdraw tendered CombiMatrix Series F warrants at any time until the Expiration Date and, if Invitae has not agreed to accept the CombiMatrix Series F warrants for exchange on or prior to November 13, 2017, CombiMatrix Series F warrant holders can thereafter withdraw their CombiMatrix Series F warrants from tender at any time after such date until Invitae accepts CombiMatrix Series F warrants for exchange.

For the withdrawal of CombiMatrix Series F warrants to be effective, the exchange agent must receive a written notice of withdrawal from the CombiMatrix Series F warrant holder at the address set forth on the back cover of this document, prior to the Expiration Date. The notice must include the warrant holder’s name, address, social security number, the certificate number(s) of the CombiMatrix Series F warrant(s) to be withdrawn, the number of CombiMatrix Series F warrants to be withdrawn and any other information required pursuant to the Offer.

Invitae will decide all questions as to the form and validity (including time of receipt) of any notice of withdrawal in its sole discretion, and its decision shall be final and binding. None of Invitae, CombiMatrix, the exchange agent, the information agent or any other person is under any duty to give notification of any defects or irregularities in any tender or notice of withdrawal or will incur any liability for failure to give any such notification. Any CombiMatrix Series F warrants properly withdrawn will be deemed not to have been validly tendered for purposes of the Offer. However, a CombiMatrix Series F warrant holder may re-tender withdrawn CombiMatrix Series F warrants by following the applicable procedures discussed under the sections entitled “The Offer — Procedure for Tendering” or “The Offer — Guaranteed Delivery” at any time prior to the Expiration Date.

Procedure for Tendering

For a registered holder of CombiMatrix Series F warrants to validly tender such warrants pursuant to the Offer:

 

    a properly completed and duly executed letter of transmittal, along with any required signature guarantees and any other documents required by the letter of transmittal, and certificates for tendered CombiMatrix Series F warrants must be received by the exchange agent at the address set forth on the back cover of this document before the Expiration Date; or

 

    the terms and conditions of the guaranteed delivery procedure set forth below under the section entitled “The Offer — Guaranteed Delivery” must be met.

For CombiMatrix Series F warrants that are held in “street name” through a broker, dealer, commercial bank, trust company or other nominee, the warrant holder should contact the broker or other nominee to provide instructions to tender Series F warrants in the Offer within the time period provided by the broker or other nominee. Your broker, dealer, commercial bank, trust company or other nominee may establish a deadline before the expiration of the Offer by which you must provide it with your instructions. Please contact your broker or other nominee for their specific requirements.

 

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Signatures on all letters of transmittal must be guaranteed by an eligible institution, except in cases in which CombiMatrix Series F warrants are tendered either by a registered holder of CombiMatrix Series F warrants who has not completed the box entitled “Special Issuance Instructions” or the box entitled “Special Delivery Instructions” on the letter of transmittal or for the account of an eligible institution.

If the certificates for CombiMatrix Series F warrants are registered in the name of a person other than the person who signs the letter of transmittal, or if certificates for unexchanged CombiMatrix Series F warrants are to be issued to a person other than the registered holder(s), the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed by an eligible institution.

The method of delivery of CombiMatrix Series F warrant certificates and all other required documents is at the option and risk of the tendering CombiMatrix Series F warrant holder, and delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, Invitae recommends registered mail with return receipt requested, properly insured. In all cases, CombiMatrix Series F warrant holders should allow sufficient time to ensure timely delivery.

The tender of CombiMatrix Series F warrants pursuant to any of the procedures described above will constitute a binding agreement between Invitae and the tendering CombiMatrix Series F warrant holder upon the terms and subject to the conditions of the Offer.

Exchange Agent

The exchange agent for the Offer is American Stock Transfer & Trust Company, LLC. The address to which letters of transmittal and Series F warrant certificates should be mailed or delivered by overnight courier is provided below and on the back cover of this document. If sent by mail, it is recommended that you send documents by registered mail, properly insured, with return receipt requested, and that you allow a sufficient number of days to ensure delivery to the exchange agent before the Expiration Date. Do not send or deliver these materials to CombiMatrix or Invitae. If you deliver your documents in a manner different than described above, we may not honor your tender.

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC

For assistance call (877) 248-6417 or (718) 921-8317

 

If delivering by hand, express mail, courier,

or other expedited service:

   By mail:
  

American Stock Transfer & Trust Co., LLC

Operations Center

Attn: Reorganization Department

6201 15th Avenue

Brooklyn, New York 11219

  

American Stock Transfer & Trust Co., LLC

Operations Center

Attn: Reorganization Department

P.O. BOX 2042

New York, NY 10272-2042

 

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Information Agent

If you have any questions about the Offer or if you need additional copies of this document, you should contact Advantage Proxy, Inc., Invitae’s information agent for this Offer:

ADVANTAGE PROXY, INC.

PO Box 13581

Des Moines, WA 98198

Telephone: (877) 870-8565 (toll free); (206) 870-8565 (collect)

Email: ksmith@advantageproxy.com

Lost or Destroyed Certificates

Registered holders of CombiMatrix Series F warrants whose certificate for part or all of their CombiMatrix Series F warrants has been lost, stolen, misplaced or destroyed may contact BNY Mellon Investor Services, at the address and telephone number set forth below, for instructions as to obtaining a replacement CombiMatrix Series F warrant certificate. That certificate will then be required to be submitted together with the letter of transmittal in order for such CombiMatrix Series F warrants to be validly tendered pursuant to the Offer. The CombiMatrix Series F warrant holder may have to post a bond to secure against the risk that the CombiMatrix Series F warrant certificate may subsequently emerge. CombiMatrix Series F warrant holders whose CombiMatrix Series F warrant certificate has been lost, stolen, misplaced or destroyed should contact BNY Mellon Investor Services immediately in order to permit timely processing of this documentation.

BNY Mellon Investor Services

520 Pike Street, Suite 1220

Seattle, WA 98101

(206) 674-3031

Guaranteed Delivery

CombiMatrix Series F warrant holders desiring to tender CombiMatrix Series F warrants pursuant to the Offer but whose certificates are not immediately available or cannot otherwise be delivered with all other required documents to the exchange agent prior to the Expiration Date may nevertheless tender CombiMatrix Series F warrants, as long as all of the following conditions are satisfied:

 

    the tender is by or through an eligible institution;

 

    a properly completed and duly executed notice of guaranteed delivery, substantially in the form made available by Invitae, is received by the exchange agent as provided below prior to the Expiration Date; and

 

    the certificates for all tendered CombiMatrix Series F warrants, in proper form for transfer, together with a properly completed and duly executed letter of transmittal with any required signature guarantees and all other documents required by the letter of transmittal are received by the exchange agent at the address on the back cover of this document within three NYSE trading days after the date of execution of such notice of guaranteed delivery.

A CombiMatrix Series F warrant holder may deliver the notice of guaranteed delivery by hand, facsimile transmission or mail to the exchange agent at the address on the back cover of this document. The notice must include a guarantee by an eligible institution in the form set forth in the notice.

In all cases, Invitae will exchange CombiMatrix Series F warrants tendered and accepted for exchange pursuant to the Offer only after timely receipt by the exchange agent of certificates for CombiMatrix Series F warrants, a properly completed and duly executed letter of transmittal and any other required documents.

 

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Fees and Commissions

Registered holders of CombiMatrix Series F warrants who tender directly to the exchange agent will not be obligated to pay any charges or expenses of the exchange agent or any brokerage commissions. CombiMatrix Series F warrant holders who hold their warrants in “street name” through a broker, dealer, commercial bank, trust company or other nominee should consult that institution as to whether or not such institution will charge the warrant holder any service fees in connection with tendering CombiMatrix Series F warrants pursuant to the Offer. Except as set forth in the instructions to the letter of transmittal, any transfer taxes on the exchange of CombiMatrix Series F warrants pursuant to the Offer will be paid by Invitae.

Matters Concerning Validity and Eligibility

Invitae will determine questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of CombiMatrix Series F warrants in its sole discretion, and its determination shall be final and binding. Invitae reserves the absolute right to reject any and all tenders of CombiMatrix Series F warrants that it determines are not in the proper form or the acceptance of or exchange for which may be unlawful. Invitae also reserves the absolute right to waive any defect or irregularity in the tender of any CombiMatrix Series F warrants. No tender of CombiMatrix Series F warrants will be deemed to have been validly made until all defects and irregularities in tenders of such CombiMatrix Series F warrants have been cured or waived. None of Invitae, CombiMatrix, the information agent, the exchange agent nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any CombiMatrix Series F warrants or will incur any liability for failure to give any such notification. Invitae’s interpretation of the terms and conditions of the Offer (including the letter of transmittal and instructions thereto) will be final and binding.

CombiMatrix Series F warrant holders who have any questions about the procedure for tendering CombiMatrix Series F warrants in the Offer should contact the information agent at the address and telephone number set forth on the back cover of this document.

Announcement of Results of the Offer

Invitae will announce the final results of the Offer, including whether all of the conditions to the Offer have been satisfied or waived and whether Invitae will accept the tendered CombiMatrix Series F warrants for exchange, as promptly as practicable following the Expiration Date. The announcement will be made by a press release in accordance with applicable NYSE requirements.

Material U.S. Federal Income Tax Consequences of the Offer

The following is a discussion of material U.S. federal income tax consequences of the Offer applicable to U.S. Holders (as defined below) who exchange their CombiMatrix Series F warrants for Invitae common stock in the Offer. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local, or non-U.S. tax laws are not discussed. This discussion is based on the Code, U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the Internal Revenue Service, or the IRS, each as in effect as of the date of this prospectus/offer to exchange. These authorities are subject to differing interpretations or change. Any such change, which may or may not be retroactive, could alter the tax consequences to holders of CombiMatrix Series F warrants as described herein.

This discussion does not address all U.S. federal income tax consequences relevant to the particular circumstances of each CombiMatrix Series F warrant holder. In addition, it does not address consequences relevant to CombiMatrix Series F warrant holders that are subject to particular U.S. tax rules, including, without limitation:

 

    persons who hold CombiMatrix Series F warrants in a functional currency other than the U.S. dollar;

 

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    persons who hold CombiMatrix Series F warrants as part of an integrated investment (including a “straddle,” pledge against currency risk, “constructive” sale or “conversion” transaction or other integrated or risk reduction transactions) consisting of CombiMatrix Series F warrants and one or more other positions;

 

    persons who are not U.S. Holders as defined below;

 

    persons who are U.S. expatriates;

 

    banks, insurance companies, mutual funds, tax-exempt entities, financial institutions, broker-dealers, real estate investment trusts or regulated investment companies;

 

    persons who do not hold their CombiMatrix Series F warrants as a “capital asset” within the meaning of Section 1221 of the Code;

 

    partnerships or other entities classified as partnerships or disregarded entities for U.S. federal income tax purposes, S corporations or other pass-through entities (including hybrid entities);

 

    persons who acquired CombiMatrix Series F warrants pursuant to compensatory transactions;

 

    persons who acquired CombiMatrix Series F warrants pursuant to conversion rights under convertible instruments; and

 

    persons who hold CombiMatrix Series F warrants through individual retirement accounts or other tax-deferred accounts.

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of CombiMatrix Series F warrants that, for U.S. federal income tax purposes, is or is treated as:

 

    an individual who is a citizen or resident of the United States;

 

    a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

    an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

    a trust if either (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons (within the meaning of Section 7701(a)(30) of the Code) are authorized or have the authority to control all substantial decisions of such trust, or (ii) the trust was in existence on August 20, 1996 and has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

If an entity treated as a partnership for U.S. federal income tax purposes holds CombiMatrix Series F warrants, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. If you are a partnership or a partner of a partnership holding CombiMatrix Series F warrants or any other person excluded from this discussion, you should consult your tax advisor regarding the tax consequences of the Offer.

The purpose of the Offer is for Invitae to satisfy its obligations under the Merger Agreement, and Invitae intends to consummate the Merger promptly after completion of the Offer. See the section entitled “The Offer – Purpose of the Merger; The Merger; No Dissenter’s Rights – Purpose of the Offer; The Merger.” Consequently, the following discussion assumes that the Offer will not be completed without the completion of the Merger, and that the Offer, together with the Merger, should be treated for U.S. federal income tax purposes as a single integrated transaction.

In addition, the following discussion does not address (i) any U.S. federal non-income tax consequences of the Offer, including estate, gift or other tax consequences, (ii) any state, local or non-U.S. tax consequences of the

 

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Offer, (iii) the Medicare contribution tax on net investment income or the alternative minimum tax, (iv) the tax consequences of transactions effectuated before, after or at the same time as the Offer (whether or not they are in connection with the Offer), including, without limitation, transactions in which CombiMatrix Series F warrants are acquired or are converted in the Merger, and (v) tax consequences to holders of CombiMatrix common stock or options or similar rights to purchase CombiMatrix stock other than CombiMatrix Series F warrants.

IN LIGHT OF THE FOREGOING, COMBIMATRIX SERIES F WARRANT HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM OF THE OFFER, INCLUDING THE APPLICABLE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES, AND ANY TAX REPORTING REQUIREMENTS OF THE OFFER AND RELATED TRANSACTIONS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

In connection with the filing of the registration statement of which this prospectus/offer to exchange is a part, Pillsbury will deliver to Invitae and Stradling will deliver to CombiMatrix opinions that the statements under the caption “The Offer – Material U.S. Federal Income Tax Consequences of the Offer,” constitute the opinions of Pillsbury and Stradling, respectively. In rendering their opinions, counsel assume that the statements and facts concerning the Offer set forth in this prospectus/offer to exchange, in the proxy statement/prospectus relating to the Merger, and in the Merger Agreement, are true and accurate in all respects, and that the Offer and the Merger will be completed in accordance with this prospectus/offer to exchange, the prospectus/proxy statement relating to the Merger, and the Merger Agreement. Counsels’ opinions also assume the truth and accuracy of certain representations and covenants as to factual matters made by Invitae, CombiMatrix and Merger Sub in tax representation letters provided to counsel. In addition, counsel base their tax opinions on the law in effect on the date of the opinions and assume that there will be no change in applicable law between such date and the time of completion of the Offer and the Merger. If any of these assumptions is inaccurate, the tax consequences of the Offer could differ from those described in this prospectus/offer to exchange.

No ruling from the IRS has been or will be requested with respect to the tax consequences of the Offer. Opinions of counsel do not bind the courts or the IRS, nor will they preclude the IRS from adopting a position contrary to those expressed in the opinions. Subject to the qualifications and assumptions described in this prospectus/offer to exchange, the Offer, together with the Merger, will be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Accordingly, but subject to the discussion below under the caption “—Possible Alternative Characterization for U.S. Holders Also Holding Repurchased Warrants,” the tax consequences to U.S. Holders of CombiMatrix Series F warrants will be as follows:

 

    a U.S. Holder will not recognize gain or loss upon the exchange of CombiMatrix Series F warrants for Invitae common stock pursuant to the Offer, except with respect to cash received in lieu of a fractional share of Invitae common stock as described below;

 

    a U.S. Holder who receives cash in lieu of a fractional share of Invitae common stock in the Offer will recognize capital gain or loss in an amount equal to the difference between the amount of cash received instead of a fractional share and the U.S. Holder’s tax basis allocable to such fractional share;

 

    a U.S. Holder’s aggregate tax basis for the shares of Invitae common stock received in the Offer (including any fractional share interest for which cash is received) will equal the U.S. Holder’s aggregate tax basis in the CombiMatrix Series F warrants surrendered in the Offer; and

 

    the holding period of the shares of Invitae common stock received by a U.S. Holder in the Offer will include the holding period of the CombiMatrix Series F warrants surrendered in exchange therefor.

Gain or loss recognized by a U.S. Holder who receives cash in lieu of a fractional share of Invitae common stock will constitute capital gain or loss and any such gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period in the CombiMatrix Series F warrants surrendered in the Offer is more than one year as of completion of the Offer and the Merger. Under current law, long-term capital gains of non-corporate

 

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taxpayers are taxed at a reduced U.S. federal income tax rate. Under current law, the deductibility of capital losses is subject to limitations. In addition, for purposes of the above discussion regarding the determination of the bases and holding periods for shares of Invitae common stock received in the Offer, U.S. Holders who acquired different blocks of CombiMatrix Series F warrants at different times for different prices must calculate their bases and holding periods in their CombiMatrix Series F warrants separately for each identifiable block of such warrants exchanged in the Offer.

As provided in Treasury Regulations Section 1.368-3(d), each U.S. Holder who receives shares of Invitae common stock in the Offer or the Merger is required to retain permanent records pertaining to the Offer and the Merger, and make such records available to any authorized IRS officers and employees. Such records should specifically include information regarding the amount, basis, and fair market value of all transferred property, and relevant facts regarding any liabilities assumed or extinguished as part of such reorganization. Additionally, U.S. Holders who owned immediately before completion of the Offer and the Merger at least five percent (by vote or value) of the total outstanding stock of CombiMatrix, or Series D warrants or Series F warrants (including Series F warrants participating in the Offer) the aggregate federal income tax basis of which was at least $1 million, are required to attach a statement to their tax returns for the year in which the Offer and the Merger are completed that contains the information listed in Treasury Regulation Section 1.368-3(b). Such statement must include the U.S. Holder’s tax basis in and fair market value of such U.S. Holder’s shares of CombiMatrix stock, Series D warrants and Series F warrants surrendered in the Offer or the Merger, the date of completion of the Offer and the Merger and the name and employer identification number of each of CombiMatrix and Invitae. Holders of CombiMatrix Series F convertible preferred stock should consult their tax advisors regarding application of these requirements to their particular circumstances.

If the Offer, together with the Merger, fails to qualify as a reorganization within the meaning of Section 368(a) of the Code, then a U.S. Holder would recognize gain or loss upon the exchange of CombiMatrix Series F warrants for shares of Invitae common stock equal to the difference between the fair market value, at the time of the exchange, of the Invitae common stock received in the Offer (including any cash received in lieu of a fractional share of Invitae common stock) and such U.S. Holder’s tax basis in the CombiMatrix Series F warrants surrendered in the Offer. Such gain or loss would be long-term capital gain or loss if the CombiMatrix Series F warrants were held for more than one year at the time of completion of the Offer and the Merger. In addition, the U.S. Holder’s aggregate tax basis in the shares of Invitae common stock received in the Offer would equal their fair market value at the time of completion of the Offer and the Merger, and the U.S. Holder’s holding period of such shares of Invitae common stock would commence the day after completion of the Offer and the Merger.

Possible Alternative Characterization for U.S. Holders Also Holding Repurchased Warrants

CombiMatrix has repurchased half of the outstanding and unexercised CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants pursuant to the terms of that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016 and, upon the closing of the Merger, will repurchase the remainder of such outstanding and unexercised warrants. See the section entitled “The Merger Agreement—CombiMatrix Stock Options, RSUs and Warrants.” The discussion above assumes that any cash received by a U.S. Holder in respect of any such repurchase of warrants by CombiMatrix should not be integrated with the exchange of CombiMatrix Series F warrants for Invitae common stock in the Offer; however, the IRS may assert that cash received pursuant to any such repurchase from a U.S. Holder should be integrated with such exchange of CombiMatrix Series F warrants for Invitae common stock in the Offer (and, if relevant, the exchange of CombiMatrix stock for Invitae common stock in the Merger). If the IRS prevailed in such an assertion, the federal income tax consequences to U.S. Holders could differ from the consequences described above. In general, U.S. Holders would not be able to recognize any loss in the integrated transaction and any cash received would be treated as capital gain in an amount equal to the lesser of the overall gain recognized in the integrated transaction and the cash received. Holders of shares of CombiMatrix capital stock and of CombiMatrix warrants should consult their tax advisors as to the federal income tax consequences to them of any such alternative characterization.

 

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Information Reporting and Backup Withholding

A U.S. Holder of CombiMatrix Series F warrants may be subject to information reporting and backup withholding for U.S. federal income tax purposes on cash paid in lieu of fractional shares in connection with the Offer. The current backup withholding rate is 28 percent. Backup withholding will not apply, however, to a U.S. Holder who (i) furnishes a correct taxpayer identification number and certifies the U.S. Holder is not subject to backup withholding on IRS Form W-9 or a substantially similar form or (ii) certifies the U.S. Holder is otherwise exempt from backup withholding. U.S. Holders of CombiMatrix Series F warrants should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption. If a U.S. Holder does not provide a correct taxpayer identification number on IRS Form W-9 or other proper certification, the U.S. Holder may be subject to penalties imposed by the IRS. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS. In the event of backup withholding, consult with your tax advisor to determine if you are entitled to any tax credit, tax refund or other tax benefit as a result of such backup withholding.

THE PRECEDING DISCUSSION IS A SUMMARY OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. U.S. HOLDERS OF COMBIMATRIX SERIES F WARRANTS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER, INCLUDING THE APPLICABLE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES, AND ANY TAX REPORTING REQUIREMENTS OF THE OFFER AND RELATED TRANSACTIONS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

Purpose of the Offer; The Merger; No Dissenter’s Rights

Purpose of the Offer; The Merger

Pursuant to the Merger Agreement, the successful completion of the Offer, including the satisfaction of the condition to the Offer that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement shall have been validly tendered and not withdrawn prior to the expiration of the Offer, is a precondition to Invitae’s obligation to consummate the Merger. Promptly after completion of the Offer, Invitae intends to consummate the Merger, i.e., a merger of Merger Sub with and into CombiMatrix, with CombiMatrix surviving the Merger as a wholly owned subsidiary of Invitae. After the Merger, the former CombiMatrix Series F warrant holders will no longer have any direct ownership interest in the surviving corporation. See the sections entitled “Background of the Merger and the Offer” and “The Merger Agreement” for a more detailed description of the events leading up to the proposed Merger and Offer and the terms and conditions of the Merger Agreement.

In the Merger, the CombiMatrix Series F warrants of warrant holders that do not participate in the Offer will be assumed by Invitae in accordance with their terms and converted into warrants to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to reflect the Merger Exchange Ratio.

It is currently anticipated that, at the closing of the Merger, the Merger Exchange Ratio would be between approximately 0.91 and 0.84 shares of Invitae common stock. The Merger Exchange Ratio is determined pursuant to a formula in the Merger Agreement and described in this prospectus/offer to exchange, and the estimate of the Merger Exchange Ratio is subject to adjustment. For example, the estimated Merger Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 trading days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative $0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Merger Exchange Ratio represented $8.60 in value for each share of

 

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CombiMatrix common stock. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Merger Exchange Ratio would be reduced to 0.84, representing $8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Offer of at least 90% as described in this prospectus/offer to exchange, the Merger Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. See the sections entitled “The Merger Agreement — Merger Consideration and Exchange Ratio” and “The Merger Agreement — Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis” for additional factors that may affect the Merger Exchange Ratio. Invitae does not intend to list such warrants for trading on any national stock exchange.

Following the completion of the Merger, Invitae securityholders are expected to own approximately 6.9% of the fully-diluted common stock of the combined company and CombiMatrix securityholders are expected to own approximately 93.1% of the fully-diluted common stock of the combined company. These estimates are based on the assumption that 100% of the CombiMatrix Series F warrants are exchanged in the Offer and subject to adjustment.

See the section entitled “The Merger Agreement – Merger Consideration and Exchange Ratio” for a description of the Merger Exchange Ratio formula.

In comparison, under the terms of the Offer, each CombiMatrix Series F warrant holder will receive, for each outstanding CombiMatrix Series F warrant to acquire one share of CombiMatrix common stock validly tendered and not withdrawn in the Offer, a fraction of a share of Invitae common stock equal to the Warrant Exchange Ratio, subject to the procedures described in this document and the related letter of transmittal.

No Dissenter’s Rights

CombiMatrix Series F warrant holders do not have dissenter’s rights in connection with the Offer. In addition, holders of shares of CombiMatrix common stock will not be entitled to any appraisal rights under Delaware General Corporation Law in connection with the Merger.

Effect of the Offer on the Market for CombiMatrix Series F warrants; NASDAQ Capital Market Listing; Registration Under the Exchange Act; Margin Regulations

Effect of the Offer on the Market for the CombiMatrix Series F warrants; NASDAQ Capital Market Listing

In connection with the completion of the Offer and the Merger, Invitae and CombiMatrix intend to make the appropriate filings to delist any remaining unexchanged CombiMatrix Series F warrants from trading on the NASDAQ Capital Market, presuming any remaining unexchanged CombiMatrix Series F warrants will qualify for delisting. The CombiMatrix Series F warrants that are not validly tendered in the Offer, if any, and that remain outstanding and unexercised at the time of the Merger will be assumed by Invitae in accordance with their terms and converted into warrants to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to reflect the Merger Exchange Ratio. Invitae does not intend to list such warrants for trading on any national stock exchange.

