| Item 1.01 | Entry into a Material Definitive Agreement. |
Agreement and Plan of Merger
On January 28, 2020, Conatus Pharmaceuticals Inc., a Delaware corporation (“Conatus”), Chinook Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Conatus (“Merger Sub”), and Histogen Inc., a Delaware corporation (“Histogen”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Histogen, with Histogen continuing as a wholly-owned subsidiary of Conatus and the surviving corporation of the merger (the “Merger”). The Merger is intended to qualify for federal income tax purposes as atax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Subject to the terms and conditions of the Merger Agreement, at the closing of the Merger, each outstanding share of Histogen capital stock outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than shares held by Conatus or Histogen or any of their respective subsidiaries) will be converted into the right to receive a number of shares of Conatus common stock (subject to the payment of cash in lieu of fractional shares and after giving effect to a reverse stock split of Conatus common stock) (the “Exchange Ratio”) such that, immediately following the effective time of the Merger, preexisting Conatus stockholders are expected to own approximately 26%, and preexisting Histogen stockholders are expected to own approximately 74%, of the outstanding capital stock of Conatus on a fully-diluted basis, after taking into account Histogen’s and Conatus’ outstanding convertible securities immediately prior to the Effective Time, irrespective of the exercise prices of outstanding options and warrants. The foregoing post-Merger ownership ratio is subject to adjustment based on each company’s net cash balance at the time of closing the Merger. In connection with the Merger, Conatus will assume all outstanding Histogen options and warrants, subject to appropriate adjustment of the number of underlying shares and exercise price based on the Exchange Ratio.
The Merger Agreement contains customary representations and warranties from the parties, and each party has agreed to customary covenants, including covenants relating to (1) the conduct of its business prior to the closing, (2) the use of commercially reasonable efforts to consummate the Merger and obtain all required consents and approvals, including regulatory, stock exchange and stockholder approvals, (3) the preparation and filing of a registration statement on FormS-4 to register the shares of Conatus common stock to be issued in the Merger (the “Merger Shares”) and a proxy statement/information statement for the special meeting or approval by written consent, as applicable, of stockholders of Conatus and Histogen, (4) holding a meeting or approval by written consent, as applicable, of stockholders of Conatus and Histogen to obtain their requisite approvals in connection with the Merger, including, among other approvals, the approval by Conatus stockholders of the issuance of the Merger Shares and amendments to the certificate of incorporation of Conatus to effect a reverse stock split and change the company name (the “Charter Amendments”), (5) subject to certain exceptions, the recommendation of the board of directors of each party to its stockholders that such approvals be given, and (6) subject to customary exceptions and limitations, prohibitions on Conatus or Histogen soliciting or facilitating certain competing acquisition proposals prior to the consummation of the Merger or the termination of the Merger Agreement.
Consummation of the Merger is subject to certain closing conditions, including, among other things, (a) approval by the stockholders of Conatus and Histogen of the Merger Agreement and Merger and by the stockholders of Conatus of the issuance of the Merger Shares and the Charter Amendments, (b) the continued listing of Conatus common stock on the Nasdaq Capital Market and the authorization for listing on the Nasdaq Capital Market of the Merger Shares, (c) effectiveness of a registration statement on FormS-4 registering the Merger Shares, and (d) compliance with caps on the potential and actual dissenting shares. In connection with the execution of the Merger Agreement, certain executive officers, directors and stockholders of Histogen (solely in their respective capacities as Histogen stockholders) have entered into a support agreement with Histogen and Conatus regarding all of their shares (now owned or hereafter acquired) of Histogen capital stock (the “Histogen Support Agreement”) and the executive officers and directors of Conatus (solely in their respective capacities as Conatus stockholders) have entered into support agreements with Histogen and Conatus regarding all of their shares of Conatus common stock (now owned or hereafter acquired) (the “Conatus Support Agreement,” and together with the Histogen Support Agreement, the “Support Agreements”). The Support Agreements include covenants with respect to the voting of shares of Histogen or Conatus capital stock, respectively, in favor of approving the transactions contemplated by the Merger Agreement and against any competing acquisition proposals and place certain restrictions on the transfer of the shares of Conatus and Histogen capital stock held by the respective signatories thereto prior to the consummation of the Merger or the termination of the Merger Agreement.
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