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ITEM 1.02.
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TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT.
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As previously disclosed, on November 1, 2018, Pacific Biosciences of California, Inc. (the “Company”) entered into an Agreement and Plan of Merger
(as amended, the “Merger Agreement”) with Illumina, Inc. (“Illumina”) and FC Ops Corp., a wholly owned subsidiary of Illumina (“Merger Subsidiary”). On September 25, 2019, the Company, Illumina and Merger
Subsidiary entered into Amendment No. 1 to the Merger Agreement to, among other things, extend the End Time (as defined in the Merger Agreement) to December 31, 2019, subject to Illumina’s unilateral right to extend the End Time to March 31,
2020. On December 18, 2019, Illumina elected to extend the End Time.
On January 2, 2020, the Company, Illumina and Merger Subsidiary entered into an
agreement to terminate the Merger Agreement (such agreement, the “Termination Agreement”). Pursuant to the Termination Agreement, (1) the Merger Agreement was terminated; (2) no later than January 6, 2020, Illumina will make a cash payment
to the Company of $98 million (which amount constitutes the Reverse Termination Fee (as defined in the Merger Agreement)); and (3) Illumina will make, which it would have been obligated to make under the Merger Agreement, cash payments to the
Company of $6 million on or before each of January 2, 2020, and March 2, 2020, and a cash payment to the Company of $22 million on or before February 3, 2020 (the payments contemplated by this clause (3), the “Continuation Advances”).
However, pursuant to the Termination Agreement, in the event that, on prior to September 30, 2020, the Company enters into a definitive agreement providing
for, or consummates, a Change of Control Transaction (as defined in the Termination Agreement), then the Company will repay the Reverse Termination Fee (without interest) to Illumina in connection with the consummation of such Change of Control
Transaction. If such Change of Control Transaction is not consummated by the two-year anniversary of the execution of the definitive agreement for such Change of Control Transaction, then the Company will not be required to repay the Reverse
Termination Fee.
In addition, up to the full amount of the Continuation Advances actually paid to the Company are repayable without interest to Illumina
if, within two years of March 31, 2020, the Company enters into a Change of Control Transaction or raises at least $100 million in equity or debt financing in a single transaction (with the amount repayable dependent on the amount raised by the
Company).
The Company and Illumina mutually agreed to terminate the Merger Agreement as a result of the lengthy regulatory approval process both in the
United States and United Kingdom, and uncertainties regarding the ultimate outcome of the regulatory process.
The foregoing summary of the Termination
Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Termination Agreement, which is attached as Exhibit 10.1 and incorporated by reference.