The ability to sell unexchanged warrants which are converted into Invitae warrants will become limited and could cease to exist due to the reduction in the anticipated amount of the warrants outstanding upon completion of the Offer and the delisting of the warrants from the NASDAQ Capital Market. A more limited trading market

 

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might adversely affect the liquidity, market price and price volatility of these securities. If a market for such warrants develops, these securities may trade at a discount to the price at which the securities would trade if the amount outstanding were not reduced and the securities were not delisted from trading on the NASDAQ Capital Market, depending on the market for similar securities and other factors. However, there can be no assurance that an active market or any market in the warrants will exist, develop or be maintained or as to the prices at which such warrants may be traded.

Registration Under the Exchange Act

CombiMatrix Series F warrants currently are registered under the Exchange Act. This registration may be terminated upon application by CombiMatrix to the SEC if CombiMatrix Series F warrants are not listed on a national securities exchange and there are fewer than 300 record holders. Termination of registration would substantially reduce the information required to be furnished to holders of CombiMatrix Series F warrants and to the SEC and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirements of Exchange Act Rule 13e-3 with respect to “going private” transactions, no longer applicable to CombiMatrix Series F warrants. In addition, “affiliates” of CombiMatrix and persons holding “restricted securities” of CombiMatrix may be deprived of the ability to dispose of these securities pursuant to Rule 144 under the Securities Act. If registration of CombiMatrix Series F warrants under the Exchange Act is not terminated prior to the Merger, then Invitae intends to terminate the registration of CombiMatrix Series F warrants following consummation of the Merger.

Margin Regulations

CombiMatrix Series F warrants currently are a “margin security” under the regulations of the Board of Governors of the Federal Reserve System, which has the effect, among other things, of allowing brokers to extend credit on the collateral of the CombiMatrix Series F warrants. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, CombiMatrix Series F warrants may no longer constitute “margin securities” for purposes of the margin regulations of the Federal Reserve Board, in which event such CombiMatrix Series F warrants could no longer be used as collateral for loans made by brokers.

Conditions of the Offer

Subject to the provisions of the Merger Agreement, Invitae will not accept for exchange or exchange any CombiMatrix Series F warrants, may postpone the acceptance for exchange, or the exchange, of tendered CombiMatrix Series F warrants, and may, in its sole discretion, terminate or amend the Offer consistent with the terms of the Merger Agreement if at the Expiration Date the following conditions are not met or waived, if subject to waiver.

Minimum Tender

There shall have been validly tendered and not properly withdrawn prior to the expiration of the Offer, a number of CombiMatrix Series F warrants which constitutes at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement; provided that Invitae has offered shares of Invitae common stock with a value of at least $2.90 per CombiMatrix Series F warrant (based on the Invitae Trailing Average Share Value).

Certain Other Conditions

The other conditions to the Offer are as follows:

 

    the registration statement on Form S-4, of which this document is a part, must have been declared effective by the SEC in accordance with the Securities Act of 1933, or the Securities Act, and must not be subject to any stop order or proceeding, or any proceeding threatened by the SEC, seeking a stop order;

 

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    the holders of a majority of the outstanding CombiMatrix common stock must have adopted and approved the proposal to adopt the Merger Agreement;

 

    there must not have been issued any temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Offer by any court of competent jurisdiction or other governmental entity of competent jurisdiction that remains in effect, and there must be no law, statute, rule, regulation, ruling or decree in effect which has the effect of making the consummation of the Offer illegal;

 

    any waiting period applicable to the consummation of the Merger and the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or HSR Act, must have expired or been terminated, and there must not be in effect any voluntary agreement by any party to the Merger Agreement and the U.S. Federal Trade Commission, the U.S. Department of Justice or any foreign governmental body, pursuant to which such party has agreed not to consummate the Merger or the Offer for any period of time;

 

    there must not be any legal proceeding pending or threatened by an official of a government or governmental entity in which such government or governmental entity indicates that it intends to conduct any legal proceeding or take any other action (i) challenging or seeking to restrain or prohibit the consummation of the Offer or any of the other transactions contemplated by the Merger Agreement, (ii) relating to the Offer or any of the other transactions contemplated by the Merger Agreement and seeking to obtain from Invitae, Merger Sub or CombiMatrix any material damages or other relief, (iii) seeking to materially prohibit or limit the ability to vote, transfer, receive dividends or otherwise exercise ownership rights with respect to any Invitae common stock to be issued in the Offer, (iv) that would materially affect the right or ability of Invitae or CombiMatrix to own the assets or operate their businesses, or (v) seeking to compel Invitae or CombiMatrix to dispose of or hold separate any material assets as a result of the Offer or any of the other transactions contemplated by the Merger Agreement;

 

    the shares of Invitae common stock to be issued in Offer must be approved for listing on the NYSE as of the effective time of the Merger;

 

    all conditions to closing under the Merger Agreement shall have been satisfied or waived, other than those conditions which by their nature are only capable of being satisfied as of closing and other than the consummation of the Offer; and

 

    the Merger Agreement shall not have been terminated in accordance with its terms.

Subject to the provisions of the Merger Agreement, the foregoing conditions are for the sole benefit of Invitae and may be asserted by Invitae regardless of the circumstances or may be waived by Invitae, by express and specific action to that effect, in whole or in part at any time and from time to time on or prior to the Expiration Date, except that the conditions relating to receipt of any approvals from any governmental entity may be asserted at any time prior to Invitae’s acceptance of CombiMatrix Series F warrants for exchange pursuant to the Offer. Any determination by Invitae concerning any event described above will be final and binding upon all parties. The failure by Invitae at any time to exercise any of the foregoing rights will not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and other circumstances will not be deemed a waiver with respect to any other facts and circumstances and each such right will be deemed an ongoing right that may be asserted at any time and from time to time, in each case subject to the applicable rules and regulations of the SEC.

Certain Legal Matters; Regulatory Approvals

Invitae is not aware of any governmental license or regulatory permit that appears to be material to CombiMatrix’s business that might be adversely affected by Invitae’s acquisition of CombiMatrix Series F warrants pursuant to the Offer or, except as described below, of any approval or other action by any government

 

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or governmental administrative or regulatory authority or agency, domestic or foreign, that would be required for Invitae’s acquisition or ownership of CombiMatrix Series F warrants pursuant to the Offer. Pursuant to the Merger Agreement, Invitae and CombiMatrix have agreed to cooperate and use commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Merger Agreement, including the Offer. Invitae must comply with applicable federal and state securities laws and the rules and regulations of the NYSE in connection with the issuance of shares of Invitae common stock upon completion of the Offer and the filing of this prospectus/offer to exchange and other documents with the SEC.

The Merger Agreement also provides that CombiMatrix and Invitae will file any notification and report forms required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and respond as promptly as practicable to any inquiries or requests received from the Federal Trade Commission or the Department of Justice for information or documentation or any inquiries or requests received from any other governmental body in connection with antitrust or competition matters.

Although neither Invitae nor CombiMatrix knows of any reason why these regulatory approvals cannot be obtained in a timely manner, neither Invitae nor CombiMatrix can be certain when or if they will be obtained. Invitae’s obligation under the Offer to accept for exchange and pay for CombiMatrix Series F warrants is subject to certain conditions. See the section entitled “The Offer — Conditions of the Offer.”

Interests of Certain CombiMatrix Directors and Officers

When you consider whether to tender your CombiMatrix Series F warrants in the Offer, you should keep in mind that the directors and officers of CombiMatrix have interests in the Merger and the Offer as individuals that are different from, or in addition to, your interests as a stockholder. The CombiMatrix board of directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions it contemplates.

In addition, the exercise of CombiMatrix’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the Merger may result in a conflict of interest when determining whether such changes or waivers are appropriate and in the best interests of CombiMatrix’s stockholders.

As of September 26, 2017, directors and executive officers of CombiMatrix owned or controlled 1.42% of the outstanding shares of CombiMatrix common stock.

Restated Executive Change of Control Severance Plan

CombiMatrix provides certain severance benefits such that if any of its executive officers is terminated for other than cause, death or disability, the executive will receive payments equal to three months’ base salary plus medical and dental benefits. In addition, CombiMatrix has a Restated Executive Change of Control Severance Plan (as amended, the “Severance Plan”) that affects certain senior management-level employees who are classified as “Section 16 Officers” of CombiMatrix. Pursuant to the Severance Plan, if a participating employee is involuntarily terminated (other than for death, disability or for cause) or resigns for “good reason” (as defined in the Severance Plan) during the two-year period following a “change of control” (as defined in the Severance Plan) of CombiMatrix, then, subject to execution of a release of claims against CombiMatrix, the employee will be entitled to receive: (i) one-half times annual base salary (one times annual base salary for the chief executive officer); (ii) immediate vesting of outstanding compensatory equity awards; and (iii) payment of COBRA premiums for the participating employee and eligible dependents for a pre-determined period of time. Payment of benefits under the Severance Plan will be limited by provisions contained in Section 409A of the U.S. Internal Revenue Code. The Severance Plan is administered by a plan administrator, which initially is the compensation committee of the CombiMatrix board of directors. In order to participate in the Severance Plan, an eligible employee must waive any prior retention or severance agreements. The Severance Plan automatically renews annually unless terminated upon 12 months prior written notice. It is anticipated that Mr. McDonough,

 

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CombiMatrix’s chief executive officer, and Mr. Burell, CombiMatrix’s chief financial officer, will receive approximately $380,000 and $141,000, respectively, in benefits (inclusive of payment of COBRA premiums) under the Severance Plan as a result of any consummation of the Merger.

Transaction Bonus Payout Agreements

The CombiMatrix board of directors and compensation committee adopted a Transaction Bonus Plan on December 2, 2015, or the Transaction Bonus Plan, as a form of retention for senior management to actively assist in exploring a strategic transaction, and to motivate and align the participants’ interest in negotiating for and maximizing stockholder value for a strategic transaction. The Transaction Bonus Plan provides for certain bonus payments to be made, upon any consummation of a qualifying change of control transaction such as the Merger, to certain participants as shall be determined from time to time by the compensation committee of the CombiMatrix board of directors. The aggregate value of the bonuses payable under the Transaction Bonus Plan shall be the greater of (i) $1,000,000 or (ii) ten percent of the net proceeds received in connection with a qualifying change of control transaction such as the Merger, and the percentage of such bonus pool awarded to each eligible participant shall be determined from time to time by the compensation committee of the CombiMatrix board of directors. Although the total amount of the bonuses payable under the Transaction Bonus Plan will not be known until immediately prior to the closing of the Merger, and the participants and the allocation of bonus amounts payable under the Transaction Bonus Plan have not yet been determined by the compensation committee of the CombiMatrix board of directors, it is anticipated that CombiMatrix’s executive officers will receive a substantial portion of the bonus pool and that CombiMatrix’s non-employee members of the board of directors will receive a small portion of the bonus pool.

In connection with the execution of the Merger Agreement, certain officers of CombiMatrix entered into a transaction bonus payout agreement, or the Executive Officer Transaction Bonus Payout Agreement. The form of the Executive Officer Transaction Bonus Payout Agreement, dated July 31, 2017, is attached as Exhibit B-1 to Annex A to this prospectus/offer to exchange and is incorporated herein by reference. In accordance with the terms of the Executive Officer Transaction Bonus Payout Agreement, CombiMatrix’s executive officers and a vice president of CombiMatrix have agreed to accept restricted stock units for Invitae common stock, or Invitae RSUs, in lieu of cash payments under the Transaction Bonus Plan, which Invitae RSUs will be subject to the terms of an Invitae RSU award agreement. The number of shares of Invitae common stock subject to such Invitae RSUs shall be equal to the dollar amount of the transaction bonus awarded to the participant under the Transaction Bonus Plan divided by the Invitae Trailing Average Share Value.

If the applicable executive has a Consulting Agreement (as defined and described below) with Invitae as of the closing of the Merger, then the Invitae RSUs granted under the Executive Officer Transaction Bonus Payout Agreement shall vest and be settled as follows: (a) Invitae RSUs represented by the dollar amount of the transaction bonus awarded to the executive under the Transaction Bonus Plan minus $817,834 in the case of Mr. McDonough and $40,000 in the case of Mr. Burell, divided by the Invitae Trailing Average Share Value, shall vest and be settled on the closing of the Merger; and (b) Invitae RSUs represented by $817,834 in the case of Mr. McDonough and $40,000 in the case of Mr. Burell, divided by the Invitae Trailing Average Share Value, shall vest and be settled on the eight-month anniversary of the closing of the Merger, so long as the executive has rendered services as required by the Consulting Agreement through the eight-month anniversary of the closing of the Merger (subject to acceleration for a change in control of Invitae or a termination of the Consulting Agreement without cause, for good reason or due to death or permanent disability). To the extent that the applicable executive does not have a Consulting Agreement in effect as of the closing of the Merger, the Invitae RSUs granted under the Executive Officer Transaction Bonus Payout Agreement shall vest on the closing of the Merger and be settled in three equal monthly installments, subject to acceleration of settlement upon a change in control of Invitae.

In connection with the execution of the Merger Agreement, non-employee members of the CombiMatrix board of directors entered into a transaction bonus payout agreement, or the Board Transaction Bonus Payout

 

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Agreement. The form of the Board Transaction Bonus Payout Agreement, dated July 31, 2017, is attached as Exhibit B-2 to Annex A to this prospectus/offer to exchange and is incorporated herein by reference. In accordance with the terms of the Board Transaction Bonus Payout Agreement, CombiMatrix’s non-employee directors have agreed to accept unrestricted Invitae common stock at the closing of the Merger in lieu of cash payments under the Transaction Bonus Plan. The number of shares of Invitae common stock shall be equal to the dollar amount of the transaction bonus awarded to the participant under the Transaction Bonus Plan divided by the Invitae Trailing Average Share Value.

Consulting Agreements

In connection with the execution of the Merger Agreement and in order to satisfy one of the conditions to closing of the Merger, Mr. McDonough and Mr. Burell each entered into an eight-month consulting agreement with Invitae to become effective as of the closing of the Merger, each of which is referred to as a Consulting Agreement, and, collectively as the Consulting Agreements. The Consulting Agreements require such individuals to provide strategic management and leadership services of CombiMatrix as the operations of CombiMatrix integrate into Invitae. The Consulting Agreements provide for monthly compensation of $30,333.33 and $22,150, respectively, for Messrs. McDonough and Burell and monthly reimbursement of COBRA premiums. In addition, the Consulting Agreements provide that (a) within 75 days after December 31, 2017, and assuming that no portion of any such bonus amount has been previously paid to the contractor, Invitae will pay the contractor any applicable annual bonus amount for actual achievement of second half and year-end targets under that certain CombiMatrix Amended and Restated 2017 Executive Performance Bonus Plan and (b) Invitae will reimburse all reasonable and otherwise unreimbursed transportation and hotel expenses for the contractor and his spouse for the CombiMatrix 2017 President’s Club. The Consulting Agreements are terminable by Invitae or the contractor, but in the event of termination without cause or for good reason, all compensation will continue to be paid through the eight-month anniversary and the performance bonus also will be paid in the event of termination due to death or permanent disability.

Indemnification and Other Interests

In connection with the closing of the Merger, all CombiMatrix RSUs and in-the-money stock options held by the CombiMatrix executive officers and members of the board of directors will be accelerated in full and converted into the right to receive Merger consideration (less the exercise price of the in-the-money stock options).

CombiMatrix is party to indemnification agreements with each of its directors and executive officers that require CombiMatrix, among other things, to indemnify the directors and executive officers against certain liabilities that may arise by reason of their status or service as directors or officers. In addition, pursuant to the terms of the Merger Agreement, CombiMatrix’s directors and executive officers will be entitled to certain ongoing indemnification from the surviving corporation in the Merger and coverage under directors’ and officers’ liability insurance policies. Such indemnification and insurance coverage is further described in the section entitled “The Merger Agreement — Indemnification and Insurance for CombiMatrix Directors and Officers.”

Merger-Related Compensation for CombiMatrix’s Named Executive Officers

In accordance with Item 402(t) of Regulation S-K, the tables below present the estimated amounts of compensation that each named executive officer of CombiMatrix could receive that are based on or otherwise relate to the Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section such term is used to describe the Merger-related compensation that may become payable to CombiMatrix’s named executive officers. This Merger-related compensation will be the subject of a non-binding advisory vote of CombiMatrix stockholders at the special meeting.

The amounts set forth below have been calculated assuming completion of the Merger on September 27, 2017, the latest practicable date prior to the filing of this prospectus/offer to exchange, and, where applicable, assuming

 

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each named executive officer experiences a qualifying termination as of September 27, 2017. In addition, for purposes of determining equity award values, the amounts below are determined using the per-share Merger consideration. The amounts indicated below are estimates of amounts that would be payable to CombiMatrix’s named executive officers, and the estimates are based on multiple assumptions that may or may not actually occur, including assumptions described in this prospectus/offer to exchange. Some of the assumptions are based on information not currently available, and as a result, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. The amounts set forth in the table below do not reflect any reduction that might apply by reason of the applicable limits on paying amounts subject to a golden parachute excise tax; it is not expected that any payments would be grossed up in respect of such taxes. In addition, consistent with SEC guidance, the amounts below do not take into account the effect of the new Consulting Agreements between Invitae and Messrs. McDonough and Burell, which are described above. All dollar amounts set forth below have been rounded to the nearest whole number.

 

     Golden Parachute Payment(1)  

Name

   Cash Severance ($)(2)      Equity ($)(3)      Perquisites/Benefits ($)(4)      Total ($)  

Mark McDonough

     364,000        600,234        1,313,440        2,277,674  

Scott Burell

     132,600        195,806        661,220        989,626  

 

(1) All amounts reflected in the table, other than estimated amounts pertaining to the Transaction Bonus Plan, are attributable to “double-trigger” arrangements (i.e., the amounts are triggered by (a) the change in control that will occur upon completion of the Merger and (b) the officer’s qualifying termination in connection with the change in control).
(2) The amounts reflect cash severance benefits that are payable under the Severance Plan in connection with the Merger. The severance benefits payable under the Severance Plan are described in more detail above.
(3) The amounts reflect the aggregate value of time-based restricted stock unit awards held by each of CombiMatrix’s named executive officers that will be accelerated in connection with the Merger. The terms of equity acceleration are described in more detail above. All stock options held by each of CombiMatrix’s named executive officers are out-of-the-money and, accordingly, will be terminated in connection with the Merger.
(4) The amounts reflect the payment of (i) estimated amounts of $1,291,000 and $650,000 provided to Messrs. McDonough and Burell, respectively, under the Transaction Bonus Plan (in the form of Invitae RSUs) and (ii) COBRA premiums of $22,440 and $11,220 provided to Messrs. McDonough and Burell, respectively, under the Severance Plan. The Transaction Bonus Plan payments and COBRA premiums are described in more detail above. The Transaction Bonus Plan payments reflected in the table are only estimates based on an assumed aggregate Merger consideration of $26 million, and allocations of amounts under the Transaction Bonus Plan are subject to approval of the compensation committee of the CombiMatrix board of directors.

Current Directors and Executive Officers of Invitae

Set forth below are the name, address and current principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director and executive officer of Invitae. Except as otherwise noted, positions specified are positions with Invitae. The business address for the directors and executive officers is 1400 16th Street, San Francisco, California 94103.

Except as otherwise indicated, all of the persons listed below are citizens of the United States of America. Except as otherwise indicated, none of the directors and executive officers of Invitae listed below has, during the past five years, (a) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (b) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

 

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Name

    

Occupation or Employment

Randal W. Scott, Ph.D.

     Dr. Scott has served as Executive Chairman since January 2017, as Chairman since August 2012 and as a director since 2010. From August 2012 through January 2017, he served as Chief Executive Officer. From 2000 through August 2012, Dr. Scott held a number of positions at Genomic Health, Inc., a publicly held genomic information company which he co-founded in 2000, most recently serving as the Chief Executive Officer of a wholly owned subsidiary of Genomic Health, and as a director. Dr. Scott also served as Executive Chairman of the Board of Genomic Health from January 2009 until March 2012 and as Chairman of the Board and Chief Executive Officer from August 2000 until December 2008. Dr. Scott was a founder of Incyte Corporation, which at the time was a genomic information company, and served in various roles from 1991 through 2000, including Chairman of the Board, President and Chief Scientific Officer.

Sean E. George, Ph.D.

     Dr. George has served as Chief Executive Officer since January 2017, a position he previously held from January 2010 through August 2012. Dr. George is one of Invitae’s co-founders and has served as President since August 2012 and as Chief Operating Officer from August 2012 to January 2017. He has also served as a director since January 2010. Prior to co-founding Invitae, Dr. George served as Chief Operating Officer from 2007 to November 2009 at Navigenics, Inc., a personalized medicine company. Previously, he served as Senior Vice President of Marketing and Senior Vice President, Life Science Business at Affymetrix, Inc., a provider of life science and molecular diagnostic products, as well as Vice President, Labeling and Detection Business at Invitrogen Corporation, a provider of tools to the life sciences industry, during his tenure there from 2002 to 2007.

Eric Aguiar, M.D.

     Dr. Aguiar has served as a director since September 2010. Since January 2016 he has been a partner at Aisling Capital, an investment firm specializing in products, technologies, and global businesses that advance health. He was a partner in the venture capital firm Thomas, McNerney & Partners from 2007 to January 1, 2016. Prior to joining that firm, he was a Managing Director of HealthCare Ventures, a healthcare focused venture capital firm, from 2001 to 2007. Dr. Aguiar was Chief Executive Officer and a director of Genovo, Inc., a biopharmaceutical company focused on gene delivery and gene regulation, from 1998 to 2000. Dr. Aguiar previously served as a director of Amarin Pharmaceuticals, a publicly-held biopharmaceutical company, as well as on the boards of directors of numerous private companies including companies in the life sciences industry. He is a member of the Board of Overseers of the Tufts School of Medicine and a member of the Council on Foreign Relations.

Geoffrey S. Crouse

     Mr. Crouse has served as a director since March 2012. Mr. Crouse served as Chief Executive Officer of Cord Blood Registry from September 2012 to August 2015 when the company was sold to AMAG Pharmaceuticals. He served as Executive Vice President of AMAG until December 2015. Cord Blood Registry stores stem cells from umbilical blood and tissues. From April 2011 through September 2012, Mr. Crouse was a consultant. He previously served as Chief Operating Officer at Immucor, Inc., a publicly traded in vitro diagnostics company, from August 2009 to April 2011. Prior to Immucor, he served as Vice President of the life sciences business at Millipore Corporation, a publicly traded provider of technologies, tools and services for the life science industry, from 2006 to 2009. Prior to joining Millipore, he worked at Roche, a pharmaceuticals and diagnostics company, where he held various roles from 2003 to 2006.

 

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Name

    

Occupation or Employment

Christine M. Gorjanc

     Ms. Gorjanc has served as a director since November 2015. She has served as the Chief Financial Officer of Netgear, Inc., a provider of networking products and services, since January 2008, where she previously served as Chief Accounting Officer from December 2006 to January 2008 and Vice President, Finance from November 2005 to December 2006. From September 1996 through November 2005, Ms. Gorjanc served as Vice President, Controller, Treasurer and Assistant Secretary for Aspect Communications Corporation, a provider of workforce and customer management solutions. From October 1988 through September 1996, she served as the Manager of Tax for Tandem Computers, Inc., a provider of fault-tolerant computer systems. Prior to that, Ms. Gorjanc served in management positions at Xidex Corporation, a manufacturer of storage devices, and spent eight years in public accounting with a number of public accounting firms.

Lee Bendekgey

     Mr. Bendekgey has served as Chief Operating Officer since June 2017 and previously served as Chief Financial Officer from November 2013. Mr. Bendekgey also served as General Counsel from November 2013 through January 2017. Prior to joining Invitae, he was the General Counsel of DNAnexus, Inc., a cloud-based genome informatics and data management company, from September 2011 to October 2013. From March 2009 until September 2011, Mr. Bendekgey pursued personal interests. Prior to that, he was Chief Financial Officer and General Counsel for Nuvelo, Inc., a biopharmaceutical company, from July 2004 to March 2009. Mr. Bendekgey also served as General Counsel and Chief Financial Officer for Incyte Corporation from 1998 to July 2004.

Shelly D. Guyer

     Ms. Guyer has served as Chief Financial Officer since June 2017. From April 2013 to December 2016, she was Chief Financial Officer of Veracyte, Inc., a genomic diagnostics company, and served as Veracyte’s Secretary from April 2013 to March 2014. Previously, she served as Chief Financial Officer and Executive Vice President of Finance and Administration of iRhythm Technologies, Inc., a digital healthcare company, from April 2008 to December 2012. From March 2006 to August 2007, Ms. Guyer served as Vice President of Business Development and Investor Relations of Nuvelo Inc., a biopharmaceutical company. Prior to joining Nuvelo, Ms. Guyer worked at J.P. Morgan Securities and its predecessor companies for over 17 years, serving in a variety of roles including in healthcare investment banking.

Robert L. Nussbaum, M.D.

     Dr. Nussbaum has served as Chief Medical Officer since August 2015. From April 2006 to August 2015, he was chief of the Division of Genomic Medicine at UCSF Health where he also held leadership roles in the Cancer Genetics and Prevention Program beginning in January 2009 and the Program in Cardiovascular Genetics beginning in July 2007. From April 2006 to August 2015, he served as a member of the UCSF Institute for Human Genetics. Prior to joining UCSF Health, Dr. Nussbaum was chief of the Genetic Disease Research Branch of the National Human Genome Research Institute, one of the National Institutes of Health, from 1994 to 2006. He is a member of the Institute of Medicine and a fellow at the American Academy of Arts and Sciences.

 

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Board of Directors and Management of Invitae Following Completion of the Merger

Upon completion of the Merger, the board of directors of Invitae will continue to consist of the current five members, namely, Eric Aguiar, M.D., Geoffrey S. Crouse, Sean E. George, Ph.D. (Invitae’s President and Chief Executive Officer), Christine M. Gorjanc, and Randal W. Scott, Ph.D (Invitae’s Executive Chairman). Upon completion of the Merger, Randy Scott, Ph.D. will continue to serve as Executive Chairman and Sean George, Ph.D. will continue to serve as President and Chief Executive Officer of Invitae. The other executive officers of Invitae will continue to serve in their current capacities, including Lee Bendekgey, Chief Operating Officer, Shelly D. Guyer, Chief Financial Officer, and Robert L. Nussbaum, M.D., Chief Medical Officer.

Certain Relationships With CombiMatrix

As of the date of the Offer, Invitae does not own any CombiMatrix Series F warrants. Invitae has not effected any transaction in securities of CombiMatrix in the past 60 days. None of the directors or executive officers of Invitae, nor any of its associates or majority-owned subsidiaries, beneficially owns or has the right to acquire any securities of CombiMatrix or has effected any transaction in securities of CombiMatrix during the past 60 days.

On September 25, 2017, Invitae and its wholly-owned subsidiary Good Start Genetics, Inc. (collectively referred to as Invitae) entered into a Marketing and Laboratory Services Agreement, or the Marketing Agreement, with CombiMatrix Molecular Diagnostics, Inc., or CMDX, a wholly-owned subsidiary of CombiMatrix. Pursuant to the terms of the Marketing Agreement, Invitae will promote and market certain CMDX diagnostic tests, including miscarriage analysis tests, or the Tests, to physicians and other healthcare providers in the same channels in which Invitae markets its own diagnostic tests. Invitae will also coordinate logistics, customer service and support for the Tests.

In consideration for the services provided by Invitae under the Marketing Agreement, CMDX will pay Invitae a $200 fee for each Test Invitae markets and which CMDX processes, reports and bills to a patient, ordering physician or other healthcare provider and/or third party payer program, subject to all applicable federal, state and local laws, rules, and regulations, including, without limitation, the federal Anti-Kickback Statute and similar state anti-kickback laws and regulations. CMDX has also agreed to assist Invitae in promoting and marketing the Tests by providing training and support and sharing educational materials and scientific publications. In addition, CMDX will remain responsible for Test performance, reporting and billing.

Under the terms of the Marketing Agreement, the parties will jointly own all data and results from Tests performed as a result of Invitae’s promotional activities, and CMDX will retain ownership of the Tests and related intellectual property.

The term of the Marketing Agreement commenced on September 25, 2017 and continues until December 31, 2019, with automatic renewals for successive 12-month periods. The Marketing Agreement may be terminated by either party upon (a) 60 days’ notice prior to the end of the then-current term, (b) a material breach by the other party (subject to a 60-day cure period, or 10 days with respect to a breach of such party’s payment obligations) and (c) 60 days’ notice after the filing of bankruptcy, reorganization, liquidation or receivership proceedings by or against the other party. CMDX may also terminate the Marketing Agreement upon 30 days’ notice if Invitae enters into an agreement with a third party for, or decides to internally develop, invasive prenatal diagnostic tests, pediatric array tests or miscarriage analysis tests.

Except for the Marketing Agreement or as otherwise described in this document, (i) there have been no contacts, negotiations or transactions during the past two years between Invitae, any of its directors, executive officers or other affiliates, on the one hand, and CombiMatrix or its affiliates, on the other hand, concerning any merger, consolidation, acquisition, tender offer, election of CombiMatrix’s directors, or the sale of a material amount of CombiMatrix’s assets, and (ii) Invitae, its directors, executive officers or other affiliates do not have any other present or proposed material agreement, arrangement, understanding or relationship with CombiMatrix or any of its executive officers, directors, controlling persons or subsidiaries.

 

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Source and Amount of Funds

The Offer and the Merger are not conditioned upon any financing arrangements or contingencies. Invitae believes it has all necessary funds on hand to consummate the transactions contemplated by the Merger Agreement and the Offer, including any related fees and expenses, and anticipates that it will have, immediately following the consummation of the transactions contemplated by the Merger Agreement and the Offer, cash on hand or available to be borrowed under its one or more credit facilities in an amount sufficient to fund ordinary course working capital and other general corporate purposes.

Fees and Expenses

Invitae has retained Advantage Proxy, Inc. as information agent in connection with the Offer. The information agent may contact holders of CombiMatrix Series F warrants by mail, email, telephone, facsimile and personal interview and may request brokers, dealers, commercial banks, trust companies and other nominees to forward material relating to the Offer to beneficial owners of CombiMatrix Series F warrants who hold such warrants in “street name.” Invitae will pay the information agent reasonable and customary compensation for these services in addition to reimbursing the information agent for its reasonable out-of-pocket expenses. Invitae agreed to indemnify the information agent against certain liabilities and expenses in connection with the Offer, including certain liabilities under the U.S. federal securities laws.

In addition, Invitae has retained American Stock Transfer & Trust Company, LLC as exchange agent in connection with the Offer. Invitae will pay the exchange agent reasonable and customary compensation for its services in connection with the Offer, will reimburse the exchange agent for its reasonable out-of-pocket expenses and will indemnify the exchange agent against certain liabilities and expenses, including certain liabilities under the U.S. federal securities laws.

Invitae will reimburse brokers, dealers, commercial banks, trust companies and other nominees, upon request, for customary clerical and mailing expenses incurred by them in forwarding offer materials to their customers who hold CombiMatrix Series F warrants in “street name.” Except as set forth above, Invitae will not pay any fees or commissions to any broker, dealer, commercial bank, trust company, other nominee or other person for soliciting tenders of CombiMatrix Series F warrants pursuant to the Offer.

Accounting Treatment

Invitae prepares its financial statements in accordance with U.S. GAAP. In determining the accounting treatment of the Merger, management has evaluated all pertinent facts and circumstances and has concluded that business combination accounting would apply to the transaction.

The Merger will be accounted for using the acquisition method of accounting, which requires the determination of which entity is the accounting acquirer. The accounting acquirer is the entity that obtains control of the acquiree. The determination of the acquirer considers many factors, including but not limited to the relative voting rights in the combined entity after the business combination, the existence of a large minority interest in the combined entity if no other owner or organized group of owners has a significant voting interest, the composition of the governing body of the combined entity, the composition of the senior management of the combined entity, the terms of the exchange of equity securities, and the relative size of the combining entities and which of the combining entities initiated the combination. There is no hierarchical guidance on determining the acquirer in a business combination effected through an exchange of equity interests.

Invitae has concluded that Invitae is the accounting acquirer based on its evaluation of the facts and circumstances of the acquisition. The purpose of the Merger is to expand Invitae’s business through the acquisition of the products and services that CombiMatrix offers. Invitae is the larger of the two entities and will be the operating company within the combining companies. Invitae’s board members will continue to hold all of the seats on the Invitae board of directors and CombiMatrix stockholders do not have any board appointment rights. Invitae’s senior management will be continuing as senior management of the combined company.

 

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The Merger will be accounted for using the acquisition method of accounting in accordance with FASB ASC 805, “Business Combinations.” Invitae will recognize and measure the assets acquired and liabilities assumed at their fair values at the acquisition date. Acquisition-related costs, which include advisory, legal, accounting, valuation, and other professional or consulting fees, will be expensed in the period incurred. As of the date of this prospectus/offer to exchange, the valuation studies necessary to estimate the fair values of the assets acquired and liabilities assumed are preliminary and have been performed based on publicly available benchmarking information as well as a variety of other assumptions, including market participant assumptions, as there are limitations on the type of information that can be exchanged between Invitae and CombiMatrix at this time. Until the Merger is complete, all the relevant information will not be known. Differences between preliminary estimates and the final acquisition accounting will occur.

The financial condition and results of operations of Invitae after completion of the Merger will reflect CombiMatrix after completion of the Merger, but will not be restated retroactively to reflect the historical financial condition or results of operations of CombiMatrix. The earnings of Invitae following completion of the Merger will reflect acquisition accounting adjustments, including the effect of changes in the carrying value for assets and liabilities on depreciation expense, amortization expense and interest expense. Goodwill will not be amortized but will be tested for impairment at least annually, and all tangible and intangible assets including goodwill will be tested for impairment when certain indicators are present. If, in the future, Invitae determines that tangible or intangible assets (including goodwill) are impaired, Invitae would record an impairment charge at that time.

Stock Exchange Listing

Shares of Invitae common stock are listed on the NYSE. Invitae has submitted an application to the NYSE to list the shares of Invitae common stock that Invitae will issue in the Offer to holders of CombiMatrix Series F warrants.

 

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THE MERGER AGREEMENT

Invitae is making the Offer in order to satisfy its obligations under the Merger Agreement, which provides for the acquisition, through the Merger, of CombiMatrix by Invitae. The following describes certain aspects of the Merger, including material provisions of the Merger Agreement. The following description of the Merger Agreement is subject to, and qualified in its entirety by, reference to the Merger Agreement, which is attached to this document as Annex A and is incorporated by reference into this document. You are urged to carefully read the Merger Agreement in its entirety.

Structure

Under the Merger Agreement, Merger Sub will merge with and into CombiMatrix, with CombiMatrix surviving as a wholly owned subsidiary of Invitae.

Completion and Effectiveness of the Merger

The Merger will be completed as promptly as practicable after all of the conditions to completion of the Merger are satisfied or waived, including the approval of the stockholders of CombiMatrix and the successful completion of the Offer for CombiMatrix Series F warrants. Invitae and CombiMatrix are working to complete the Merger as quickly as practicable. However, Invitae and CombiMatrix cannot predict the exact timing of the completion of the Merger because it is subject to various conditions.

Merger Consideration and Exchange Ratio

At the effective time of the Merger,

 

    each share of CombiMatrix common stock outstanding immediately prior to completion of the Merger (other than shares of CombiMatrix common stock held by CombiMatrix as treasury or held by CombiMatrix, Merger Sub or any subsidiary of CombiMatrix) automatically will be converted into the right to receive a fraction of a share of Invitae common stock equal to the Merger Exchange Ratio described in more detail below;

 

    each share of CombiMatrix Series F preferred stock outstanding immediately prior to completion of the Merger (other than shares of CombiMatrix Series F preferred stock held by CombiMatrix as treasury or held by CombiMatrix, Merger Sub or any subsidiary of CombiMatrix) automatically will be converted into the right to receive a number of shares of Invitae common stock equal the Merger Exchange Ratio multiplied by the number of shares of CombiMatrix common stock issuable upon conversion of one share of Series F preferred stock on the date immediately prior to the Merger;

 

    each CombiMatrix RSU outstanding immediately prior to completion of the Merger will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such CombiMatrix RSU by the Merger Exchange Ratio;

 

    each in-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock underlying such CombiMatrix stock option by the Merger Exchange Ratio, minus the number of shares of Invitae common stock determined by dividing the aggregate exercise price for such option by the Invitae Trailing Average Share Value;

 

    each out-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be cancelled and terminated without the right to receive any consideration; and

 

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    although Invitae’s obligation to proceed with the Merger is subject to achieving 90% participation in the Offer, each outstanding Series D warrant and Series F warrant to purchase shares of CombiMatrix common stock (other than those Series F warrants exchanged in the Offer or previously exercised) will be assumed by Invitae and will be converted into a warrant to purchase shares of Invitae common stock, with the exercise price and the number of shares of Invitae common stock subject to such warrants being adjusted appropriately to account for the Merger Exchange Ratio.

If any shares of CombiMatrix common stock, CombiMatrix RSUs, or options to purchase shares of CombiMatrix common stock outstanding prior to the Merger are unvested or are subject to a repurchase option or the risk of forfeiture, then the shares of Invitae common stock issued in exchange for such shares of CombiMatrix common stock, RSUs or options will be issued without regard to such vesting, restrictions, repurchase options or risk of forfeiture.

No fractional shares of Invitae common stock will be issued in connection with the Merger. Instead, each CombiMatrix stockholder, holder of CombiMatrix RSUs or holder CombiMatrix stock options who otherwise would be entitled to receive a fractional share of Invitae common stock (after aggregating all fractional shares of Invitae common stock issuable to such holder) will be entitled to payment in cash of the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the Invitae Trailing Average Share Value.

The Merger Exchange Ratio is calculated using a formula intended to allocate to existing CombiMatrix securityholders a percentage of the combined company. Based on CombiMatrix’s and Invitae’s capitalization as of September 26, 2017, the Merger Exchange Ratio is currently estimated to be between approximately 0.91 and 0.84 shares of Invitae’s common stock. This estimate is subject to adjustment prior to closing of the Merger, including (i) adjustments to account for the issuance of any additional shares of CombiMatrix common stock prior to the consummation of the Merger, (ii) adjustments to account for CombiMatrix’s net cash at the effective time of the Merger and (iii) adjustments to account for the number of CombiMatrix Series F warrants exchanged in the Offer, assumed by Invitae, or exercised prior to the closing of the Merger. For example, the estimated Merger Exchange Ratio of 0.91 was calculated assuming that 100% of the CombiMatrix Series F warrants are exchanged in the Offer. Based on the average closing price of $9.491 per share of Invitae common stock on the NYSE for the 30 trading days prior to July 31, 2017, the date on which the Merger Agreement was executed, and estimated CombiMatrix net cash of negative $0.8 million (the calculation of which includes a reduction for CombiMatrix transaction bonuses payable), the estimated Merger Exchange Ratio represented $8.60 in value for each share of CombiMatrix common stock. These dollar values may fluctuate higher or lower prior to the closing of the Merger depending on fluctuations in the price of Invitae common stock on the NYSE. Also, a portion or all of the Series F warrants could be exercised prior to the closing of the Merger, which affects the computations of the Merger Exchange Ratio. If, instead of being exchanged, 100% of the CombiMatrix Series F warrants were exercised prior to the Merger, the Merger Exchange Ratio would be reduced to 0.84, representing $8.00 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $2.3 million (which excludes warrant exercise proceeds). Alternatively, if none of the CombiMatrix Series F warrants are exchanged in the Offer or exercised prior to the Merger and all such warrants are assumed by Invitae, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Offer of at least 90%, the Merger Exchange Ratio would be reduced to 0.87, representing $8.25 in value for each share of CombiMatrix common stock, based on estimated CombiMatrix net cash of negative $0.7 million.

Based on the estimates set forth above, in connection with the Merger and the Offer, Invitae expects to issue a maximum of 3,985,812 shares of common stock, including common stock underlying warrants and Invitae RSUs, to CombiMatrix securityholders, who, immediately after the Merger, are expected to own approximately 6.9% of the fully-diluted common stock of the combined company, with Invitae securityholders, whose shares of Invitae capital stock will remain outstanding after the Merger, owning approximately 93.1% of the fully-diluted common stock of the combined company. These estimates are based on the assumption that 100% of the CombiMatrix Series F warrants are exchanged in the Offer and subject to adjustment.

 

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The Merger Exchange Ratio is the greater of X or Y, where:

Calculation of X

X = The quotient obtained by dividing the Invitae Merger Shares by the CombiMatrix Outstanding Shares, where:

 

  a. “CombiMatrix Outstanding Shares” is the total number of shares of CombiMatrix capital stock outstanding immediately prior to the effective time of the Merger on a fully-diluted and an as-converted to common stock basis, assuming (i) the settlement of all CombiMatrix RSUs, whether unvested or vested, (ii) the cash exercise of each outstanding CombiMatrix option (to the extent such option is not an out-of-the-money option terminated in connection with the Merger), (iii) the cash exercise of all CombiMatrix Series F warrants (to the extent such warrants are not exchanged in the Offer or exercised prior to consummation of the Offer), (iv) the conversion of all CombiMatrix Series F preferred stock, and (v) the issuance of shares of CombiMatrix common stock in respect of all other options, warrants, convertible securities or rights to receive such shares; provided, however, that all shares of CombiMatrix common stock issuable upon exercise of CombiMatrix Series D warrants (so long as the terms of such warrants have not been modified following the date of the Merger Agreement), shares of CombiMatrix common stock issuable upon exercise of CombiMatrix Series F warrants that are exchanged in the Offer, and terminated CombiMatrix options will be excluded from this amount.

 

  b. “Adjusted Aggregate Value” is the sum of (i) $27,000,000, plus or minus (ii) CombiMatrix’s Net Cash (as defined below) at the effective time of the Merger.

 

  c. “Invitae Merger Shares” is the total number of shares of Invitae common stock determined by dividing (i) the Adjusted Aggregate Value by (ii) the Invitae Trailing Average Share Value.

 

  d. “Invitae Trailing Average Share Value” means the average closing price for shares of Invitae common stock on the NYSE for the immediately preceding period of 30 trading days prior to the date of the Merger Agreement.

Example

As an example, if Net Cash is $0.00, the CombiMatrix Outstanding Shares amount is 3,750,000 and the Invitae Trailing Average Share Value is $9.491, then X would be determined as follows:

 

LOGO

The Merger Exchange Ratio calculated under X would thus be 0.7586 shares of Invitae common stock issuable per share of CombiMatrix common stock. However, if the calculation of Y (below) is greater than X, then Y will be used as the Merger Exchange Ratio.

Calculation of Y

Y = The quotient obtained by dividing (i) the sum of $8.25 minus the Adjustment Amount by (ii) the Invitae Trailing Average Share Value, where:

 

  a. “Adjustment Amount” means the quotient of:

 

  1.

The sum of (i) the amount, if any, by which Net Cash (not taking into account any gross proceeds from exercises of CombiMatrix Series F warrants after the date of the Merger Agreement) is

 

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  below (x) negative $1 million if the aggregate payouts in shares of Invitae common stock (calculated using the Invitae Trailing Average Share Value) pursuant to the Transaction Bonus Payout Agreements will be greater than $2,000,000, and otherwise (y) $0.00, plus (ii) the product of $8.25 multiplied by the sum, if any, of (x) any shares of CombiMatrix common stock that are issued or that become issuable (including upon any conversion or exercise of any securities) after the date of the Merger Agreement (other than pursuant to conversion or exercise of any securities outstanding as of the date of the Merger Agreement) plus (y) the excess, if any, of (A) the total number of shares of CombiMatrix common stock actually outstanding as of the date of the Merger Agreement over (B) the total number of shares of CombiMatrix common stock represented to be outstanding as of the date of the Merger Agreement by CombiMatrix, calculated in each instance on a fully diluted and as-converted/as-exercised to CombiMatrix common stock basis but excluding shares issuable upon the exercise of terminated CombiMatrix stock options or CombiMatrix warrants subject to the CombiMatrix Warrant Repurchase (as defined below); divided by

 

  2. The CombiMatrix Outstanding Shares.

Example

As an example, if Net Cash (excluding CombiMatrix Series F warrant proceeds) is negative $1,285,000 (and the aggregate payouts in shares of Invitae common stock (calculated using the Invitae Trailing Average Share Value) pursuant to the CombiMatrix Transaction Bonus Payout Agreements will be greater than $2,000,000), there are 20,000 shares of CombiMatrix common stock issued or that become issuable after the date of this Agreement (other than pursuant to conversion or exercise of any securities outstanding as of the date of this Agreement), the Invitae Trailing Average Share Value is $9.491 and the CombiMatrix Outstanding Shares amount is 3,0000,000, then Y would be determined as follows:

 

LOGO

 

LOGO

 

LOGO

The Merger Exchange Ratio calculated under Y would thus be 0.8534 shares of Invitae common stock issuable per share of CombiMatrix common stock. However, if the calculation of X (above) is greater than Y, then X will be used as the Merger Exchange Ratio.

The “X” method of calculation values CombiMatrix at $27,000,000 in the aggregate, with adjustments for Net Cash, CombiMatrix RSU settlements, option exercises, outstanding preferred stock and warrant exercises. The “Y” method of calculation imputes an $8.25 per share valuation, with adjustments thereafter for Net Cash and any new share issuances after the date of the Merger Agreement. One of the functions of the two separate Merger Exchange Ratio calculations is that the “Y” calculation acts as a floor price (although still subject to certain adjustments, including for working capital) preventing extraordinary reduction in the per share Merger consideration if less than 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement are tendered and Invitae elects to effect the Merger notwithstanding that the closing condition was not fulfilled, or if certain Series F warrants are exercised, both of which would cause dilution to existing CombiMatrix common stockholders.

 

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Determination of CombiMatrix’s Net Cash; Merger Consideration Sensitivity Analysis

For purposes of determining the Merger Exchange Ratio, adjustments will be made to account for CombiMatrix’s Net Cash (as calculated pursuant to the terms of the Merger Agreement) at the effective time of the Merger. CombiMatrix’s Net Cash will be calculated shortly before the closing date of the Merger; provided, however, that current assets, current liabilities not triggered by the closing of the Merger, and long-term capital lease obligations may be calculated as of an earlier month-end date if the Merger closes mid-month and a mid-month calculation of such liabilities and assets would be impractical. The closing of the Merger could be delayed if Invitae and CombiMatrix are not able to agree upon the amount of CombiMatrix’s Net Cash as of CombiMatrix’s cash determination date.

Under the Merger Agreement, CombiMatrix’s “Net Cash” is defined as the sum of (i) CombiMatrix’s cash and cash equivalents (inclusive of any cash resulting from exercises of CombiMatrix options or Series F warrants), marketable securities, short-term investments, accounts receivable (less allowance for doubtful accounts), deposits (to the extent refundable to CombiMatrix), supplies, prepaid expenses, and other current assets (excluding deferred tax assets), in each case determined in a manner consistent with the Merger Agreement or the manner in which such items were historically determined and in accordance with CombiMatrix’s audited financial statements and CombiMatrix’s unaudited interim balance sheet, minus (ii) the sum of CombiMatrix’s accounts payable, accrued expenses and other current liabilities (other than accrued expenses listed below, deferred rent and deferred tax liabilities), capital lease obligations, and all other liabilities (including any amounts payable for the CombiMatrix Warrant Repurchase, any amounts payable in satisfaction of CombiMatrix’s obligations to purchase a “tail” insurance policy for directors and officers prior to closing of the Merger, and any amounts that will become payable to participants pursuant to the CombiMatrix severance plan), in each case as of such date and determined in a manner consistent with the Merger Agreement or the manner in which such items were historically determined and in accordance with CombiMatrix’s audited financial statements and CombiMatrix’s unaudited interim balance sheet, minus (iii) $250,000 (representing CombiMatrix’s normalized working capital), minus (iv) without double counting if otherwise included above, any unpaid fees and expenses (including any attorney’s, accountant’s, financial advisor’s or finder’s fees) incurred by CombiMatrix or any of its subsidiaries in connection with the Merger Agreement and the Merger and other transactions contemplated by the Merger Agreement or for which CombiMatrix or any of its subsidiaries is otherwise liable, minus (v) without double counting if otherwise included above, all amounts payable to any of CombiMatrix’s employees, officers, directors, consultants, advisors and representatives in connection with the Merger Agreement and the Merger and other transactions contemplated by the Merger Agreement (including pursuant to the Transaction Bonus Plan), regardless of whether any recipient agrees to accept any portion of any such payment in equity or cash, minus (vi) any fees and expenses payable by CombiMatrix in connection with the resolution of disagreements regarding Net Cash by an independent auditor, plus or minus (as applicable) (vii) the amount of any transaction expense reimbursements owed to, or owed by, CombiMatrix pursuant to the Merger Agreement.

CombiMatrix’s Net Cash balance at the determination date is subject to numerous factors, many of which are outside of CombiMatrix’s control.

Any warrants exercised prior to the consummation of the Merger would increase the number of CombiMatrix Outstanding Shares and the related cash proceeds from such exercises would increase the Net Cash adjustment calculated under the “X” scenario above (but not the “Y” scenario). Similarly, Series F warrants that are not exchanged in the Offer would also increase the CombiMatrix Outstanding Shares (meaning the full amount of shares underlying Series F warrants not tendered would be added to the amount of CombiMatrix Outstanding Shares) and thus potentially adjust the aggregate Merger consideration. Below is a table showing how the participation percentage by the holders of the Series F warrants in the Offer and the amount of warrants separately exercised impacts the implied per share Merger consideration based on estimated CombiMatrix Net Cash of $1.8 million (before taking into account in such Net Cash amount any transaction bonus payments or, as applicable, warrant exercise proceeds).

 

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LOGO

A condition to the closing of the Merger is that at least 90% of the Series F warrants outstanding immediately prior to the date of the Merger Agreement are tendered in the Offer; however, the table above includes scenarios where less than 90% have tendered, which presumes Invitae has waived this closing condition under that circumstance. To the extent Series F warrants neither tender nor exercise and the Merger occurs, the shares underlying those warrants are included in the fully diluted shares of CombiMatrix common stock issued and outstanding for the purpose of the table computations.

Invitae Common Stock

Each share of Invitae common stock issued and outstanding at the closing of the Merger will remain issued and outstanding and those shares will be unaffected by the Merger. Invitae stock options, restricted stock units and warrants issued and outstanding at the closing of the Merger will also remain issued and outstanding and unaffected by the Merger. Immediately after the Merger, Invitae securityholders are expected to own approximately 93.1% of the fully-diluted common stock of the combined company.

Procedures for Exchanging CombiMatrix Stock Certificates

At the effective time of the Merger, American Stock Transfer & Trust Company, LLC, as the exchange agent for the Merger, will establish an exchange fund to hold the shares of Invitae common stock to be issued to CombiMatrix stockholders in connection with the Merger.

Promptly after the effective time of the Merger, the exchange agent will mail to each holder of record of CombiMatrix capital stock a letter of transmittal and instructions for surrendering the record holder’s stock certificates in exchange for the shares of Invitae common stock. Upon proper surrender of CombiMatrix stock certificates together with a properly completed and duly executed letter of transmittal in accordance with the exchange agent’s instructions, the holder of such CombiMatrix stock certificates will be entitled to receive shares representing the number of whole shares of Invitae common stock issuable to such holder pursuant to the Merger and cash in lieu of any fractional share of Invitae common stock issuable to such holder. The surrendered certificates representing CombiMatrix capital stock will be cancelled.

After the effective time of the Merger, each certificate representing shares of CombiMatrix capital stock that has not been surrendered will represent only the right to receive shares of Invitae common stock issuable pursuant to the Merger and cash in lieu of any fractional share of Invitae common stock to which the holder of any such certificate is entitled. No interest will be paid or accrued on any cash in lieu of fractional shares payable to holders of CombiMatrix stock certificates.

Any holder or former holder of CombiMatrix capital stock may be subject to withholding under the Code, or under another provision of state, local or foreign tax law. To the extent such amounts are withheld and paid to the appropriate governmental entity, they will be treated as having been paid to the person to whom such amounts would otherwise have been paid.

 

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HOLDERS OF COMBIMATRIX CAPITAL STOCK SHOULD NOT SEND IN THEIR COMBIMATRIX STOCK CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT WITH INSTRUCTIONS FOR THE SURRENDER OF COMBIMATRIX STOCK CERTIFICATES.

Fractional Shares

No fractional shares of Invitae common stock will be issuable pursuant to the Merger to CombiMatrix stockholders, holders of CombiMatrix RSUs or holders of CombiMatrix stock options. Instead, each CombiMatrix stockholder, holder of CombiMatrix RSUs or holder of CombiMatrix stock options who would otherwise be entitled to receive a fraction of a share of Invitae common stock, after aggregating all fractional shares of Invitae common stock issuable to such holder, will be entitled to receive a cash payment in lieu of such fractional shares equal to the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the Invitae Trailing Average Share Value.

Representations and Warranties

The Merger Agreement contains customary representations and warranties made by Invitae, Merger Sub and CombiMatrix relating to their respective businesses, as well as other facts pertinent to the Merger. These representations and warranties are subject to materiality, knowledge and other similar qualifications in many respects and expire at the effective time of the Merger or termination of the Merger Agreement, as further described below. The representations and warranties of each of Invitae, Merger Sub and CombiMatrix have been made solely for the benefit of the other parties and those representations and warranties should not be relied on by any other person. In addition, those representations and warranties may be intended not as statements of actual fact, but rather as a way of allocating risk among the parties, may have been modified by the disclosure schedules delivered in connection with the Merger Agreement, are subject to the materiality standard described in the Merger Agreement, which may differ from what may be viewed as material by you, will not survive completion of the Merger and cannot be the basis for any claims under the Merger Agreement by the other parties after termination of the Merger Agreement, and were made only as of the date of the Merger Agreement or another date as is specified in the Merger Agreement.

CombiMatrix made a number of representations and warranties to Invitae and Merger Sub in the Merger Agreement, including representations and warranties relating to the following matters:

 

    subsidiaries; due organization;

 

    certificate of incorporation; bylaws; charters; codes of conduct;

 

    capitalization;

 

    SEC filings; financial statements;

 

    absence of changes;

 

    title to assets;

 

    real property; leaseholds;

 

    intellectual property;

 

    agreements, contracts and commitments;

 

    undisclosed liabilities;

 

    compliance; permits; restrictions; regulatory matters;

 

    tax matters;

 

    employee and labor matters; benefit plans;

 

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    environmental matters;

 

    insurance;

 

    legal proceedings; orders;

 

    authority; binding nature of agreement;

 

    inapplicability of anti-takeover statutes;

 

    vote required;

 

    non-contravention; consents;

 

    bank accounts; receivables;

 

    financial advisor;

 

    opinion of financial advisor;

 

    shell company status;

 

    transactions with affiliates;

 

    code of ethics;

 

    disclosure; and

 

    exclusivity of representations.

Significant portions of CombiMatrix’s representations and warranties are qualified as to “materiality” or “material adverse effect.” Under the Merger Agreement, a material adverse effect with respect to CombiMatrix means any effect, change, event, circumstance or development that has occurred prior to the date of determination of the occurrence of such material adverse effect, that is or could reasonably be expected to be materially adverse to or has or could reasonably be expected to have or result in a material adverse effect on (i) the business, condition (financial or otherwise), capitalization, assets (including intellectual property), operations or financial performance of CombiMatrix and its subsidiaries, taken as a whole or (ii) the ability of CombiMatrix to consummate the Merger or the other transactions contemplated by the Merger Agreement or perform any of its covenants or obligations under the Merger Agreement in all material respects, except that none of the following, as they apply to CombiMatrix and its subsidiaries, will be taken into account in determining whether there has been a material adverse effect (except as expressly provided):

 

    any rejection by a governmental body of a registration or filing by CombiMatrix relating to CombiMatrix’s intellectual property rights;

 

    any change in the cash position of CombiMatrix that results from operations in the ordinary course of business;

 

    conditions generally affecting the industries in which CombiMatrix and its subsidiaries participate or the U.S. or global economy or capital markets as a whole, to the extent that such conditions do not have a disproportionate impact on CombiMatrix and its subsidiaries, taken as a whole;

 

    any failure by CombiMatrix or any of its subsidiaries to meet internal projections or forecasts or third-party revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of the Merger Agreement, provided that any such effect, change, event, circumstance or development causing or contributing to any such failure to meet projections or predictions or any change in stock price or trading volume may constitute a material adverse effect of CombiMatrix and may be taken into account in determining whether a material adverse effect has occurred;

 

    the execution, delivery, announcement or performance of obligations under the Merger Agreement or the announcement, pendency or anticipated consummation of the Merger;

 

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    any natural disaster or any acts of terrorism, sabotage, military action or war or any escalation or worsening thereof, to the extent that any such event does not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole;

 

    changes in regulatory, legislative or political conditions in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole;

 

    changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole, including (i) changes in interest rates or credit ratings in the United States or any other country, (ii) changes in exchange rates for the currencies of any country, or (iii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world; or

 

    any changes after the date of the Merger Agreement in U.S. GAAP or applicable laws, to the extent that such changes do not have a disproportionate impact on CombiMatrix and its subsidiaries taken as a whole.

Invitae and Merger Sub made a number of representations and warranties to CombiMatrix in the Merger Agreement, including representations and warranties relating to the following subject matters:

 

    organization; authority; enforceability;

 

    non-contravention; governmental consents;

 

    SEC documents;

 

    compliance; permits;

 

    no financial advisor;

 

    legal proceedings; orders;

 

    shares of common stock;

 

    no vote of Invitae stockholders;

 

    lack of ownership of shares;

 

    Merger Sub capitalization;

 

    disclosure; and

 

    exclusivity of representations.

Significant portions of Invitae’s representations and warranties are qualified as to “materiality” or “material adverse effect.” Under the Merger Agreement, a material adverse effect with respect to Invitae means any effect, change, event, circumstance or development that has occurred prior to the date of determination of the occurrence of such material adverse effect, that is or could reasonably be expected to be materially adverse to or has or could reasonably be expected to have or result in a material adverse effect on (i) the business, condition (financial or otherwise), capitalization, assets, operations or financial performance of Invitae or (ii) the ability of Invitae to consummate the Merger or the other transactions contemplated by the Merger Agreement or perform any of its covenants or obligations under the Merger Agreement in all material respects, except that none of the following, as they apply to Invitae, will be taken into account in determining whether there has been a material adverse effect (except as expressly provided):

 

    conditions generally affecting the industries in which Invitae participates or the U.S. or global economy or capital markets as a whole, to the extent that such conditions do not have a disproportionate impact on Invitae;

 

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    any failure by Invitae to meet internal projections or forecasts or third-party revenue or earnings predictions for any period ending (or for which revenues or earnings are released) on or after the date of the Merger Agreement or any change in the price or trading volume of Invitae common stock, provided that any such effect, change, event, circumstance or development causing or contributing to any such failure to meet projections or predictions or any change in stock price or trading volume may constitute a material adverse effect of Invitae and may be taken into account in determining whether a material adverse effect has occurred;

 

    the execution, delivery, announcement or performance of obligations under the Merger Agreement or the announcement, pendency or anticipated consummation of the Merger;

 

    any natural disaster or any acts of terrorism, sabotage, military action or war or any escalation or worsening thereof, to the extent that any such event does not have a disproportionate impact on Invitae;

 

    changes in regulatory, legislative or political conditions in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on Invitae;

 

    changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region in the world, to the extent that such changes do not have a disproportionate impact on Invitae, including (i) changes in interest rates or credit ratings in the United States or any other country, (ii) changes in exchange rates for the currencies of any country, or (iii) any suspension of trading in securities (whether equity, debt, derivative or hybrid securities) generally on any securities exchange or over-the-counter market operating in the United States or any other country or region in the world; or

 

    any changes after the date of the Merger Agreement in U.S. GAAP or applicable laws, to the extent that such changes do not have a disproportionate impact on Invitae.

Covenants; Conduct of Business Pending the Merger

During the period commencing on July 31, 2017 and ending at the earlier of the date of termination of the Merger Agreement and the effective time of the Merger, CombiMatrix agreed that it will conduct its business in the ordinary course and in compliance with all applicable laws, rules, regulations, permits and certain material contracts and will provide Invitae with prompt notice upon the occurrence of certain events or discovery of certain conditions, facts or circumstances.

CombiMatrix also agreed that prior to the earlier of termination and the effective time of the Merger, subject to certain limited exceptions set forth in the Merger Agreement, without the consent of Invitae, it would not and would not permit any of its subsidiaries to:

 

    declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of CombiMatrix capital stock or repurchase, redeem or otherwise reacquire any shares of its capital stock or other securities except for shares of CombiMatrix stock from terminated employees;

 

    sell, issue or grant, or authorize the issuance of any capital stock or other security (except for shares of CombiMatrix common stock issued upon the valid exercise of CombiMatrix options, CombiMatrix RSUs or CombiMatrix warrants outstanding as of the date of the Merger Agreement), any option, warrant or right to purchase any capital stock or any other security, or any instrument convertible into or exchangeable for any capital stock or other security;

 

    amend the certificate of incorporation, bylaws or other charter or organizational documents of CombiMatrix, or effect or be a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction except as related to the transactions contemplated by the Merger Agreement;

 

    form any subsidiary or acquire any equity interest or other interest in any other entity;

 

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    lend money to any person other than in the ordinary course of business, incur or guarantee any indebtedness for borrowed money, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities, guarantee any debt securities of others, or, other than in the ordinary course of business, make any capital expenditure or commitment;

 

    adopt, establish or enter into any CombiMatrix employee benefit plan, cause or permit any CombiMatrix employee benefit plan to be amended other than as required by law or in order to make amendments for the purposes of compliance with Section 409A of the Code, pay any bonus or make any profit-sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, employees or consultants, or pay or increase the severance or change of control benefits offered to any current or new employee or consultant, subject to certain exceptions.

 

    enter into any material transaction outside the ordinary course of business;

 

    purchase, lease, license or otherwise acquire, or sell, lease, license or otherwise dispose of, any of its assets, rights or properties, or grant any encumbrance with respect to such assets, rights or properties, in each case, other than in the ordinary course of business consistent with past practices;

 

    make, change or revoke any material tax election, file any material amendment to any tax return, adopt or change any accounting method in respect of taxes, change any annual tax accounting period, enter into any tax allocation agreement, tax sharing agreement or tax indemnity agreement, other than commercial contracts entered into in the ordinary course of business with vendors, customers or landlords, enter into any closing agreement with respect to any tax, settle or compromise any claim, notice, audit report or assessment in respect of material taxes, apply for or enter into any ruling from any tax authority with respect to taxes, surrender any right to claim a material tax refund, or consent to any extension or waiver of the statute of limitations period applicable to any material tax claim or assessment;

 

    enter into, amend or terminate any material contract;

 

    materially change pricing, royalties or other payments set or charged to its customers or licensees, or materially increase pricing, royalties or other payments set or charged by vendors or persons who have licensed intellectual property to CombiMatrix; or

 

    agree, resolve or commit to do any of the foregoing.

Non-Solicitation

The Merger Agreement contains provisions prohibiting CombiMatrix from seeking a competing transaction, subject to specified exceptions described below. Under these “non-solicitation” provisions, CombiMatrix has agreed that neither it nor its subsidiaries, nor any of their officers, directors, employees, representatives, advisors, attorneys, accountants or agents will directly or indirectly: (i) solicit, initiate, respond to or take any action to facilitate or encourage any inquiries or the communication, making, submission or announcement of any competing proposal or inquiry or take any action that could reasonably be expected to lead to a competing proposal or inquiry; (ii) enter into or participate in any discussions or negotiations with any person with respect to any competing proposal or inquiry; (iii) furnish any information regarding CombiMatrix or any of its subsidiaries to any person in connection with, in response to, relating to or for the purpose of assisting with or facilitating a competing proposal or inquiry; (iv) approve, endorse or recommend any competing proposal (subject to the terms and conditions of the Merger Agreement); (v) execute or enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any competing proposal; or (vi) grant any waiver or release under any confidentiality, standstill or similar agreement (other than to Invitae).

However, prior to the approval of the Merger Proposal, (i) CombiMatrix may enter into discussions or negotiations with any person that has made (and not withdrawn) a bona fide, unsolicited, competing proposal,

 

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which CombiMatrix’s board of directors determines in good faith, after consultation with its independent financial advisor, if any, and its outside legal counsel, constitutes, or would reasonably be expected to result in, a superior competing proposal, and (ii) thereafter furnish to such person non-public information regarding CombiMatrix pursuant to an executed confidentiality agreement containing provisions (including nondisclosure provisions, use restrictions, non-solicitation provisions, no hire provisions and “standstill” provisions) at least as favorable to CombiMatrix as those contained in the confidentiality agreement existing between CombiMatrix and Invitae, but in each case of the foregoing clauses (i) and (ii), only if: (A) neither CombiMatrix nor any representative of CombiMatrix has breached its non-solicitation obligations; (B) the board of directors of CombiMatrix determines in good faith based on the advice of outside legal counsel, that the failure to take such action would reasonably be expected to result in a breach of the fiduciary duties of the CombiMatrix board of directors under applicable laws; (C) at least five business days prior to furnishing any such non-public information to, or entering into discussions with, such person, CombiMatrix gives Invitae written notice of the identity of such person, the terms and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements) made thereby, and of CombiMatrix’s intention to furnish nonpublic information to, or enter into discussions with, such person; and (D) at least five business days prior to furnishing any such non-public information to such person, CombiMatrix furnishes such non-public information to Invitae (to the extent such non-public information has not been previously furnished by CombiMatrix to Invitae). Without limiting the generality of the foregoing, CombiMatrix has acknowledged and agreed that, in the event any representative of CombiMatrix (whether or not such representative is purporting to act on behalf of CombiMatrix) takes any action that, if taken by CombiMatrix, would constitute a breach of the non-solicitation obligations of CombiMatrix, the taking of such action by such representative shall be deemed to constitute a breach of the non-solicitation obligations of CombiMatrix for purposes of the Merger Agreement.

CombiMatrix will notify Invitae no later than 24 hours after receipt of any competing proposal or inquiry, and any such notice will be made orally and in writing and will include the identity of the person making or submitting such competing proposal or inquiry, the terms thereof, and any written materials submitted therewith. CombiMatrix will keep Invitae fully informed, on a current basis, of the status and material developments (including any changes to the terms) of such competing proposal or inquiry and will deliver to Invitae copies of any written materials submitted with such competing proposal or inquiry.

A competing proposal is any of the following proposals, indications of interest or offers, other than transactions contemplated by the Merger Agreement:

 

    any merger, consolidation, amalgamation, share exchange, business combination, issuance of securities, acquisition of securities, reorganization, recapitalization, tender offer, exchange offer or other similar transaction in which (i) CombiMatrix is a constituent corporation, (ii) a person or “group” (as defined in the Exchange Act and the rules promulgated thereunder) of persons directly or indirectly acquires beneficial or record ownership of securities representing more than 20% of the outstanding securities of any class of voting securities of CombiMatrix or any of its subsidiaries, or (iii) CombiMatrix or any of its subsidiaries issues securities representing more than 20% of the outstanding securities of any class of voting securities of CombiMatrix or any of its subsidiaries;

 

    any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated book value or the fair market value of the assets of CombiMatrix and its subsidiaries, taken as a whole; or

 

    any liquidation or dissolution of CombiMatrix.

A superior competing proposal is any unsolicited bona fide competing proposal at a 50% threshold (and excluding a dissolution or liquidation of CombiMatrix) made by a third party that the board of directors of CombiMatrix determines, in its reasonable, good faith judgment, after obtaining and taking into account such matters that it deems relevant following consultation with its outside legal counsel and financial advisor, if any (i) is reasonably likely to be more favorable, from a financial point of view, to the CombiMatrix stockholders

 

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than the terms of the Merger; and (ii) is reasonably capable of being consummated; provided, however, that any such offer shall not be deemed to be a superior competing proposal if (A) any financing required to consummate the transaction contemplated by such offer is not committed and is not reasonably capable of being obtained or (B) if the consummation of such transaction is contingent on any such financing being obtained.

Invitae may terminate the Merger Agreement if the CombiMatrix board of directors (each such action, a “change of recommendation” by the CombiMatrix board of directors):

 

    failed to recommend that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal or has for any reason withdrawn or modified in a manner adverse to Invitae its recommendation that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal;

 

    failed to include its recommendation that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal in the related proxy statement/prospectus;

 

    approved, endorsed or recommended a competing proposal; or

 

    entered into a letter of intent or similar document or a definitive agreement for a competing proposal.

If the Merger Agreement is terminated in connection with these provisions and a bona fide competing proposal had been publicly announced or disclosed or otherwise communicated to the CombiMatrix board of directors prior to the CombiMatrix special meeting, CombiMatrix has agreed to pay Invitae a fee of $1,400,000 (net of expense reimbursement previously paid). See the section entitled “The Merger AgreementTermination of the Merger Agreement and Termination Fee” below for a more complete discussion of the termination fees.

Disclosure Documents

As promptly as practicable following the date of the Merger Agreement, Invitae and CombiMatrix agreed to prepare and cause to be filed with the SEC a proxy statement/prospectus in connection therewith and Invitae agreed to prepare and cause to be filed with the SEC a registration statement on Form S-4 in connection with the registration under the Securities Act of the shares of Invitae common stock to be issued pursuant to the Merger. Each of Invitae and CombiMatrix agreed to use commercially reasonable efforts to cause the registration statement to become effective as promptly as practicable. Prior to the registration statement on Form S-4 being declared effective, CombiMatrix and Invitae each agreed to (i) deliver tax representation letters to Stradling and Pillsbury, and (ii) use its commercially reasonable efforts to cause its respective counsel to deliver to it a tax opinion satisfying the requirements of Item 601(b)(8) of Regulation S-K under the Securities Act. Each of Invitae and CombiMatrix agreed to use their commercially reasonable efforts to cause the registration statement on Form S-4 and the related proxy statement/prospectus to comply with the applicable rules and regulations promulgated by the SEC. Invitae and CombiMatrix each agreed to ensure that the proxy statement/prospectus will not, at the time that the proxy statement/prospectus or any amendment or supplement thereto is filed with the SEC or is first mailed to the stockholders of CombiMatrix, at the time of the CombiMatrix stockholders’ meeting and at the effective time of the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated herein or necessary in order to make the statements made herein, in light of the circumstances under which they were made, not misleading; provided, that Invitae did not make such assurances with respect to statements made in the proxy statement/prospectus by CombiMatrix or based on information furnished by CombiMatrix for inclusion herein, and that CombiMatrix did not make such assurances with respect to statements made in the proxy statement/prospectus by Invitae or based on information furnished by Invitae for inclusion therein. Each of Invitae, Merger Sub and CombiMatrix agreed to furnish all information concerning itself and its subsidiaries, as applicable, to the other parties as the other parties may reasonably request in connection with such actions and the preparation of the registration statement on Form S-4 and the proxy statement/prospectus. CombiMatrix agreed to use commercially reasonable efforts to cause the proxy statement/prospectus to be mailed to its stockholders as promptly as practicable after the registration statement on Form S-4 is declared effective by the SEC.

 

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In connection with the Offer, Invitae and CombiMatrix agreed to cooperate with each other regarding, and to prepare, offering documents, and to cause such offering to comply as to form in all material respects with the applicable provisions of the Securities Act and the Exchange Act, for the purpose of effecting and consummating the Offer. Invitae and CombiMatrix agreed that the offering documents will include (i) an offer to exchange document describing the material terms of the Offer, (ii) a statement on Schedule TO with respect to the Offer, if required, (iii) a registration statement on Form S-4 registering the Offer, (iv) a statement by the CombiMatrix board of directors describing its recommendation that the CombiMatrix stockholders vote to adopt and approve the Merger Proposal and the requirement that at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement must be exchanged in the Offer, including that such requirement is a condition to the obligations of Invitae and Merger Sub to effect the Merger, and (v) all ancillary documents related to the Offer, including exhibits, press releases, letters of transmittal, notices and announcements.

Invitae agreed, substantially contemporaneously with, or as promptly as practicable after, the filing of the registration statement on Form S-4 relating to the Merger to file with the SEC the registration statement on Form S-4 registering the Offer, of which this prospectus/offer to exchange is a part. Each of Invitae and CombiMatrix agreed to use commercially reasonable efforts to cause the registration statement to become effective as promptly as practicable. Prior to the registration statement on Form S-4 registering the Offer being declared effective, CombiMatrix and Invitae each agreed to (i) deliver tax representation letters to Stradling and Pillsbury and (ii) use its commercially reasonable efforts to cause its respective counsel to deliver to it a tax opinion satisfying the requirements of Item 601(b)(8) of Regulation S-K under the Securities Act. Each of Invitae and CombiMatrix agreed use commercially reasonable efforts to cause the registration statement on Form S-4 registering the Offer and the other offering documents to comply with the applicable rules and regulations promulgated by the SEC. Invitae and CombiMatrix each agreed to ensure that the offering documents will not, as of the date any offering document is first mailed to holders of CombiMatrix Series F warrants and at the effective time of the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided, that Invitae did not make such assurances with respect to statements made in any offering document by CombiMatrix or based on information furnished by CombiMatrix for inclusion therein, and that CombiMatrix did not make such assurances with respect to statements made in any offering document by Invitae or based on information furnished by Invitae for inclusion therein. Each of Invitae, Merger Sub and CombiMatrix agreed to furnish all information concerning itself and its subsidiaries, as applicable, to the other parties as the other parties may reasonably request in connection with such actions and the preparation of the registration statement on Form S-4 registering the Offer. The parties agreed to cause the offering documents to be mailed to the holders of the CombiMatrix Series F warrants when appropriate after the registration statement on Form S-4 registering the Offer becomes effective, in order to permit Invitae to conduct the Offer in a timely manner and consistent with applicable regulations and requirements under securities laws, including the Exchange Act.

Regulatory Approvals Required for the Merger

Invitae and CombiMatrix have agreed to cooperate and use commercially reasonable efforts to obtain all regulatory approvals required to complete the transactions contemplated by the Merger Agreement. Invitae must comply with applicable federal and state securities laws and the rules and regulations of the NYSE in connection with the issuance of shares of Invitae common stock and RSUs and the filing of the related proxy statement/prospectus with the SEC.

The Merger Agreement also provides that CombiMatrix and Invitae will file any notification and report forms required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and respond as promptly as practicable to any inquiries or requests received from the Federal Trade Commission or the Department of Justice for information or documentation or any inquiries or requests received from any other governmental body in connection with antitrust or competition matters.

 

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Although neither Invitae nor CombiMatrix knows of any reason why these regulatory approvals cannot be obtained in a timely manner, neither Invitae nor CombiMatrix can be certain when or if they will be obtained. Invitae’s and CombiMatrix’s obligations under the Merger Agreement are subject to certain conditions. See the section entitled “The Merger Agreement — Conditions to the Completion of the Merger.”

CombiMatrix Stock Options, RSUs and Warrants

At the effective time of the Merger, (i) each in-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock underlying such CombiMatrix stock option by the Merger Exchange Ratio, minus the number of shares of Invitae common stock determined by dividing the aggregate exercise price for such option by the Invitae Trailing Average Share Value, (ii) each out-the-money CombiMatrix stock option that is outstanding and unexercised immediately prior to completion of the Merger, whether or not vested or exercisable, will be cancelled and terminated without the right to receive any consideration, (iii) each CombiMatrix RSU outstanding immediately prior to completion of the Merger will be fully accelerated to the extent of any applicable vesting period and converted into the right to receive a number of shares of Invitae common stock determined by multiplying the number of shares of CombiMatrix common stock that were subject to such CombiMatrix RSU by the Merger Exchange Ratio, and (iv) each outstanding Series D warrant and Series F warrant to purchase shares of CombiMatrix capital stock (other than those warrants exchanged in the Offer or previously exercised) will be assumed by Invitae and will be converted into a warrant to purchase shares of Invitae common stock, although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Offer of at least 90%.

Although Invitae’s obligation to proceed with the Merger is subject to a participation level in the Offer of at least 90%, all rights and obligations with respect to each CombiMatrix Series D warrant or Series F warrant outstanding at the closing of the Merger will be assumed by Invitae in accordance with their terms, with the number of underlying shares and exercise price as adjusted for the Merger Exchange Ratio. Invitae stockholders will continue to own and hold their existing shares of Invitae common stock. Accordingly, from and after the effective time of the Merger each Series D warrant or Series F warrant assumed by Invitae may be exercised solely for shares of Invitae common stock. The number of shares of Invitae common stock subject to each outstanding CombiMatrix Series D warrant or Series F warrant, as applicable, assumed by Invitae will be determined by multiplying the number of shares of CombiMatrix common stock that were subject to such CombiMatrix Series D warrant or Series F warrant by the Merger Exchange Ratio. The per share exercise price for the Invitae common stock issuable upon exercise of each CombiMatrix Series D warrant or Series F warrant assumed by Invitae will be determined by dividing the per share exercise price of CombiMatrix common stock subject to such CombiMatrix Series D warrant or Series F warrant, as applicable, by the Merger Exchange Ratio. Any restriction on any CombiMatrix Series D warrant or Series F warrant assumed by Invitae will continue in full force and effect and the term and other provisions of such CombiMatrix Series D warrant or Series F warrant will otherwise remain unchanged.

Immediately after the announcement of the Merger, CombiMatrix repurchased one-half of the outstanding and unexercised CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants pursuant to the terms of that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016. Upon the closing of the Merger, CombiMatrix will repurchase the remainder of the outstanding and unexercised CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants (such warrant repurchase referred to herein as the “CombiMatrix Warrant Repurchase”). From and after the effective time of the Merger, holders of CombiMatrix Series A warrants, Series B warrants, Series C warrants, Series E warrants and PIPE warrants will have no further rights with respect thereto.

 

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Indemnification and Insurance for CombiMatrix Directors and Officers

Under the Merger Agreement, from the closing of the Merger through the sixth anniversary of the closing, the surviving corporation in the Merger will indemnify and hold harmless each person who was at the time of signing the Merger Agreement, or was at any time prior to the date of the Merger Agreement, or who becomes prior to the effective time of the Merger, a director or officer of CombiMatrix, against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including attorneys’ fees and disbursements incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to the fact that such person is or was a director or officer of CombiMatrix, whether asserted or claimed prior to, at or after the effective time of the Merger, to the fullest extent permitted under the DGCL for directors or officers of Delaware corporations. In addition, each such person will be entitled to advancement of expenses incurred in the defense of any such claim, action, suit, proceeding or investigation from the surviving corporation upon receipt by the surviving corporation from such person of a request for such advancement; provided, that any person to whom expenses are advanced provides an undertaking, to the extent then required by the DGCL, to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

Under the Merger Agreement, the certificate of incorporation and bylaws of the surviving corporation in the Merger will contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of present and former directors and officers of CombiMatrix than are presently set forth in the certificate of incorporation and bylaws of CombiMatrix, which provisions may not be amended, modified or repealed for a period of six years’ time from the closing of the Merger in a manner that would adversely affect the rights thereunder of individuals who, at or prior to the closing, were officers or directors of CombiMatrix.

The Merger Agreement also provides that prior to the closing of the Merger, CombiMatrix will purchase an insurance policy with an effective date as of the effective date of the Merger which maintains in effect for six years from the effective date of the Merger the current directors’ and officers’ liability insurance policies maintained by CombiMatrix.

CombiMatrix Transaction Bonus Payout Agreements

Under the Merger Agreement, Invitae and CombiMatrix agreed that (i) bonus payments under the CombiMatrix Transaction Bonus Plan will be paid in cash to all participants in accordance with the terms of the CombiMatrix Transaction Bonus Plan, other than the executive officers, the vice president of billing and reimbursement and the directors of CombiMatrix, (ii) pursuant to the Transaction Bonus Payout Agreements entered into with each of the executive officers and the vice president of billing and reimbursement of CombiMatrix concurrently with the execution of the Merger Agreement, the bonus payments for each such executive officer and vice president of billing and reimbursement will be paid in Invitae RSUs (to be settled in shares of Invitae common stock) calculated using the Invitae Trailing Average Share Value and subject to time-based vesting and/or settlement with acceleration upon a change in control of Invitae and/or certain other events as set forth in the applicable Transaction Bonus Payout Agreement, and (iii) pursuant to the Transaction Bonus Payout Agreements entered into with each of the outside directors of CombiMatrix concurrently with the execution of the Merger Agreement, the bonus payments for each such director will be paid in unrestricted shares of Invitae Common Stock calculated using the Invitae Trailing Average Share Value. To the extent such shares of common stock are not covered by a registration statement that is effective before the closing date, Invitae also covenanted to use commercially reasonable efforts to register for resale such unrestricted shares of common stock or shares of common stock underlying RSUs.

Additional Agreements

Each of CombiMatrix and Invitae has agreed to, among other things:

 

    use its commercially reasonable efforts to cause to be taken all actions necessary to consummate the Merger and any other transaction contemplated by the Merger Agreement;

 

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    reasonably cooperate with the other parties and provide the other parties with such assistance as may be reasonably requested for the purpose of facilitating the performance by each party of its respective obligations under the Merger Agreement and to enable the combined entity to continue to meet its obligations under the Merger Agreement following the closing;

 

    make all filings and other submissions (if any) and give all notices (if any) required to be made and given by such party in connection with the Merger and any other transaction contemplated by the Merger Agreement;

 

    use its commercially reasonable efforts to obtain each consent (if any) reasonably required to be obtained pursuant to any applicable law, contract or otherwise by such party in connection with the Merger or any other transaction contemplated by the Merger Agreement or for any such contract to remain in full force and effect;

 

    use its commercially reasonable efforts to lift any injunction prohibiting, or any other legal bar to, the Merger and any other transaction contemplated by the Merger Agreement;

 

    use its commercially reasonable efforts to satisfy the conditions precedent to the consummation of the Merger Agreement; and

 

    use its commercially reasonable efforts to cause the Merger, together with the Offer, to qualify, and has agreed not to, and not to permit or cause any affiliate or any subsidiary to, take any actions or cause any action to be taken which would reasonably be expected to prevent the Merger, together with the Offer, from being qualified, as a “reorganization” under Section 368(a) of the Code.

Conditions to the Completion of the Merger

The respective obligations of Invitae and CombiMatrix to complete the Merger and the other transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of various conditions that include, in addition to other customary closing conditions, the following:

 

    the registration statement on Form S-4 registering the shares to be issued in connection with the Merger and the registration statement on Form S-4 registering the Offer, of which this prospectus/offer to exchange is a part, must have been declared effective by the SEC in accordance with the Securities Act and must not be subject to any stop order or proceeding, or any proceeding threatened by the SEC, seeking a stop order;

 

    there must not have been issued any temporary restraining order, preliminary or permanent injunction or other order preventing the consummation of the Merger or the Offer by any court of competent jurisdiction or other governmental entity of competent jurisdiction that remains in effect, and there must be no law, statute, rule, regulation, ruling or decree in effect which has the effect of making the consummation of the Merger or the Offer illegal;

 

    the holders of a majority of the outstanding CombiMatrix common stock must have adopted and approved the Merger Proposal;

 

    any waiting period applicable to the consummation of the Merger and the Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or HSR Act, must have expired or been terminated, and there must not be in effect any voluntary agreement by any party to the Merger Agreement and the U.S. Federal Trade Commission, the U.S. Department of Justice or any foreign governmental body, pursuant to which such party has agreed not to consummate the Merger or the Offer for any period of time;

 

   

there must not be any legal proceeding pending or threatened by an official of a government or governmental entity in which such government or governmental entity indicates that it intends to conduct any legal proceeding or take any other action (i) challenging or seeking to restrain or prohibit the consummation of the Merger, the Offer or any of the other transactions contemplated by the Merger

 

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Agreement, (ii) relating to the Merger, the Offer or any of the other transactions contemplated by the Merger Agreement and seeking to obtain from Invitae, Merger Sub or CombiMatrix any material damages or other relief, (iii) seeking to materially prohibit or limit the ability to vote, transfer, receive dividends or otherwise exercise ownership rights with respect to any Invitae common stock to be issued in the Merger or the Offer, (iv) that would materially affect the right or ability of Invitae or CombiMatrix to own the assets or operate their businesses, or (v) seeking to compel Invitae or CombiMatrix to dispose of or hold separate any material assets as a result of the Merger, the Offer or any of the other transactions contemplated by the Merger Agreement; and

 

    the shares of Invitae common stock to be issued in the Merger and the Offer must be approved for listing on the NYSE as of the effective time of the Merger.

In addition, each of CombiMatrix’s and Invitae’s obligation to complete the Merger is further subject to the satisfaction or waiver by that party of the following additional conditions:

 

    certain representations and warranties of the other party in the Merger Agreement must be true and correct in all material respects on the date of the Merger Agreement and on the closing date of the Merger with the same force and effect as if made on the closing date, or, if such representations and warranties address matters as of a particular date, then as of that particular date;

 

    all other representations and warranties of the other party in the Merger Agreement must be true and correct on the date of the Merger Agreement and on the closing date of the Merger with the same force and effect as if made on the closing date, or, if such representations and warranties address matters as of a particular date, then as of that particular date, except where the failure of these representations and warranties to be true and correct would not have a material adverse effect on the other party;

 

    the other party to the Merger Agreement must have performed or complied with in all material respects all covenants and obligations in the Merger Agreement required to be performed or complied with by it on or before the closing of the Merger;

 

    the other party must not have experienced a material adverse effect that is continuing as of the closing of the Merger; and

 

    the other party must have delivered certain certificates and other documents required under the Merger Agreement for the closing of the Merger.

In addition, the obligation of Invitae and Merger Sub to complete the Merger is further subject to the satisfaction or waiver of the following conditions:

 

    Invitae must have consummated the Offer and at least 90% of the CombiMatrix Series F warrants outstanding immediately prior to the date of the Merger Agreement must have been tendered in the Offer; provided that Invitae has offered shares of Invitae common stock with a value of at least $2.90 (based on the Invitae Trailing Average Share Value) per CombiMatrix Series F warrant;

 

    CombiMatrix must have completed the repurchase of all CombiMatrix Series A, Series B, Series C, Series E and PIPE warrants pursuant to the terms of that certain CombiMatrix Common Stock Purchase Warrants Repurchase Agreement dated July 11, 2016;

 

    the Transaction Bonus Payout Agreements with CombiMatrix’s directors and executives must remain in full force and effect;

 

    consulting agreements with each of Mark McDonough and Scott Burell shall have been executed and become effective immediately at the effective time;

 

    Invitae must have received any required consent under its existing loan and security agreement with Oxford Capital, LLC to the Merger, the Offer and the other transactions contemplated by the Merger Agreement; and

 

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    CombiMatrix must have delivered a certificate setting forth the allocation of the Merger consideration to its securityholders.

Termination of the Merger Agreement and Termination Fee

The Merger Agreement may be terminated at any time before the closing of the Merger, whether before or after the required stockholder approvals to complete the Merger have been obtained, as set forth below:

 

  (1) by mutual agreement of CombiMatrix and Invitae;

 

  (2) by either CombiMatrix or Invitae if the Merger has not closed by January 31, 2018 (other than in cases in which such failure to close is due to a breach by the party wishing to terminate), which date may be extended in certain circumstances;

 

  (3) by either CombiMatrix or Invitae if there is any final and nonappealable order, decree or ruling that prohibits the completion of the Merger;

 

  (4) by either CombiMatrix or Invitae if the CombiMatrix special meeting has been held and completed and the Merger Proposal not been approved (other than by CombiMatrix in cases in which such failure has been caused by CombiMatrix’s action or failure to act and such action or failure to act is a material breach by CombiMatrix);

 

  (5) by Invitae if (i) the CombiMatrix board of directors fails to recommend, withdraws or modifies in a manner adverse to Invitae that CombiMatrix’s stockholders vote to adopt and approve the Merger Proposal, (ii) the CombiMatrix board fails to include its board recommendation of the Merger Proposal in the related proxy statement/prospectus, (iii) the CombiMatrix board has approved, endorsed or recommended any competing proposal, (iv) CombiMatrix has entered into any letter of intent or definitive agreement for a competing proposal or (v) CombiMatrix or any of its representatives has breached the non-solicitation obligations in the Merger Agreement;

 

  (6) by CombiMatrix if Invitae breaches any of its representations, warranties, covenants or agreements in the Merger Agreement or if a material adverse effect has occurred with respect to Invitae, in each case that would prevent Invitae from satisfying its closing conditions (with a 30 calendar day cure period); and

 

  (7) by Invitae if CombiMatrix breaches any of its representations, warranties, covenants or agreements in the Merger Agreement or if a material adverse effect has occurred with respect to CombiMatrix, in each case that would prevent CombiMatrix from satisfying its closing conditions (with a 30 calendar day cure period).

CombiMatrix is required to pay Invitae a termination fee of $1,400,000 (net of expense reimbursement previously paid) and/or Invitae’s expenses up to $400,000, if the Merger Agreement is terminated by CombiMatrix or Invitae pursuant to clause 4 or by Invitae pursuant to clause 5 above, but only if (i) at any time before the CombiMatrix stockholders’ meeting a bona fide competing proposal with respect to CombiMatrix has been publicly announced, disclosed or, in the event the Merger Agreement is terminated pursuant to clause 5 above, otherwise communicated to CombiMatrix’s board of directors and (ii) in the event the Merger Agreement is terminated pursuant clause 4 above, within twelve months after the date of such termination, CombiMatrix enters into a definitive agreement with respect to a competing transaction or consummates a competing transaction. CombiMatrix is also required to pay Invitae expense reimbursements of up to $400,000 if the Merger Agreement is terminated pursuant to clause 7 above (except as it relates to a material adverse effect) or if Invitae fails to consummate the Merger solely as a result of a material adverse effect with respect to CombiMatrix.

Invitae is required to pay CombiMatrix expense reimbursements of up to $400,000 if the Merger Agreement is terminated by CombiMatrix pursuant to clause 6 above (except as it relates to a material adverse effect) or if CombiMatrix fails to consummate the Merger solely as a result of a material adverse effect with respect to Invitae.

 

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Any termination of the Merger Agreement shall not relieve any party for its fraud or of liability for any willful and material breach of any representation, warranty, covenant, obligation or other provision contained in the Merger Agreement.

Amendment

The Merger Agreement may be amended by an instrument in writing signed on behalf of each of Invitae, Merger Sub and CombiMatrix with the approval of the respective boards of directors of Invitae, Merger Sub and CombiMatrix at any time, except that after the Merger Proposal has been adopted by the stockholders of CombiMatrix, no amendment which by law requires further approval by the stockholders of CombiMatrix shall be made without such further approval.

Expenses

The Merger Agreement provides all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby shall be paid by the party incurring such expenses, except as described above in the section entitled “The Merger AgreementTermination of the Merger Agreement and Termination Fee” and except that CombiMatrix and Invitae shall share equally all filing fees and expenses, other than attorneys’ and accountants’ fees and expenses, incurred in relation to any filings required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and shall share equally any fees and expenses, other than attorneys’ and accountants’ fees and expenses, incurred by the engagement of the exchange agent and in relation to printing, filing and mailing with the SEC of the registration statements on Form S-4 for the Merger and the Offer and for the related proxy statement/prospectus and offer documents.

Special Meeting of CombiMatrix Stockholders

CombiMatrix is obligated under the Merger Agreement to hold its stockholders meeting for the purpose of adopting and approving the Merger Proposal as promptly as practicable after the registration statement on Form S-4 filed in connection with the Merger being declared effective by the SEC.

 

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DESCRIPTION OF INVITAE CAPITAL STOCK

For a description of Invitae’s capital stock, please see Invitae’s periodic reports and other documents incorporated by reference into this document. See the section entitled “Where You Can Find More Information.”

 

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COMPARISON OF RIGHTS OF INVITAE AND COMBIMATRIX STOCKHOLDERS

In the Offer, CombiMatrix Series F warrant holders will receive shares of Invitae common stock. The following is a summary of certain material differences between the rights of holders of CombiMatrix common stock and the rights of holders of Invitae common stock, but it is not a complete description of those differences. These differences arise from the governing documents of the two companies, including Invitae’s amended and restated certificate of incorporation, as amended (referred to as Invitae’s certificate of incorporation), and amended and restated bylaws (referred to as Invitae’s bylaws), and CombiMatrix’s amended and restated certificate of incorporation (referred to as CombiMatrix’s certificate of incorporation) and second amended and restated bylaws (referred to as CombiMatrix’s bylaws). Invitae and CombiMatrix are each Delaware corporations and are governed by the DGCL. After completion of the Offer and the Merger, the rights of CombiMatrix Series F warrant holders who become Invitae stockholders will be governed by the DGCL and Invitae’s certificate of incorporation and bylaws. The following is a comparison of the material rights of the holders of shares of Invitae common stock and the holders of shares of CombiMatrix common stock, but it is not a complete description of those rights. You are urged to read each of the Invitae certificate of incorporation and bylaws and the CombiMatrix certificate of incorporation and bylaws in its entirety. For additional information, see the section entitled “Where You Can Find More Information.

Capitalization

Invitae.    The total number of shares of all classes of stock authorized under Invitae’s certificate of incorporation is 420,000,000 shares, consisting of 400,000,000 shares of common stock, par value $0.0001 per share, and 20,000,000 shares of preferred stock, par value $0.0001 per share, of which 3,458,823 shares are designated Series A convertible preferred stock. As of September 26, 2017, there were 50,207,961 shares of Invitae common stock issued and outstanding and 3,458,823 shares of Series A convertible preferred stock issued and outstanding.

CombiMatrix.    The total number of shares of all classes of stock authorized under CombiMatrix’s certificate of incorporation is 55,000,000 shares, consisting of 50,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, of which 4,000 shares are designated Series A 6% convertible preferred stock, 2,000 shares are designated Series B 6% convertible preferred stock, 2,500 shares are designated Series C 6% convertible preferred stock, 12,000 shares are designated Series D convertible preferred stock, 2,202 shares are designated Series E 6% convertible preferred stock and 8,000 shares are designated Series F convertible preferred stock. As of September 26, 2017, there were 2,938,982 shares of CombiMatrix common stock issued and outstanding, no shares of CombiMatrix Series A 6% convertible preferred stock issued and outstanding, no shares of CombiMatrix Series B 6% convertible preferred stock issued and outstanding, no shares of CombiMatrix Series C 6% convertible preferred stock issued and outstanding, no shares of CombiMatrix Series D convertible preferred stock issued and outstanding, no shares of CombiMatrix Series E 6% convertible preferred stock issued and outstanding, and 14 shares of CombiMatrix Series F convertible preferred stock issued and outstanding.

Voting Rights

Invitae. Invitae’s bylaws provide that at every meeting of the stockholders each stockholder shall be entitled to one vote for each share of the capital stock having voting power held by such stockholder. The holders of preferred stock have no voting rights, except as otherwise required by law.

CombiMatrix.    Pursuant to CombiMatrix’s certificate of incorporation, each holder of CombiMatrix common stock is entitled to one vote for each share of CombiMatrix common stock held of record by such holder on all matters on which stockholders generally are entitled to vote. The holders of preferred stock have no voting rights, except as required by law. However, as long as any shares of a class of preferred stock are outstanding, CombiMatrix may not, without the affirmative vote of the holders of a majority of the then outstanding shares of

 

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such class of preferred stock, (i) alter or change adversely the powers, preferences or rights given to such class of preferred stock or alter or amend the certificate of designation setting forth such powers, preferences and rights, (ii) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation senior to, or otherwise pari passu with, such class of preferred stock, (iii) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of such class of preferred stock, (iv) increase the number of authorized shares of such class of preferred stock, or (v) enter into any agreement with respect to any of the foregoing; provided that the foregoing clause (ii) does not apply to the outstanding Series F convertible preferred stock.

Stockholder Action by Written Consent

The DGCL allows actions to be taken by stockholders by written consent to be made by the holders of the minimum number of votes that would be needed to approve a matter at an annual or special meeting of stockholders, unless this right to act by written consent is denied in the certificate of incorporation.

Invitae.    The Invitae certificate of incorporation specifically prohibits stockholders from taking action by written consent.

CombiMatrix.    The CombiMatrix certificate of incorporation specifically prohibits stockholders from taking action by written consent.

Dividends

The DGCL permits a corporation to declare and pay dividends out of “surplus” or, if there is no “surplus,” out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. “Surplus” is defined as the excess of the net assets of the corporation over the amount determined to be the capital of the corporation by the board of directors. The capital of the corporation is typically calculated to be (and cannot be less than) the aggregate par value of all issued shares of capital stock. The calculation of net assets equals the fair value of the total assets minus total liabilities. The DGCL also provides that dividends may not be paid out of net profits if, after the payment of the dividend, capital is less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.

Invitae.    Pursuant to Invitae’s certificate of incorporation, the holders of shares of Invitae common stock are entitled to receive dividends, when, as and if declared by the board of directors from time to time. Dividends are payable in cash, property or shares of capital stock. Invitae shall not declare, pay or set aside dividends on shares of any other class or series of Invitae’s capital stock (other than dividends in the form of Invitae’s common stock) unless the holders of Invitae’s Series A convertible preferred stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of preferred stock in an amount at least equal to that dividend per share of preferred stock as would equal the product of (i) the dividend payable on each share of Invitae’s common stock and (ii) the number of shares of common stock issuable upon conversion of a share of Invitae’s Series A convertible preferred stock, in each case as calculated on the record date for determination of holders entitled to receive such dividend.

CombiMatrix.    CombiMatrix’s certificate of incorporation provides that the holders of CombiMatrix’s Series F convertible preferred stock will be entitled to dividends equal to and in the same form as dividends actually paid on shares of CombiMatrix’s common stock when, as and if such dividends are paid on shares of the common stock. CombiMatrix’s certificate of incorporation also provides dividends for certain other classes of preferred stock which are not outstanding as of the date of this prospectus/offer to exchange.

Number of Directors

Under the DGCL, the board of directors of a corporation must consist of one or more members, each of whom must be a natural person.

 

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Invitae.    The bylaws of Invitae state that the number of directors that shall constitute the entire board of directors shall be fixed from time to time by resolution adopted by a majority of the directors then in office. There are currently five members of the Invitae board of directors.

CombiMatrix.    CombiMatrix’s certificate of incorporation provides that the number of directors of CombiMatrix will be fixed from time to time by action of at least a majority of the directors then in office, and that such number will be no less than five and no more than nine. There are currently six members of the CombiMatrix board of directors.

Classification of Directors

The DGCL permits the directors of any corporation to be divided into one, two or three classes, with the term of office of those directors of the first class expiring at the first annual meeting held after such classification becomes effective, of the second class one year thereafter, and of the third class two years thereafter, with directors being chosen for a full term to replace those whose terms expire at each annual election thereafter.

Invitae.    The members of Invitae’s board of directors are classified into three classes, the members of one class of which are elected at each meeting of the stockholders. Each board class is elected to hold office for a three-year term and until the successors of such class have been elected and qualified. Newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the board of directors shall be filled solely by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director, and such newly appointed directors shall hold office until the next annual election at which the term of the class to which he or she has been elected expires and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, removal or incapacity.

CombiMatrix.    The board of directors of CombiMatrix is not classified. All CombiMatrix directors are elected annually to serve one-year terms.

Election of Directors

The DGCL provides that directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors, and that a bylaw amendment adopted by stockholders which specifies the votes that shall be necessary for the election of directors shall not be further amended or repealed by the board of directors.

Invitae.    Invitae directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Each director so elected shall hold office until the next annual meeting of stockholders in which such director’s class stands for election and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, removal or incapacity.

CombiMatrix.    The CombiMatrix bylaws provide that directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Each director so elected shall hold office until the next annual meeting of stockholders and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, retirement, disqualification or removal.

Removal of Directors

The DGCL provides that in the absence of cumulative voting or a classified board, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote in an election of directors.

 

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Invitae.    Invitae’s certificate of incorporation provides that any or all of the Invitae directors may be removed from office, but only for cause and only by the holders of a majority of the voting power of the capital stock issued and outstanding then entitled to vote at an election of directors.

CombiMatrix.    CombiMatrix’s certificate of incorporation provides that directors may be removed, with or without cause, only upon the affirmative vote of holders of at least two-thirds of the voting power of all then outstanding shares of CombiMatrix stock entitled to vote generally in the election of directors, voting together as a single class; provided that where such removal is approved by a majority of the directors the affirmative vote of only a majority of the holders of all outstanding shares of CombiMatrix common stock will be required for removal of a director.

Vacancies

Invitae.    The Invitae certificate of incorporation provides that newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Invitae board of directors resulting from death, resignation, retirement, disqualification, removal or other cause shall be filled solely by a majority vote of the Invitae directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and that any director so chosen shall hold office until the next annual election at which the term of the class to which he or she has been elected expires and until such director’s successor is duly elected and qualified or until such director’s earlier resignation or removal.

CombiMatrix.    The CombiMatrix certificate of incorporation provides that newly created directorships resulting from an increase in the number of directors and any vacancies on the CombiMatrix board of directors resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely by a majority vote of the remaining CombiMatrix directors then in office, even if less than a quorum, and that any director so chosen shall hold office until the next election of directors and until his or her successor shall be elected and qualified.

Amendments to Certificate of Incorporation

Under the DGCL, an amendment to the certificate of incorporation requires (1) the approval of the board of directors, (2) the approval of the holders of a majority of the outstanding stock entitled to vote upon the proposed amendment, and (3) the approval of the holders of a majority of the outstanding stock of each class entitled to vote thereon as a class.

Invitae.    Invitae’s certificate of incorporation provides that the affirmative vote of the holders of at least 66-2/3% of the voting power of the shares of Invitae’s capital stock entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend in any respect or repeal Paragraph A of Article V (Amendments to Bylaws), Article VI (Board of Directors; Newly Created Directorships), Article VII (Action By Written Consent; Meetings of Stockholders; Stockholder Nominations; Exclusive Forum), Article VIII (Indemnification; Insurance) or Article IX (Amendment to Certificate of Incorporation).

CombiMatrix.    The CombiMatrix certificate of incorporation provides that CombiMatrix reserves the right to amend, alter, change or repeal any provision contained in the certificate of incorporation, and all rights, preferences, and privileges conferred upon the stockholders, directors or any other persons, and to add or insert other provisions authorized by the DGCL, in the manner prescribed by the DGCL.

Amendments to Bylaws

Under the DGCL, bylaws may be adopted, amended or repealed by the stockholders entitled to vote, and by the board of directors if the corporation’s certificate of incorporation confers the power to adopt, amend or repeal the corporation’s bylaws upon the directors.

 

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Invitae.    The Invitae certificate of incorporation authorizes the Invitae board of directors to adopt, amend or repeal Invitae’s bylaws, without any action on the part of the stockholders, by the vote of at least a majority of the directors then in office. In addition, Invitae’s bylaws may be adopted, amended or repealed by the affirmative vote of the holders of at least two-thirds of the voting power of the shares of Invitae’s capital stock entitled to vote in the election of directors, voting as one class; provided, however, that the affirmative vote of the holders representing only a majority of the voting power of the shares of Invitae’s capital stock entitled to vote in the election of directors, voting as one class, shall be required if such adoption, amendment or repeal of Invitae’s bylaws has been previously approved by the affirmative vote of at least two-thirds of the directors then in office.

CombiMatrix.    The CombiMatrix certificate of incorporation and bylaws provide that the CombiMatrix board of directors is expressly authorized to adopt, alter, amend and repeal the CombiMatrix bylaws, subject to the power of the stockholders to change or repeal the bylaws and provided that the board of directors may not make or alter any bylaws fixing the qualifications, classifications, or term of office of directors. In addition, CombiMatrix’s bylaws may be repealed, altered or amended or new bylaws adopted by the affirmative vote of the holders of two-thirds of CombiMatrix’s stock entitled to vote at any meeting of the stockholders.

Annual Meetings of Stockholders

Invitae.    The Invitae bylaws provide that an annual meeting of Invitae’s stockholders shall be held each year at such date and time as shall be designated from time to time by the Invitae board of directors and stated in the notice of the meeting. At each such annual meeting, the stockholders shall elect directors of the class whose term expires at such meeting and shall transact such other business as may properly be brought before the meeting.

CombiMatrix.    The CombiMatrix bylaws provide that an annual meeting of CombiMatrix’s stockholders, for the purpose of electing directors and for such other business as may lawfully come before such meeting, shall be held each year at such date and time as shall be designated from time to time by the CombiMatrix board of directors, or, if not so designated, then at 10:00 a.m. on May 31 each year if a business day and not a legal holiday, or at the same time on the next succeeding business day that is not a holiday.

Special Meetings of Stockholders

Invitae.    The Invitae certificate of incorporation specifically denies any power of Invitae’s stockholders to call a special meeting of stockholders. Invitae’s bylaws provide that a special meeting of the stockholders shall be called by the Secretary upon the written request of the Chairman of the Invitae board of directors or the Chief Executive Officer of Invitae or by a resolution adopted by the affirmative vote of a majority of the Invitae board of directors, with such request stating the purpose of the proposed meeting.

CombiMatrix.    The CombiMatrix certificate of incorporation provides that only the Chairman of the Board, the President or the CombiMatrix board of directors may call a special meeting of stockholders and specifically denies any power of CombiMatrix’s stockholders to call a special meeting of stockholders. CombiMatrix’s bylaws provide that a special meeting of the stockholders may be called for any purpose or purposes, by the Chairman of the Board, the President or the CombiMatrix board of directors at any time.

Submission of Stockholder Proposals

Invitae.    Invitae’s bylaws provide that any stockholder entitled to vote at a meeting of stockholders may propose business to be brought before such meeting only if such stockholder has given timely notice to the Secretary of Invitae in proper written form of the stockholder’s intent to propose such business. Notice of any proposal to be presented by any stockholder or of the name of any person to be nominated by any stockholder for election as a director of Invitae at an annual or special meeting of stockholders shall be delivered to the Secretary of Invitae at Invitae’s principal executive office not less than 90 nor more than 120 days in advance of the anniversary of the date of Invitae’s proxy statement provided in connection with the previous year’s annual meeting of

 

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stockholders, provided that in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is more than 30 days before or after the anniversary date of the previous year’s annual meeting, notice by the stockholder must be received by the Secretary of Invitae not later than the close of business on the later of (a) the 90th day prior to such annual meeting and (b) the tenth day following the day on which public announcement of the date of such meeting is first made. In the case of a special meeting of stockholders called for the purpose of electing directors, notice must be delivered not later than the close of business on the tenth day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made. Any stockholder who gives notice of any such matter must deliver with such notice the text of the business or proposal to be presented and a brief written description of the business desired to be brought before the annual meeting and the reasons for conducting such business, setting forth such stockholder’s name and record address and the beneficial owner, if any, on whose behalf the proposal is made, the class, series and number of shares of Invitae that are owned beneficially and of record by the stockholder and such beneficial owner, if any, any material interest of the stockholder in such business, and any other information that is required to be provided by the stockholder pursuant to Section 14 of the Exchange Act in such stockholder’s capacity as a proponent of a stockholder proposal.

CombiMatrix.    CombiMatrix’s bylaws provided that a stockholder submitting a proposal for a stockholder vote must deliver a written notice to the Secretary of CombiMatrix no less than 120 days nor more than 180 days prior to the date on which CombiMatrix first mailed its proxy materials for the previous year’s annual meeting of stockholders (or the date on which CombiMatrix mails its proxy materials for the current year if during the prior year CombiMatrix did not hold an annual meeting or if the date of the annual meeting was changed more than 30 days from the prior year). The notice must set forth (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of the stockholder proposing such business, (c) the class and number of shares of CombiMatrix which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business.

Stockholder Nomination of Director Candidates

Invitae.    In addition to the advance notice requirements described above, which apply to nominations by Invitae stockholders of candidates for director, any stockholder desiring to nominate any person for election as a director must deliver with such notice a statement in writing setting forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, (i) the name, age, business address and residence address of the person to be nominated, (ii) the principal occupation or employment of the person, (iii) the class, series and number of shares of capital stock of Invitae that are owned beneficially by the person, (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Exchange Act and (v) such person’s signed consent to serve as a director of Invitae if elected and (b) as to the stockholder giving the notice (x) the stockholder’s name and address, (y) the class, series and number of shares of capital stock of Invitae beneficially owned by such stockholder and (z) a description of all arrangements or understandings between such stockholder and each such nominee.

CombiMatrix.    CombiMatrix’s bylaws provide that any stockholder desiring to nominate any person for election as director must deliver a written notice to the Secretary not less than 80 days nor more than 120 days prior to the date on which CombiMatrix first mailed its proxy materials for the previous year’s annual meeting of stockholders (or the date on which CombiMatrix mails its proxy materials for the current year if during the prior year CombiMatrix did not hold an annual meeting or if the date of the annual meeting was changed more than 30 days from the prior year). Such notice must set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of CombiMatrix which are beneficially owned by the person, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Rule 14a under the Exchange Act; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder, and (ii) the class and number of shares of CombiMatrix which are beneficially owned by the stockholder.

 

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Indemnification and Limitation of Personal Liability of Directors

The DGCL provides that a corporation may indemnify a director or officer against expenses actually and reasonably incurred by him or her in association with any action, suit or proceeding in which the director or officer is involved by reason of his or her service to the corporation, if the director or officer acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to a criminal proceeding, the director or officer had no reason to believe that the act was unlawful. In addition, the DGCL requires that a corporation indemnify a director or officer who successfully defends himself or herself in such a proceeding.

Invitae.    Invitae’s bylaws provide that it will indemnify any person who was or is made a party or is threatened to be made a party to or is involved in any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of Invitae, or is or was serving at the request of Invitae as a director, officer, employee or agent of another corporation, partnership, limited liability company, joint venture, trust, employee benefit plan sponsored or maintained by Invitae, or other enterprise, against all expense, liability and loss (including attorneys’ fees and related disbursements, judgments, fines, excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of Invitae, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

Invitae’s bylaws further provide that a person entitled to indemnification will also have the right advancement of expenses incurred in defending any proceeding, provided that if the DGCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to Invitae of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it is ultimately determined that such director or officer is not entitled to be indemnified. In addition, no advance shall be made to an officer of Invitae (unless such officer is or was a director of Invitae) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is made by the disinterested members of Invitae’s board of directors or independent legal counsel, that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of Invitae.

CombiMatrix.    CombiMatrix’s bylaws provide that it will indemnify to the fullest extent authorized by the DGCL any person who was or is a party or is threatened to be made a party to or is involved in any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that such person is or was a director, officer, employee, or agent of CombiMatrix, or is or was serving at the request of CombiMatrix as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against all expense, liability and loss (including attorneys’ fees, judgments, fines, excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection with such action, suit or proceeding.

CombiMatrix’s bylaws further provide that a person entitled to indemnification will also have the right advancement of expenses incurred in defending any proceeding, provided that if required by the DGCL, expenses will be advanced only upon delivery to CombiMatrix of an undertaking by or on behalf of such director or officer to repay such amount if it is ultimately determined that he or she is not entitled to be indemnified.

Extraordinary Transactions

The DGCL generally requires that any merger, consolidation or sale of substantially all the assets of a corporation be approved by a vote of a majority of all outstanding shares entitled to vote thereon.

 

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Invitae.    Although the DGCL permits a Delaware corporation’s certificate of incorporation to provide for a greater vote for a merger, consolidation or sale of substantially all the assets of a corporation than the vote described above, the Invitae certificate of incorporation does not require a greater vote.

CombiMatrix.    Although the DGCL permits a Delaware corporation’s certificate of incorporation to provide for a greater vote for a merger, consolidation or sale of substantially all the assets of a corporation than the vote described above, the CombiMatrix certificate of incorporation does not require a greater vote.

 

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LEGAL MATTERS

Pillsbury Winthrop Shaw Pittman LLP, San Diego, California will pass upon the validity of the Invitae common stock offered by this prospectus/offer to exchange. The material U.S. federal income tax consequences of the Offer will be passed upon for Invitae by Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California and for CombiMatrix by Stradling Yocca Carlson & Rauth, P.C., Newport Beach, California.

EXPERTS

The consolidated financial statements of Invitae Corporation included in Invitae Corporation’s Annual Report (Form 10-K, as amended) for the year ended December 31, 2016 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The financial statements of CombiMatrix at December 31, 2016 and 2015 and for each of the two years in the period ended December 31, 2016 included in this prospectus/offer to exchange have been included in reliance upon the report of Haskell & White LLP, an independent registered public accounting firm, and given on the authority of said firm as experts in auditing and accounting.

 

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WHERE YOU CAN FIND MORE INFORMATION

The SEC allows Invitae to incorporate by reference information in this document. This means that Invitae can disclose important information to you by referring you to another document filed separately with the SEC. These documents contain important information about Invitae and its financial condition, business, operations and results. The information incorporated by reference is considered to be part of this document, except for any information that is superseded by information that is included directly in this document. This document incorporates by reference the documents listed below that Invitae previously filed with the SEC.

 

Invitae SEC Filings

  

Period or Date Filed

Annual Report on Form 10-K    For the fiscal year ended December 31, 2016, as filed with the SEC on March 16, 2017 (as amended June 23, 2017 and June 26, 2017)
Quarterly Report on Form 10-Q    For the quarterly periods ended June 30, 2017 and March 31, 2017, as filed with the SEC on August 9, 2017 and May 9, 2017, respectively
Current Report on Form 8-K    Filed on: September 27, 2017, August 7, 2017, August 4, 2017, August 1, 2017 (two filings), June 13, 2017, June 1, 2017, May 19, 2017, February 9, 2017, January 9, 2017 and January 6, 2017 (other than the portions of those documents not deemed to be filed)
The description of Invitae’ capital stock set forth in a registration statement filed pursuant to Section 12 of the Exchange Act and any amendment or report filed for the purpose of updating those descriptions    As filed with the SEC on February 11, 2015, together with all amendments and reports filed for the purpose of updating such description
Proxy Statement on Schedule 14A    For the 2017 annual meeting of stockholders, filed with the SEC on April 6, 2017

In addition, Invitae also incorporates by reference additional documents that it files with the Securities and Exchange Commission between the date of this document and the Expiration Date of the Offer. These documents include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy statements.

CombiMatrix is subject to the information requirements of the Exchange Act; however, CombiMatrix cannot incorporate by reference into this prospectus/offer to exchange because it is not eligible to do so under Form S-4. The documents listed below have been previously filed with the SEC by CombiMatrix, contain important information about CombiMatrix and its financial condition, and are included with this prospectus/offer to exchange in the applicable annex set forth below.

 

CombiMatrix SEC Filings

  

Annex to Prospectus/Offer to Exchange

CombiMatrix Annual Report on Form 10-K for the fiscal year ended December 31, 2016   

Annex B

CombiMatrix Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017   

Annex C

Invitae has filed a registration statement on Form S-4 to register with the SEC the offer and sale of the shares of Invitae common stock to be issued in the Offer. This prospectus/offer to exchange is a part of that registration statement. Invitae may also file amendments to that registration statement. In addition, on September 13, 2017,

 

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Invitae filed with the SEC a tender offer statement on Schedule TO under the Exchange Act, together with exhibits, to furnish certain information about the Offer. Invitae may also file amendments to the Schedule TO. You should read these documents as they will contain important information. These documents will not be sent to you in hard copy form. You may obtain copies of the Form S-4 and Schedule TO (and any amendments to those documents) by contacting the information agent as directed on the back cover of this prospectus/offer to exchange. You may also request that the information agent sends you all future documents, announcements and information in relation to the offer in hard copy form.

Invitae has supplied all information contained or incorporated by reference in this document relating to Invitae and CombiMatrix has supplied all information relating to CombiMatrix. Documents incorporated by reference by Invitae or otherwise previously filed by CombiMatrix with the SEC are available without charge, excluding any exhibits to those documents unless the exhibit is specifically incorporated by reference as an exhibit in this document. You may read and copy documents incorporated by reference in this document, other than certain exhibits to those documents, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can also obtain such documents free of charge through the SEC’s website (www.sec.gov) or by requesting them in writing or by telephone from the appropriate company at the following addresses.

 

Invitae Corporation

1400 16th Street

San Francisco, CA 94103

(415) 374-7782

Attn: Investor Relations

  

CombiMatrix Corporation

300 Goddard, Suite 100

Irvine, CA 92618

(949) 753-0624

Attn: Investor Relations

If you would like to request any documents, please do so by November 6, 2017, or five business days prior to the Expiration Date, whichever is later, to receive them before the Expiration Date of the Offer. You will not be charged for any of these documents that you request. If you request any incorporated documents from Invitae or CombiMatrix, Invitae or CombiMatrix will mail them to you by first class mail, or another equally prompt means, within one business day after it receives your request.

Neither CombiMatrix nor Invitae has authorized anyone to give any information or make any representation about the Offer, the Merger or the companies that is different from, or in addition to, that contained in this document or in any of the materials that have been incorporated in this document. Therefore, if anyone does give you information of this sort, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this document or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this document does not extend to you. The information in this document speaks only as of the date of this document unless the information specifically indicates that another date applies.

 

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Annex A

EXECUTION VERSION

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this “Agreement”) is made and entered into as of July 31, 2017, by and among INVITAE CORPORATION, a Delaware corporation (“Invitae”), CORONADO MERGER SUB, INC., a Delaware corporation (“Merger Sub”), and COMBIMATRIX CORPORATION, a Delaware corporation (“CombiMatrix”). Certain capitalized terms used in this Agreement are defined in Exhibit A.

RECITALS

A. Invitae and CombiMatrix intend to effect a merger of Merger Sub into CombiMatrix (the “Merger”) in accordance with this Agreement and the DGCL. Upon consummation of the Merger, Merger Sub will cease to exist, and CombiMatrix will become a wholly-owned subsidiary of Invitae.

B. The Parties intend, by approving resolutions authorizing this Agreement, to adopt this Agreement as a plan of reorganization within the meaning of Section 368(a) of the Code, and to cause the Merger, together with the Warrant Exchange Offer, to qualify as a reorganization under the provisions of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder.

C. The Invitae Board of Directors has approved this Agreement, the Merger, the issuance of shares of Invitae Common Stock to the stockholders of CombiMatrix pursuant to the terms of this Agreement and the other actions contemplated by this Agreement, including the Warrant Exchange Offer (consummation of which, with at least the Minimum Warrant Exchange Participation, is one of the conditions to the obligations of Invitae and Merger Sub to proceed with the Merger as set forth herein).

D. The Merger Sub Board of Directors has determined that the Merger is in the best interests of Merger Sub and its sole stockholder and has approved this Agreement, the Merger, and the other actions contemplated by this Agreement.

E. The CombiMatrix Board of Directors (i) has determined that the Merger is advisable and fair to, and in the best interests of, CombiMatrix and its stockholders, (ii) has deemed advisable and approved this Agreement, the Merger and the other actions contemplated by this Agreement, and (iii) has determined to recommend that the stockholders of CombiMatrix vote to adopt this Agreement and thereby approve the Merger and such other actions as contemplated by this Agreement (the “Merger Proposal”).

AGREEMENT

The Parties, intending to be legally bound, agree as follows:

Section 1. DESCRIPTION OF TRANSACTION

1.1 Structure of the Merger. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into CombiMatrix, and the separate existence of Merger Sub shall cease. CombiMatrix will continue as the surviving corporation in the Merger (the “Surviving Corporation”).

1.2 Effects of the Merger. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL. As a result of the Merger, CombiMatrix will become a wholly-owned subsidiary of Invitae.

 

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1.3 Closing; Effective Time. Unless this Agreement is earlier terminated pursuant to the provisions of Section 9.1, and subject to the satisfaction or waiver of the conditions set forth in Section 6, Section 7 and Section 8, the consummation of the Merger (the “Closing”) shall take place at the offices of Pillsbury Winthrop Shaw Pittman LLP, 12255 El Camino Real, Suite 300, San Diego, California, as promptly as practicable (but in no event later than the second (2nd) Business Day following the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Section 6, Section 7 and Section 8, other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of each of such conditions), or at such other time, date and place as Invitae and CombiMatrix may mutually agree in writing. The date on which the Closing actually takes place is referred to as the “Closing Date.” At the Closing, the Parties shall cause the Merger to be consummated by executing and filing with the Secretary of State of the State of Delaware a certificate of merger with respect to the Merger, satisfying the applicable requirements of the DGCL and in a form reasonably acceptable to Invitae and CombiMatrix (the “Certificate of Merger”). The Merger shall become effective at the time of the filing of such Certificate of Merger with the Secretary of State of the State of Delaware or at such later time as may be specified in such Certificate of Merger with the consent of Invitae and CombiMatrix (the time as of which the Merger becomes effective being referred to as the “Effective Time”).

1.4 Certificate of Incorporation and Bylaws; Directors and Officers. At the Effective Time:

(a) the Certificate of Incorporation of the Surviving Corporation shall be amended and restated in its entirety to read identically to the Certificate of Incorporation of Merger Sub as in effect immediately prior to the Effective Time, (i) except that references to the name of Merger Sub shall be replaced with references to the name of the Surviving Corporation and (ii) until thereafter amended as provided by the DGCL and such Certificate of Incorporation;

(b) the Bylaws of the Surviving Corporation shall be amended and restated in their entirety to read identically to the Bylaws of Merger Sub as in effect immediately prior to the Effective Time, (i) except that references to the name of Merger Sub shall be replaced with references to the name of the Surviving Corporation and (ii) until thereafter amended as provided by the DGCL and such Bylaws; and

(c) the directors and officers of Merger Sub immediately prior to the Effective Time shall be the directors and officer of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and Bylaws of the Surviving Corporation.

1.5 Conversion of CombiMatrix Common Stock, CombiMatrix RSUs, CombiMatrix Options and CombiMatrix Series F Preferred Stock; Issuance of Warrants.

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Invitae, Merger Sub, CombiMatrix or any stockholder of CombiMatrix:

(i) any shares of CombiMatrix Common Stock or CombiMatrix Preferred Stock held as treasury stock or held or owned by CombiMatrix, Merger Sub or any Subsidiary of CombiMatrix immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor; and

(ii) subject to Section 1.5(c):

(1) each share of CombiMatrix Series F Preferred Stock outstanding immediately prior to the Effective Time (excluding shares to be canceled pursuant to Section 1.5(a)(i)) shall be converted solely into the right to receive a number of shares of Invitae Common Stock equal to the product of (A) the Exchange Ratio multiplied by (B) the number of shares of CombiMatrix Common Stock underlying a share of outstanding CombiMatrix Series F Preferred Stock on the date immediately prior to the Effective Time;

(2) each share of CombiMatrix Common Stock outstanding immediately prior to the Effective Time (excluding shares to be canceled pursuant to Section 1.5(a)(i)) shall be converted solely into the right to receive a number of shares of Invitae Common Stock equal to the Exchange Ratio;

 

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(3) subject to the payment of such amounts as are required to be deducted or withheld from such consideration under the Code or under any other applicable Legal Requirement as well as the delivery of any reasonably appropriate Tax forms, including Form W-9 (or the appropriate Form W-8, as applicable), each CombiMatrix RSU outstanding immediately prior to the Effective Time shall be fully accelerated to the extent of any vesting period applicable thereto and converted into the number of shares of Invitae Common Stock determined by multiplying (A) the number of shares of CombiMatrix Common Stock that were subject to such CombiMatrix RSU, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting number down to the nearest whole number of shares of Invitae Common Stock; and

(4) subject to the payment of such amounts as are required to be deducted or withheld from such consideration under the Code or under any other applicable Legal Requirement as well as the delivery of any reasonably appropriate Tax forms, including Form W-9 (or the appropriate Form W-8, as applicable), each in-the-money CombiMatrix Option that is outstanding and unexercised immediately prior to the Effective Time, whether or not vested or exercisable, shall be converted into the number of shares of Invitae Common Stock determined by (A) multiplying the Exchange Ratio by the number of shares of CombiMatrix Common Stock underlying such CombiMatrix Option, and subtracting therefrom (B) the number of shares of Invitae Common Stock determined by dividing (x) the exercise price payable by the holder with respect to all shares underlying such CombiMatrix Option by (y) the Invitae Trailing Average Share Value, and rounding the resulting number down to the nearest whole number of shares of Invitae Common Stock.

The shares of Invitae Common Stock issuable pursuant to this Section 1.5(a)(ii) are herein referred to as the “Merger Consideration.”

(b) If any shares of CombiMatrix Common Stock, CombiMatrix RSUs or CombiMatrix Options outstanding immediately prior to the Effective Time are unvested or are subject to a repurchase option or the risk of forfeiture under any applicable restricted stock purchase agreement or other agreement with CombiMatrix, then (i) the shares of Invitae Common Stock issued in exchange for such shares of CombiMatrix Common Stock shall be issued without regard to such vesting, restrictions, repurchase options or risk of forfeiture, which shall lapse as of the Effective Time and (ii) the shares of Invitae Common Stock issued upon conversion of such CombiMatrix RSUs or CombiMatrix Options, subject to and as provided in Sections 1.5(a)(ii)(3) and 1.5(a)(ii)(4), shall be issued without any vesting period, restrictions, repurchase options or risk of forfeiture.

(c) No fractional shares of Invitae Common Stock shall be issued in connection with the Merger, and no certificates or scrip for any such fractional shares shall be issued. Any holder of CombiMatrix Common Stock, CombiMatrix RSUs or CombiMatrix Options who would otherwise be entitled to receive a fraction of a share of Invitae Common Stock (after aggregating all fractional shares of Invitae Common Stock issuable to such holder) shall, in lieu of such fraction of a share and upon surrender by such holder of a letter of transmittal in accordance with Section 1.8 and accompanying documents as required therein, be paid in cash the dollar amount (rounded to the nearest whole cent), without interest, determined by multiplying such fraction by the Invitae Trailing Average Share Value.

(d) Prior to the Effective Time, CombiMatrix shall take or cause to be taken any and all actions reasonably necessary to cause all CombiMatrix RSUs outstanding immediately prior to the Effective Time under the 2006 Plan or otherwise to become immediately fully vested as of the Effective Time and converted into the number of shares of unrestricted Invitae Common Stock calculated pursuant to Section 1.5(a)(ii)(3). In accordance with Section 5.4(a), CombiMatrix shall further take or cause to be taken any and all actions reasonably necessary to (i) cause all in-the-money CombiMatrix Options outstanding and unexercised immediately prior to the Effective Time, whether or not vested or exercisable, to become immediately vested as of the Effective Time and converted into the number of shares of unrestricted Invitae Common Stock calculated pursuant to Section 1.5(a)(ii)(4) and (ii) cause all out-of-the-money CombiMatrix Options outstanding and unexercised immediately prior to the Effective Time, whether or not vested or exercisable, to be cancelled and terminated as of the Effective Time for no consideration.

(e) All CombiMatrix Series D Warrants and CombiMatrix Series F Warrants outstanding as of the Effective Time (i.e., to the extent not exchanged in the Warrant Exchange Offer, in the instance of CombiMatrix

 

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Series F Warrants, or exercised for cash prior to consummation of the Warrant Exchange Offer) shall be assumed by Invitae and converted into warrants to purchase Invitae Common Stock in accordance with Section 5.4(c). For the avoidance of doubt, all other CombiMatrix Warrants shall be repurchased by CombiMatrix pursuant to the CombiMatrix Warrant Repurchase.

(f) Each share of Common Stock, $0.001 par value per share, of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock, $0.001 par value per share, of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares shall, as of the Effective Time, evidence ownership of such shares of Common Stock of the Surviving Corporation.

(g) If, between the date of this Agreement and the Effective Time, the outstanding shares of CombiMatrix Capital Stock or Invitae Common Stock shall have been changed into, or exchanged for, a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Exchange Ratio shall be correspondingly adjusted to provide holders of shares of CombiMatrix Capital Stock, or securities convertible into or exchangeable into or exercisable for such CombiMatrix Capital Stock, the same economic effect as contemplated by this Agreement prior to such event.

1.6 Calculation of Net Cash

(a) For the purposes of this Agreement, the “Determination Date” shall be the date that is ten (10) calendar days prior to the anticipated date for Closing, as agreed upon by Invitae and CombiMatrix at least ten (10) calendar days prior to the CombiMatrix Stockholders’ Meeting or, if later, at least ten (10) calendar days prior to the anticipated end of the period for the Warrant Exchange Offer (the “Anticipated Closing Date”). Within five (5) calendar days following the Determination Date, CombiMatrix shall deliver to Invitae a schedule (the “Net Cash Schedule”) setting forth, in reasonable detail, CombiMatrix’s good faith, estimated calculation of Net Cash (using estimates where applicable) as of the Anticipated Closing Date (the “Net Cash Calculation”) prepared and certified by CombiMatrix’s Chief Financial Officer; provided, however, that, for purposes of such calculation of Net Cash, current assets, current liabilities not triggered by the Closing, and long-term capital lease obligations may be calculated (i) as of the last day of the month prior to the Anticipated Closing Date if the Anticipated Closing Date occurs between the 15th and the 31st of the month or (ii) as of the last day of the month prior to the month preceding the Anticipated Closing Date if the Anticipated Closing Date occurs between the 1st and the 14th of the month, in both cases if, to the extent applicable, a mid-month calculation for such liabilities and assets (or, in the case of the foregoing clause (ii), calculation as of the most recent month-end) would be impractical. CombiMatrix shall make the work papers and back-up materials used or useful in preparing the Net Cash Schedule, as reasonably requested by Invitae, available to Invitae and, if requested by Invitae, its accountants and counsel at reasonable times and upon reasonable notice.

(b) Within three (3) calendar days after CombiMatrix delivers the Net Cash Schedule (the “Response Date”), Invitae shall have the right to dispute any part of such Net Cash Schedule by delivering a written notice to that effect to CombiMatrix (a “Dispute Notice”). Any Dispute Notice shall identify in reasonable detail the nature of any proposed revisions to the Net Cash Calculation.

(c) If on or prior to the Response Date, (i) Invitae notifies CombiMatrix in writing that it has no objections to the Net Cash Calculation or (ii) Invitae fails to deliver a Dispute Notice as provided in Section 1.6(b), then the Net Cash Calculation as set forth in the Net Cash Schedule shall be deemed to have been finally determined for purposes of this Agreement.

(d) If Invitae delivers a Dispute Notice on or prior to the Response Date, then Representatives of CombiMatrix and Invitae shall promptly meet and attempt in good faith to resolve the disputed item(s) and negotiate an agreed-upon determination of Net Cash, which agreed upon Net Cash amount shall be deemed to have been finally determined for purposes of this Agreement.

 

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(e) If Representatives of Invitae and CombiMatrix are unable to negotiate an agreed-upon determination of Net Cash pursuant to Section 1.6(d) within three (3) calendar days after delivery of the Dispute Notice (or such other period as Invitae and CombiMatrix may mutually agree upon), then Invitae and CombiMatrix shall jointly select an independent auditor of recognized national standing (the “Accounting Firm”) to resolve any remaining disagreements as to the Net Cash Calculation. If Invitae and CombiMatrix are unable to mutually select the Accounting Firm, then Invitae and CombiMatrix shall each select an independent auditor of recognized national standing and those two selected firms shall jointly select a third independent auditor of recognized national standing, which shall serve as the Accounting Firm. CombiMatrix shall promptly deliver to the Accounting Firm the work papers and back-up materials used in preparing the Net Cash Schedule, and Invitae and CombiMatrix shall use commercially reasonable efforts to cause the Accounting Firm to make its determination within ten (10) calendar days of accepting its selection. CombiMatrix and Invitae shall be afforded the opportunity to present to the Accounting Firm any material related to the unresolved disputes and to discuss the issues with the Accounting Firm; provided, however, that no such presentation or discussion shall occur without the presence of a Representative of each of CombiMatrix and Invitae. The determination of the Accounting Firm shall be limited to the disagreements submitted to the Accounting Firm. The determination of the amount of Net Cash made by the Accounting Firm shall be deemed to have been finally determined for purposes of this Agreement and to represent the Net Cash for purposes of this Agreement, and the Parties shall delay the Closing until the resolution of the matters described in this Section 1.6(e). The fees and expenses of the Accounting Firm shall be allocated between Invitae and CombiMatrix in the same proportion that the disputed amount of the Net Cash that was unsuccessfully disputed by such Party (as finally determined by the Accounting Firm) bears to the total disputed amount of the Net Cash amount (and for the avoidance of doubt the fees and expenses to be paid by CombiMatrix shall reduce the Net Cash). If this Section 1.6(e) applies as to the determination of the Net Cash, upon resolution of the matter in accordance with this Section 1.6(e), the Parties shall not be required to determine Net Cash again even though the Closing Date may occur later than the Anticipated Closing Date, except that either Party may request a redetermination of Net Cash if the Closing Date is more than five (5) Business Days after the Anticipated Closing Date.

1.7 Closing of CombiMatrixs Transfer Books. At the Effective Time: (a) all shares of CombiMatrix Capital Stock outstanding immediately prior to the Effective Time shall be treated in accordance with Section 1.5(a), and all holders of certificates representing shares of CombiMatrix Capital Stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of CombiMatrix; and (b) the stock transfer books of CombiMatrix shall be closed with respect to all shares of CombiMatrix Capital Stock outstanding immediately prior to the Effective Time. No further transfer of any such shares of CombiMatrix Capital Stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any shares of CombiMatrix Capital Stock immediately prior to the Effective Time (an “CombiMatrix Stock Certificate”) is presented to the Exchange Agent or to the Surviving Corporation, such CombiMatrix Stock Certificate shall be canceled and shall be exchanged as provided in Sections 1.5 or 1.8.

1.8 Surrender of Certificates.

(a) On or prior to the Closing Date, Invitae and CombiMatrix shall agree upon and select a reputable bank, transfer agent or trust company to act as exchange agent in the Merger (the “Exchange Agent”). At the Effective Time, Invitae shall deposit with the Exchange Agent: (i) the aggregate number of book-entry shares representing the Merger Consideration issuable to CombiMatrix stockholders pursuant to Section 1.5(a) and (ii) cash sufficient to make payments in lieu of fractional shares in accordance with Section 1.5(c). The book-entry shares of Invitae Common Stock and cash amounts so deposited with the Exchange Agent, together with any dividends or distributions received by the Exchange Agent with respect to such shares, are referred to collectively as the “Exchange Fund.”

(b) At or before the Effective Time, CombiMatrix will deliver to Invitae a true, complete and accurate listing of all record holders of CombiMatrix Capital Stock at the Effective Time, including the number and class of shares of CombiMatrix Capital Stock held by such record holder, and the number of shares of Invitae

 

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Common Stock such record holder is entitled to receive pursuant to Section 1.5. Promptly after the Effective Time, the Parties shall cause the Exchange Agent to mail to the Persons who were record holders of CombiMatrix Stock Certificates immediately prior to the Effective Time: (i) a letter of transmittal in customary form and containing such provisions as Invitae may reasonably specify (including a provision confirming that delivery of CombiMatrix Stock Certificates shall be effected, and risk of loss and title to CombiMatrix Stock Certificates shall pass, only upon delivery of such CombiMatrix Stock Certificates to the Exchange Agent); and (ii) instructions for effecting the surrender of CombiMatrix Stock Certificates in exchange for certificates representing Invitae Common Stock. Upon surrender of a CombiMatrix Stock Certificate to the Exchange Agent for exchange, together with a duly executed letter of transmittal and such other documents as may be reasonably required by the Exchange Agent or Invitae: (A) the holder of such CombiMatrix Stock Certificate shall be entitled to receive in exchange therefor a certificate representing the number of whole shares of Invitae Common Stock that such holder has the right to receive pursuant to the provisions of Section 1.5(a) (and cash in lieu of any fractional share of Invitae Common Stock pursuant to the provisions of Section 1.5(c)); and (B) the CombiMatrix Stock Certificate so surrendered shall be canceled. Until surrendered as contemplated by this Section 1.8(b), each CombiMatrix Stock Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive shares of Invitae Common Stock (and cash in lieu of any fractional share of Invitae Common Stock). If any CombiMatrix Stock Certificate shall have been lost, stolen or destroyed, Invitae may, in its discretion and as a condition precedent to the delivery of any shares of Invitae Common Stock, require the owner of such lost, stolen or destroyed CombiMatrix Stock Certificate to provide an applicable affidavit with respect to such CombiMatrix Stock Certificate and post a bond indemnifying Invitae against any claim suffered by Invitae related to the lost, stolen or destroyed CombiMatrix Stock Certificate or any Invitae Common Stock issued in exchange therefor as Invitae may reasonably request.

(c) No dividends or other distributions declared or made with respect to Invitae Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered CombiMatrix Stock Certificate with respect to the shares of Invitae Common Stock that such holder has the right to receive in the Merger until such holder surrenders such CombiMatrix Stock Certificate or an affidavit of loss or destruction in lieu thereof in accordance with this Section 1.8 (at which time such holder shall be entitled, subject to the effect of applicable abandoned property, escheat or similar laws, to receive all such dividends and distributions, without interest).

(d) Any portion of the Exchange Fund that remains undistributed to holders of CombiMatrix Stock Certificates as of the date 180 days after the Closing Date shall be delivered to Invitae upon demand, and any holders of CombiMatrix Stock Certificates who have not theretofore surrendered their CombiMatrix Stock Certificates in accordance with this Section 1.8 shall thereafter look only to Invitae for satisfaction of their claims for Invitae Common Stock, cash in lieu of fractional shares of Invitae Common Stock and any dividends or distributions with respect to shares of Invitae Common Stock.

(e) Each of the Exchange Agent, Invitae and the Surviving Corporation shall be entitled to deduct and withhold from any consideration deliverable pursuant to this Agreement such amounts as are required to be deducted or withheld from such consideration under the Code or under any other applicable Legal Requirement and shall be entitled to request any reasonably appropriate Tax forms, including Form W-9 (or the appropriate Form W-8, as applicable), from any recipient of payments hereunder. To the extent such amounts are so deducted or withheld, and remitted to the appropriate taxing authority, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

(f) No Party shall be liable to any holder of any CombiMatrix Stock Certificate or to any other Person with respect to any shares of Invitae Common Stock (or dividends or distributions with respect thereto) or for any cash amounts delivered to any public official pursuant to any applicable abandoned property law, escheat law or similar Legal Requirement.

1.9 Further Action. If, at any time after the Effective Time, any further action is determined by the Surviving Corporation to be necessary or desirable to carry out the purposes of this Agreement or to vest the Surviving Corporation with full right, title and possession of and to all rights and property of CombiMatrix, then

 

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the officers and directors of the Surviving Corporation shall be fully authorized, and shall use their commercially reasonable efforts (in the name of CombiMatrix, in the name of Merger Sub and otherwise) to take such action.

1.10 Tax Consequences. For federal income tax purposes, the Merger, together with the Warrant Exchange Offer, is intended to constitute a reorganization within the meaning of Section 368(a) of the Code and the Treasury Regulations promulgated thereunder. The Parties adopt this Agreement as a “plan of reorganization” within the meaning of Section 1.368-2(g) of the Treasury Regulations.

Section 2. REPRESENTATIONS AND WARRANTIES OF COMBIMATRIX

CombiMatrix represents and warrants to Invitae and Merger Sub as follows, except as set forth in the written disclosure schedule delivered by CombiMatrix to Invitae (the “CombiMatrix Disclosure Schedule”). The CombiMatrix Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Section 2. The disclosures in any section or subsection of the CombiMatrix Disclosure Schedule shall qualify other sections and subsections in this Section 2 to the extent it is reasonably clear from a reading of the disclosure that such disclosure is applicable to such other sections and subsections. The inclusion of any information in the CombiMatrix Disclosure Schedule (or any update thereto) shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms hereof to be disclosed, is material, has resulted in or would result in a CombiMatrix Material Adverse Effect, or is outside the Ordinary Course of Business. For the purposes of this Agreement, any references to documents delivered or made available to Invitae shall be deemed satisfied by Invitae’s access to the two data rooms created for the Contemplated Transactions.

2.1 Subsidiaries; Due Organization; Etc.

(a) CombiMatrix has no Subsidiaries, except for the Entities identified in Section 2.1(a) of the CombiMatrix Disclosure Schedule; and neither CombiMatrix nor any of the other Entities identified in Section 2.1(a) of the CombiMatrix Disclosure Schedule owns any capital stock of, or any equity interest of any nature in, any other Entity, other than the Entities identified in Section 2.1(a) of the CombiMatrix Disclosure Schedule. CombiMatrix has not agreed nor is obligated to make, nor is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. CombiMatrix has not, at any time, been a general partner of, or has otherwise been liable for any of the debts or other obligations of, any general partnership, limited partnership or other Entity.

(b) Each of CombiMatrix and the CombiMatrix Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all necessary power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its obligations under all Contracts by which it is bound.

(c) Each of CombiMatrix and the CombiMatrix Subsidiaries is qualified to do business as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the nature of its business requires such qualification other than in jurisdictions where the failure to be so qualified individually or in the aggregate would not be reasonably expected to have a CombiMatrix Material Adverse Effect.

2.2 Certificate of Incorporation; Bylaws; Charters and Codes of Conduct. CombiMatrix has delivered to Invitae accurate and complete copies of the certificate of incorporation, bylaws and other charter and organizational documents, including all currently effective amendments thereto, for CombiMatrix and each CombiMatrix Subsidiary. Section 2.2 of the CombiMatrix Disclosure Schedule lists, and CombiMatrix has delivered to Invitae, accurate and complete copies of: (a) the charters of all committees of CombiMatrix’s board of directors; and (b) any code of conduct or similar policy adopted by CombiMatrix or by the board of directors, or any committee of the board of directors, of CombiMatrix. Neither CombiMatrix nor any CombiMatrix Subsidiary has taken any action in breach or violation in any respect of any of the provisions of its certificate of

 

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incorporation, bylaws and other charter and organizational documents nor is in breach or violation in any respect of any of the provisions of its certificate of incorporation, bylaws and other charter and organizational documents.

2.3 Capitalization, Etc.

(a) The authorized capital stock of CombiMatrix as of the date of this Agreement consists of (i) 50,000,000 shares of CombiMatrix Common Stock, par value $0.001 per share, of which 2,918,726 shares have been issued and are outstanding as of the date of this Agreement, and (ii) 5,000,000 shares of convertible preferred stock, par value $0.001 per share (the “CombiMatrix Preferred Stock”), of which (A) 4,000 shares have been designated Series A Preferred Stock, none of which shares of Series A Preferred Stock are outstanding as of the date of this Agreement, (B) 2,000 shares have been designated Series B Preferred Stock, none of which shares of Series B Preferred Stock are outstanding as of the date of this Agreement, (C) 2,500 shares have been designated Series C Preferred Stock, none of which shares of Series C Preferred Stock are outstanding as of the date of this Agreement, (D) 12,000 shares have been designated Series D Preferred Stock, none of which shares of Series D Preferred Stock are outstanding as of the date of this Agreement, (E) 2,202 shares have been designated Series E Preferred Stock, none of which shares of Series E Preferred Stock are outstanding as of the date of this Agreement, and (F) 8,000 shares have been designated Series F Preferred Stock (the “CombiMatrix Series F Preferred Stock”), 92 shares of which are issued and outstanding as of the date of this Agreement. Each share of CombiMatrix Series F Preferred Stock is convertible into the number of shares of CombiMatrix Common Stock equal to 1,000 divided by the conversion price of $3.87. CombiMatrix does not hold any shares of its capital stock in its treasury. All of the outstanding shares of CombiMatrix Common Stock and CombiMatrix Preferred Stock have been duly authorized and validly issued, and are fully paid and nonassessable. As of the date of this Agreement, there are outstanding (i) CombiMatrix Series A Warrants to purchase an aggregate of 11,252 shares of CombiMatrix Common Stock at an exercise price of $29.55 per share, (ii) CombiMatrix Series A Warrants to purchase an aggregate of 1,690 shares of CombiMatrix Common Stock at an exercise price of $30.90 per share, (iii) CombiMatrix Series B Warrants to purchase an aggregate of 18,334 shares of CombiMatrix Common Stock at an exercise price of $29.55 per share, (iv) CombiMatrix Series C Warrants to purchase an aggregate of 65,576 shares of CombiMatrix Common Stock at an exercise price of $29.55 per share, (v) CombiMatrix Series D Warrants to purchase an aggregate of 388,365 shares of CombiMatrix Common Stock at an exercise price of $46.80 per share, (vi) CombiMatrix Series E Warrants to purchase an aggregate of 46,676 shares of CombiMatrix Common Stock at an exercise price of $16.50 per share, (vii) CombiMatrix PIPE Warrants to purchase an aggregate of 100,847 shares of CombiMatrix Common Stock at an exercise price of $16.50 per share, (viii) CombiMatrix PIPE Warrants to purchase an aggregate of 1,831 shares of CombiMatrix Common Stock at an exercise price of $32.51 per share, and (ix) CombiMatrix Series F Warrants to purchase an aggregate of 2,067,183 shares of CombiMatrix Common Stock at an exercise price of $5.17 per share (the “CombiMatrix Series F Warrants” and, collectively with the warrants referred to in the foregoing clauses (i) through (viii), the “CombiMatrix Warrants”). Section 2.3(a) of the CombiMatrix Disclosure Schedule lists, as of the date of this Agreement, (i) each record holder of issued and outstanding CombiMatrix Common Stock and the number of shares held, (ii) each record holder of issued and outstanding CombiMatrix Series F Preferred Stock and the number of shares held and (iii) (A) each record holder of issued and outstanding CombiMatrix Warrants, (B) the number of shares of CombiMatrix Common Stock subject to each such CombiMatrix Warrant, (C) the series of each such CombiMatrix Warrant, (D) the exercise price of each such CombiMatrix Warrant, and (E) the expiration date of each such CombiMatrix Warrant.

(b) Except as set forth in Section 2.3(b) of the CombiMatrix Disclosure Schedule, (i) none of the outstanding shares of CombiMatrix Common Stock or CombiMatrix Preferred Stock is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right, (ii) none of the outstanding shares of CombiMatrix Common Stock or CombiMatrix Preferred Stock is subject to any right of first refusal in favor of CombiMatrix, (iii) there are no outstanding bonds, debentures, notes or other indebtedness of CombiMatrix having a right to vote on any matters on which the CombiMatrix stockholders have a right to vote, and (iv) there is no CombiMatrix Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to),

 

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any shares of CombiMatrix Common Stock or CombiMatrix Preferred Stock. Except as set forth in Section 2.3(b) of the CombiMatrix Disclosure Schedule, CombiMatrix is not under any obligation, nor is it bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding shares of CombiMatrix Common Stock, CombiMatrix Preferred Stock, CombiMatrix Warrants or other securities. Section 2.3(b) of the CombiMatrix Disclosure Schedule accurately and completely lists all repurchase rights held by CombiMatrix and specifies (i) each holder of CombiMatrix Common Stock (including shares issued pursuant to the exercise of stock options), CombiMatrix Preferred Stock or CombiMatrix Warrant subject to such repurchase right, (ii) the original date of purchase of such CombiMatrix Common Stock, CombiMatrix Preferred Stock or CombiMatrix Warrant, (iii) the number of shares of CombiMatrix Common Stock or CombiMatrix Preferred Stock or shares underlying CombiMatrix Warrants subject to such repurchase rights, (iv) the purchase price paid by such holder, (v) any vesting schedule under which such repurchase rights lapse, and (vi) whether, to the Knowledge of CombiMatrix, the holder of such CombiMatrix Common Stock or CombiMatrix Preferred Stock subject to such repurchase right filed an election under Section 83(b) of the Code with respect to such CombiMatrix Common Stock or CombiMatrix Preferred Stock within thirty (30) days of purchase.

(c) Except for the CombiMatrix 2006 Stock Incentive Plan (the “2006 Plan”), and except as set forth in Section 2.3(c) of the CombiMatrix Disclosure Schedule, CombiMatrix does not have any stock option plan or any other plan, program, agreement or arrangement providing for any equity-based compensation for any Person. CombiMatrix has reserved 600,000 shares of CombiMatrix Common Stock for issuance under the 2006 Plan. Of such reserved shares of CombiMatrix Common Stock, (i) 823 shares have been previously issued pursuant to the exercise of options, (ii) 34,246 shares have been previously issued pursuant to the settlement of RSUs, (iii) 97 shares have been previously issued pursuant to the grants of restricted stock, (iv) options to purchase 64,310 shares have been granted and are currently outstanding, (v) 98,049 shares are issuable upon settlement of currently outstanding RSUs, and (vi) 402,475 shares of CombiMatrix Common Stock remain available for future award grants pursuant to the 2006 Plan. Section 2.3(c) of the CombiMatrix Disclosure Schedule sets forth the following information (A) with respect to each CombiMatrix Option outstanding as of the date of this Agreement: (1) the name of the optionee; (2) the number of shares of CombiMatrix Common Stock subject to such CombiMatrix Option as of the date of this Agreement; (3) the exercise price of such CombiMatrix Option; (4) the date on which such CombiMatrix Option was granted; (5) the vesting schedule applicable to such CombiMatrix Option, including the number of vested and unvested shares and whether by its terms the vesting of such CombiMatrix Option would be accelerated by the Contemplated Transactions; (6) the date on which such CombiMatrix Option expires; and (7) whether such CombiMatrix Option is an “incentive stock option” (as defined in the Code) or a non-qualified stock option; and (B) with respect to each CombiMatrix RSU outstanding as of the date of this Agreement: (1) the name of the holder; (2) the number of shares of CombiMatrix Common Stock issuable upon settlement of the RSU as of the date of this Agreement; (3) the date on which such CombiMatrix RSU was granted; (4) the vesting schedule applicable to such CombiMatrix RSU, including the extent vested to date and whether by its terms the vesting of such CombiMatrix RSU would be accelerated by the Contemplated Transactions; and (5) the date on which such CombiMatrix RSU expires. CombiMatrix has made available to Invitae an accurate and complete copy of the 2006 Plan and forms of all stock option agreements and RSU agreements approved for use thereunder. Except as set forth in Section 2.3(c) of the CombiMatrix Disclosure Schedule or as contemplated by Section 1.5 of this Agreement, no vesting of CombiMatrix Options or CombiMatrix RSUs will accelerate in connection with the execution of this Agreement or the closing of the Contemplated Transactions.

(d) Except for the outstanding CombiMatrix Options and CombiMatrix RSUs identified in Section 2.3(c) of the CombiMatrix Disclosure Schedule and for the outstanding CombiMatrix Warrants and CombiMatrix Series F Preferred Stock identified in Section 2.3(a) of the CombiMatrix Disclosure Schedule, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of CombiMatrix or any of its Subsidiaries; (ii) outstanding security, instrument or obligation that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of CombiMatrix or any of its Subsidiaries; (iii) stockholder rights plan (or similar plan commonly referred to as a “poison pill”) or Contract under which CombiMatrix or any of its

 

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Subsidiaries is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; or (iv) condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of CombiMatrix or any of its Subsidiaries. There are no outstanding or authorized stock appreciation rights, phantom stock, profit participation or other similar rights with respect to CombiMatrix or any of its Subsidiaries.

(e) All outstanding shares of CombiMatrix Common Stock and CombiMatrix Preferred Stock, as well as all CombiMatrix Options, CombiMatrix RSUs, CombiMatrix Warrants and all other securities of CombiMatrix, have been issued and granted in material compliance with (i) all applicable securities laws and other applicable Legal Requirements and (ii) all requirements set forth in applicable Contracts. CombiMatrix has delivered to Invitae accurate and complete copies of all outstanding CombiMatrix RSUs and CombiMatrix Warrants (other than the CombiMatrix Series F Warrants). CombiMatrix has delivered to Invitae an accurate and complete copy of the form of CombiMatrix Series F Warrant, and there are no deviations between the terms of any outstanding CombiMatrix Series F Warrants and the terms reflected in such form.

(f) With respect to the Merger as a Fundamental Transaction (as defined in CombiMatrix’s Certificate of Designation of Preferences, Rights and Limitations of Series F Convertible Preferred Stock as in effect on the date of this Agreement—the “CombiMatrix Series F Preferences Certificate”): (i) the Fundamental Transaction Amount (as defined in the CombiMatrix Series F Preferences Certificate) is a number of shares of Invitae Common Stock equal to the product of (x) the Exchange Ratio multiplied by (y) the number of shares of CombiMatrix Common Stock underlying a share of outstanding CombiMatrix Series F Preferred Stock on the date immediately prior to the Effective Time; and (ii) such foregoing product is greater than 130% of the Stated Value (as defined in the CombiMatrix Series F Preferences Certificate) of a share of outstanding CombiMatrix Series F Preferred Stock on the date of the Effective Time.

2.4 SEC Filings; Financial Statements.

(a) CombiMatrix has filed all reports required to be filed by it with the SEC since January 1, 2014, and CombiMatrix has made available to Invitae (including through the SEC’s EDGAR database) true, correct and complete copies of all such reports (collectively, the “CombiMatrix SEC Documents”). As of their respective dates, each of the CombiMatrix SEC Documents complied in all material respects with the applicable requirements of the Exchange Act, and none of the CombiMatrix SEC Documents, as of their respective dates, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. All statements, reports, schedules, forms and other documents required to have been filed by CombiMatrix or its officers with the SEC have been so filed on a timely basis. The certifications and statements required by (A) Rule 13a-14 under the Exchange Act and (B) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act) relating to the CombiMatrix SEC Documents (collectively, the CombiMatrix Certifications”) are accurate and complete and comply as to form and content with all applicable Legal Requirements. As used in this Section 2, the term “file” and variations thereof shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

(b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the CombiMatrix SEC Documents was prepared in accordance with United States generally accepted accounting principles (“GAAP”) throughout the periods indicated (except as may be indicated in the notes thereto and except that financial statements included with interim reports do not contain all notes to such financial statements) and each fairly presented in all material respects the consolidated financial position, results of operations and changes in stockholders’ equity and cash flows of Invitae and its consolidated subsidiaries as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal year-end adjustments which are not expected, individually or in the aggregate, to be material). Other than as expressly disclosed in the CombiMatrix SEC Documents filed prior to the date of this Agreement, there has been no material change in CombiMatrix’s accounting methods or principles prior to the

 

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date of this Agreement that would be required to be disclosed in CombiMatrix’s financial statements in accordance with GAAP. The books of account and other financial records of CombiMatrix are true and complete in all material respects.

(c) CombiMatrix’s auditor has at all times since the date of enactment of the Sarbanes-Oxley Act been: (i) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act); (ii) to the Knowledge of CombiMatrix, “independent” with respect to CombiMatrix within the meaning of Regulation S-X under the Exchange Act; and (iii) to the Knowledge of CombiMatrix, in compliance with subsections (g) through (l) of Section 10A of the Exchange Act and the rules and regulations promulgated by the SEC and the Public Company Accounting Oversight Board thereunder.

(d) Except as set forth in Section 2.4(d) of the CombiMatrix Disclosure Schedule, from January 1, 2014 through the date of this Agreement, CombiMatrix has not received any comment letter from the SEC or the staff thereof or any correspondence from NASDAQ or the staff thereof relating to the delisting or maintenance of listing of the CombiMatrix Common Stock on The NASDAQ Capital Market. CombiMatrix has not disclosed any unresolved comments in its SEC Documents.

(e) Since January 1, 2014, there have been no formal internal investigations regarding financial reporting or accounting policies and practices discussed with, reviewed by or initiated at the direction of the chief executive officer or chief financial officer of CombiMatrix, the CombiMatrix Board of Directors or any committee thereof, other than ordinary course audits or reviews of accounting policies and practices or internal controls required by the Sarbanes-Oxley Act.

(f) CombiMatrix is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act and the applicable listing and governance rules and regulations of The NASDAQ Capital Market.

(g) CombiMatrix maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that is sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including policies and procedures sufficient to provide reasonable assurance (i) that CombiMatrix maintains records that in reasonable detail accurately and fairly reflect CombiMatrix’s transactions and dispositions of assets, (ii) that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, (iii) that receipts and expenditures are made only in accordance with authorizations of management and the CombiMatrix Board of Directors, and (iv) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of CombiMatrix’s assets that could have a material effect on CombiMatrix’s financial statements. CombiMatrix has evaluated the effectiveness of CombiMatrix’s internal control over financial reporting and, to the extent required by applicable Legal Requirements, presented in any applicable CombiMatrix SEC Document that is a report on Form 10-K or Form 10-Q (or any amendment thereto) its conclusions about the effectiveness of the internal control over financial reporting as of the end of the period covered by such report or amendment based on such evaluation. CombiMatrix has disclosed to CombiMatrix’s auditors and the Audit Committee of the CombiMatrix Board of Directors (and made available to Invitae a summary of the significant aspects of such disclosure) (A) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to adversely affect CombiMatrix’s ability to record, process, summarize and report financial information and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in CombiMatrix’s internal control over financial reporting. Except as disclosed in the CombiMatrix SEC Documents filed prior to the date of this Agreement, CombiMatrix has not identified any material weaknesses in the design or operation of CombiMatrix’s internal control over financial reporting. Since December 31, 2014, there have been no material changes in CombiMatrix’s internal control over financial reporting.

(h) CombiMatrix’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by CombiMatrix in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the

 

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SEC, and that all such information is accumulated and communicated to CombiMatrix’s management as appropriate to allow timely decisions regarding required disclosure and to make the CombiMatrix Certifications.

2.5 Absence of Changes. Except as set forth in Section 2.5 of the CombiMatrix Disclosure Schedule, between January 1, 2017 and the date of this Agreement and except as otherwise expressly contemplated by this Agreement:

(a) There has not been any CombiMatrix Material Adverse Effect or an event or development that would, individually or in the aggregate, reasonably be expected to have a CombiMatrix Material Adverse Effect;

(b) There has not been any material loss, damage or destruction to, or any material interruption in the use of, any of the assets or business of CombiMatrix or any CombiMatrix Subsidiary (whether or not covered by insurance);

(c) CombiMatrix has not: (i) declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock; or (ii) repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities except for the repurchase or reacquisition of shares pursuant to CombiMatrix rights arising upon an individual’s termination as an employee, director or consultant;

(d) CombiMatrix has not sold, issued or granted, or authorized the issuance of: (i) any capital stock or other security (except for CombiMatrix Common Stock issued upon the valid exercise of outstanding CombiMatrix Options or CombiMatrix Warrants or upon the settlement of outstanding CombiMatrix RSUs); (ii) any option, warrant or right to acquire any capital stock or any other security (except for the CombiMatrix Options and CombiMatrix RSUs identified in Section 2.3(c) of the CombiMatrix Disclosure Schedule); or (iii) any instrument convertible into or exchangeable for any capital stock or other security (except for the CombiMatrix Options and CombiMatrix RSUs identified in Section 2.3(c) of the CombiMatrix Disclosure Schedule);

(e) There has been no amendment to the certificate of incorporation, bylaws or other charter or organizational documents of CombiMatrix or any CombiMatrix Subsidiary, and neither CombiMatrix nor any CombiMatrix Subsidiary has effected or been a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

(f) CombiMatrix has not amended or waived any of its rights under, or exercised its discretion to permit the acceleration of vesting under any provision of: (i) the 2006 Plan; (ii) any CombiMatrix Option, CombiMatrix RSU or any Contract evidencing or relating to any CombiMatrix Option or CombiMatrix RSU; (iii) any restricted stock purchase agreement; or (iv) any other Contract evidencing or relating to any equity award (whether payable in cash or stock);

(g) Neither CombiMatrix nor any CombiMatrix Subsidiary has formed any Subsidiary or acquired any equity interest or other interest in any other Entity;

(h) Neither CombiMatrix nor any CombiMatrix Subsidiary has: (i) lent money to any Person; (ii) incurred or guaranteed any indebtedness; (iii) issued or sold any debt securities or options, warrants, calls or other rights to acquire any debt securities; (iv) guaranteed any debt securities of others; or (v) made any capital expenditure or commitment in excess of $50,000;

(i) Neither CombiMatrix nor any CombiMatrix Subsidiary has changed any of its accounting methods, principles or practices;

(j) Neither CombiMatrix nor any CombiMatrix Subsidiary has made, changed or revoked any material Tax election, filed any material amendment to any Tax Return, adopted or changed any accounting method in respect of Taxes, changed any annual Tax accounting period, entered into any Tax allocation agreement, Tax sharing agreement or Tax indemnity agreement, other than commercial contracts entered into in the Ordinary Course of Business with vendors, customers or landlords, entered into any closing agreement with respect to any Tax, settled or compromised any claim, notice, audit report or assessment in respect of material Taxes, applied for or entered into any ruling from any Tax authority with respect to Taxes, surrendered any right to claim a

 

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material Tax refund, or consented to any extension or waiver of the statute of limitations period applicable to any material Tax claim or assessment;

(k) Neither CombiMatrix nor any CombiMatrix Subsidiary has commenced or settled any Legal Proceeding;

(l) Neither CombiMatrix nor any CombiMatrix Subsidiary has entered into any material transaction outside the Ordinary Course of Business;

(m) Neither CombiMatrix nor any CombiMatrix Subsidiary has purchased, leased, licensed or otherwise acquired any material assets, properties or rights nor sold, leased, licensed or otherwise disposed of any of its material assets, properties or rights, nor has any Encumbrance been granted with respect to such assets, properties or rights, except for Encumbrances of immaterial assets in the Ordinary Course of Business consistent with past practices;

(n) There has been no entry into, amendment or termination of any CombiMatrix Material Contract;

(o) There has been no (i) material change in pricing or royalties or other payments set or charged by CombiMatrix or any CombiMatrix Subsidiary to its customers or licensees, (ii) agreement by CombiMatrix or any CombiMatrix Subsidiary to change pricing or royalties or other payments set or charged by persons who have licensed Intellectual Property to CombiMatrix or any CombiMatrix Subsidiary, or (iii) material change in pricing or royalties or other payments set or charged by vendors to CombiMatrix or any CombiMatrix Subsidiary or persons who have licensed Intellectual Property to CombiMatrix or any CombiMatrix Subsidiary; and

(p) Neither CombiMatrix nor any CombiMatrix Subsidiary has negotiated, agreed or committed to take any of the actions referred to in clauses “(c)” through “(o)” above (other than negotiations between the Parties to enter into this Agreement).

2.6 Title to Assets. Each of CombiMatrix and the CombiMatrix Subsidiaries owns, and has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all tangible properties or assets and equipment used or held for use in its business or operations or purported to be owned by it, including all assets reflected in the books and records of CombiMatrix or any CombiMatrix Subsidiary as being owned by CombiMatrix or such CombiMatrix Subsidiary. All of said assets are owned by CombiMatrix or a CombiMatrix Subsidiary free and clear of any Encumbrances, except for: (i) any lien for current Taxes not yet due and payable or for Taxes that are being contested in good faith and for which adequate reserves have been made on the CombiMatrix Unaudited Interim Balance Sheet; (ii) minor liens that have arisen in the Ordinary Course of Business and that do not (in any case or in the aggregate) materially detract from the value of the assets subject thereto or materially impair the operations of CombiMatrix or any CombiMatrix Subsidiary; and (iii) liens listed in Section 2.6 of the CombiMatrix Disclosure Schedule.

2.7 Real Property; Leaseholds. Neither CombiMatrix nor any CombiMatrix Subsidiary owns any real property or any interest in real property, except for the leaseholds created under the real property leases identified in Section 2.7 of the CombiMatrix Disclosure Schedule which are in full force and effect and with no existing default thereunder.

2.8 Intellectual Property.

(a) Except as identified in Section 2.8(a) of the CombiMatrix Disclosure Schedule, CombiMatrix, directly or through a CombiMatrix Subsidiary, owns, or has the right to use, and has the right to bring actions for the infringement of, all CombiMatrix IP Rights.

(b) Section 2.8(b) of the CombiMatrix Disclosure Schedule is an accurate, true and complete listing of all CombiMatrix Registered IP.

(c) Section 2.8(c) of the CombiMatrix Disclosure Schedule accurately identifies (i) all CombiMatrix IP Rights licensed to CombiMatrix or any CombiMatrix Subsidiary (other than (A) any non-customized software

 

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that (1) is so licensed solely in executable or object code form pursuant to a non-exclusive, internal use software license and other Intellectual Property associated with such software and (2) is not incorporated into, or material to the development, manufacturing, or distribution of, any of CombiMatrix’s or any CombiMatrix Subsidiary’s products, technology or services and (B) any Intellectual Property licensed ancillary to the purchase or use of equipment, reagents or other materials); (ii) the corresponding CombiMatrix Contracts pursuant to which such CombiMatrix IP Rights are licensed to CombiMatrix or any CombiMatrix Subsidiary; and (iii) whether the license or licenses granted to CombiMatrix or any CombiMatrix Subsidiary are exclusive or non-exclusive.

(d) Section 2.8(d) of the CombiMatrix Disclosure Schedule accurately identifies each CombiMatrix Contract pursuant to which any Person has been granted any license under, or otherwise has received or acquired any right (whether or not currently exercisable) or interest in, any CombiMatrix IP Rights. Except as identified in Section 2.8(d) of the CombiMatrix Disclosure Schedule, CombiMatrix is not bound by, and no CombiMatrix IP Rights are subject to, any Contract containing any covenant or other provision that in any way limits or restricts the ability of CombiMatrix or any CombiMatrix Subsidiary to use, exploit, assert or enforce any CombiMatrix IP Rights anywhere in the world, in each case as would limit the business of CombiMatrix.

(e) Except as identified in Section 2.8(e) of the CombiMatrix Disclosure Schedule, to the Knowledge of CombiMatrix, CombiMatrix or one of its Subsidiaries exclusively owns all right, title, and interest to and in CombiMatrix IP Rights (other than CombiMatrix IP Rights (i) licensed to CombiMatrix or one of its Subsidiaries, as identified in Section 2.8(c) of the CombiMatrix Disclosure Schedule, (ii) any non-customized software that (A) is so licensed solely in executable or object code form pursuant to a non-exclusive, internal use software license and other Intellectual Property associated with such software and (B) is not incorporated into, or material to the development, manufacturing, or distribution of, any of CombiMatrix’s or any CombiMatrix Subsidiary’s products, technology or services, and (iii) any Intellectual Property licensed ancillary to the purchase or use of equipment, reagents or other materials) free and clear of any Encumbrances (other than those Encumbrances granted pursuant to the CombiMatrix Contracts listed in Section 2.8(d) of the CombiMatrix Disclosure Schedule). Without limiting the generality of the foregoing:

(i) All documents and instruments necessary to register or apply for or renew registration of all CombiMatrix Registered IP have been validly executed, delivered and filed in a timely manner with the appropriate Governmental Body.

(ii) Each Person who is or was an employee or contractor of CombiMatrix or any CombiMatrix Subsidiary and who is or was involved in the creation or development of any CombiMatrix IP Rights has signed an agreement (A) containing an assignment of such Intellectual Property to CombiMatrix or such Subsidiary, (B) containing confidentiality provisions protecting trade secrets and confidential information of CombiMatrix and its Subsidiaries and, (C) to the Knowledge of CombiMatrix, which is valid and enforceable. No current or former stockholder, officer, director, or employee of CombiMatrix or any of its Subsidiaries has any claim, right (whether or not currently exercisable), or interest to or in any CombiMatrix IP Rights. To the Knowledge of CombiMatrix and its Subsidiaries, no employee of CombiMatrix or any or any CombiMatrix Subsidiary is (a) bound by or otherwise subject to any Contract restricting him or her from performing his or her duties for CombiMatrix or such Subsidiary or (b) in breach of any Contract with any former employer or other Person concerning CombiMatrix IP Rights or confidentiality provisions protecting trade secrets and confidential information comprising CombiMatrix IP Rights.

(iii) No funding, facilities or personnel of any Governmental Body were used, directly or indirectly, to develop or create, in whole or in part, any CombiMatrix IP Rights in which CombiMatrix or any of its Subsidiaries has an ownership interest.

(iv) CombiMatrix and each of its Subsidiaries has taken reasonable steps to maintain the confidentiality of and otherwise protect and enforce its rights in all proprietary information that CombiMatrix or such Subsidiary holds as a trade secret.

(v) Neither CombiMatrix nor any of its Subsidiaries has assigned or otherwise transferred ownership of, or agreed to assign or otherwise transfer ownership of, any CombiMatrix IP Rights to any other Person.

 

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(vi) Except as identified in Section 2.8(e)(vi) of the CombiMatrix Disclosure Schedule, to the Knowledge of CombiMatrix and its Subsidiaries, the CombiMatrix IP Rights constitute all Intellectual Property necessary for CombiMatrix and its Subsidiaries to conduct its business as currently conducted and planned to be conducted.

(f) CombiMatrix has delivered, or made available to Invitae, a complete and accurate copy, in all material respects, of all CombiMatrix IP Rights Agreements. Neither CombiMatrix nor any CombiMatrix Subsidiary is a party to any Contract (A) pursuant to which the execution, delivery and performance of this Agreement and the consummation of the Contemplated Transactions will constitute a breach, or (B) as a result of such execution, delivery and performance of this Agreement and the consummation of the Contemplated Transactions will cause the forfeiture or termination of or Encumbrance upon, or the grant of any license or other right to, or give rise to a right of forfeiture or termination of or Encumbrance upon, any CombiMatrix IP Rights or impair the right of CombiMatrix or the Surviving Corporation and its Subsidiaries to use, sell or license any CombiMatrix IP Rights or portion thereof. With respect to each of the CombiMatrix IP Rights Agreements: (i) each such agreement is valid and binding on CombiMatrix or its Subsidiaries, as applicable, and to the Knowledge of CombiMatrix the applicable third party(ies), and in full force and effect; (ii) CombiMatrix has not received any written notice of termination or cancellation under such agreement, or received any written notice of breach or default under such agreement, which breach has not been cured or waived; and (iii) neither CombiMatrix nor its Su