Item 1.01. Entry into a Material Definitive Agreement.
On August 6, 2021, CM Life
Sciences III Inc. (“CMLSIII” or the “Company”) announced that it executed an Agreement
and Plan of Merger (the “Merger Agreement”) with EQRx, Inc., a Delaware corporation (“EQRx”),
and the other parties thereto (the transactions contemplated by the Merger Agreement, including the Merger (as defined below), the “Business
Combination”). This Current Report on Form 8-K provides a summary of the Merger Agreement and the other agreements entered
into and contemplated in connection with the Business Combination. The descriptions of these agreements do not purport to be complete
and are qualified in their entirety by the terms and conditions of such agreements, copies of which are attached as Exhibits 2.1,
10.1, 10.2, 10.3, 10.4, 10.5,10.6 and 10.7 hereto.
Merger Agreement
On August 5, 2021, CMLSIII
entered into the Merger Agreement with EQRx and Clover III Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary
of the Company (“Merger Sub”).
Business Combination
Pursuant to the terms of the
Merger Agreement, CMLSIII will acquire EQRx through the merger of Merger Sub with and into EQRx, with EQRx surviving as a wholly-owned
subsidiary of CMLSIII (the “Merger”). In connection with the Merger, CMLSIII will be renamed.
The Business Combination was
approved by the boards of directors of each of CMLSIII and EQRx.
The Business Combination is
expected to close in the fourth quarter of 2021, following the receipt of the required approval by EQRx’s and CMLSIII’s stockholders
and the satisfaction of certain other customary closing conditions.
Business Combination Consideration
At the effective time of the
Merger (the “Effective Time”), each share of EQRx’s common stock and preferred stock (collectively, “EQRx
Capital Sock“) issued and outstanding immediately prior to the Effective Time will be cancelled and automatically deemed
for all purposes to represent the right to receive a portion of the total consideration, with each EQRx’s stockholder (as applicable)
being entitled to receive a number of shares of Class A common stock, par value $0.0001 per share, of CMLSIII (the “Class
A Common Stock”) equal to: (x) such EQRx stockholder’s total shares of EQRx Capital Stock multiplied by (y)
the number equal to the final quotient of: (i) $3,650,000,000 divided by (ii) 10 divided by (iii) the Aggregate Company
Share Amount (as defined in the Merger Agreement).
In addition, at the Effective
Time, each outstanding option to purchase EQRx Capital Stock will be rolled over into options to purchase Class A Common Stock, as further
set forth in and in accordance with the terms of the Merger Agreement; and each outstanding EQRx restricted stock award will be cancelled
and converted into restricted stock awards of Class A Common Stock calculated in accordance with the terms of the Merger Agreement.
Earnout
In addition to the issuance
of Class A Common Stock, the rollover of other EQRx equity awards and the conversion of EQRx restricted stock awards described above as
of the Effective Time, (A) upon the occurrence of Triggering Event I, CMLSIII will issue or cause to be issued to each EQRx stockholder
and certain employees or individual service providers of EQRx (the “Earn-Out Service Providers”), in accordance
with the terms of their respective award agreements, 35,000,000 shares of Class A Common Stock, upon the terms and subject to the conditions
set forth in the Merger Agreement and the other Transaction Agreements; and (B) upon the occurrence of Triggering Event II, CMLSIII will
issue or cause to be issued to each EQRx stockholder and Earn-Out Service Provider an additional (one-time issuance) of 15,000,000 shares
of Class A Common Stock, upon the terms and subject to the conditions set out in the Merger Agreement. Triggering Event I and Triggering
Event II may be achieved at the same time or over the same overlapping trading days.
“Triggering Event
I” shall occur if at any time during the period beginning on the 12-month anniversary of the Closing and ending on the date
that is the 36-month anniversary of the Closing (inclusive of the first and last day of such period, the “Earn-Out Period”),
the closing price of the Class A Common Stock for a period of at least 20 days out of 30 consecutive trading days ending on the trading
day immediately prior to the date of determination (the “Common Share Price of CMLSIII’s Class A Stock”)
is greater than or equal to $12.50 per share.
“Triggering Event
II” shall occur if at any time within the Earn-Out Period, the Common Share Price of CMLSIII’s Class A Common
Stock is greater than $16.50 per share.
Governance
CMLSIII has agreed to
take all action within its power as may be necessary or appropriate such that, effective immediately after the closing of the
Business Combination, CMLSIII board of directors will consist of up to eleven directors, which will initially include: Alexis
Borisy, Krishna Yeshwant, Paul Berns, Jorge Conde, Eli Casdin, Sandra Horning, Clive Meanwell and Melanie Nallicheri, each as
designees of EQRx; Sam Merksamer and Amy Abernethy. The remaining director nominees, if any, will be mutually agreed upon
between CMLSIII’s chief executive officer and EQRx’s chief executive office. The board of directors of CMLSIII will have
a majority of “independent” directors for the purposes of Nasdaq rules, each of whom will serve in such capacity in
accordance with the terms of CMLSIII’s Organizational Documents following the Effective Time.
Representations and Warranties
The Merger Agreement contains
representations and warranties of the parties thereto that are customary for transactions of this type, with respect to, among other things,
(a) entity organization, formation and authority, (b) capital structure, (c) authorization to enter into the Merger Agreement, (d) legal
compliance and approvals, (e) financial statements and liabilities, (f) absence of changes, (g) litigation, (h) employee matters, (i)
real property, (j) taxes, (k) intellectual property and privacy, (l) material contracts, (m) transactions with affiliates, (n) government
grants and incentives and (o) in the case of CMLSIII only, (i) its public filings, (ii) the PIPE Investment (as defined below) and (iii)
its trust account.
Covenants
The Merger Agreement includes
customary covenants of the parties with respect to the operation of their respective businesses prior to the consummation of the Business
Combination and efforts to satisfy the conditions to consummation of the Business Combination.
The Merger Agreement also
contains additional covenants of the parties, including, among others, covenants providing for CMLSIII and EQRx to use their reasonable
best efforts to obtain all necessary regulatory approvals and covenants providing for CMLSIII, Merger Sub and EQRx to cooperate in the
preparation of the Proxy Statement/Prospectus (as such term is defined in the Merger Agreement) required to be filed in connection with
the Business Combination.
In addition, CMLSIII has agreed
to adopt an equity incentive plan and an employee stock purchase plan, as more fully described in the Merger Agreement.
Non-Solicitation Restrictions
Except as expressly permitted
by the Merger Agreement, from the date of the Merger Agreement to the Effective Time or, if earlier, the valid termination of the Merger
Agreement in accordance with its terms, CMLSIII, EQRx and Merger Sub have each agreed not to, directly or indirectly: (i) solicit, initiate,
enter into or continue discussions, negotiations or transactions with, or encourage or respond to any inquiries or proposals by, or provide
any information to, any Person (other than CMLSIII and its agents, representatives, advisors) concerning any merger, sale of ownership
interests and/or assets of the EQRx, recapitalization or similar transaction (each, a “Company Business Combination”);
(ii) enter into any agreement regarding, continue or otherwise participate in any discussions or negotiations regarding, or cooperate
in any way that would otherwise reasonably be expected to lead to a Company Business Combination; or (iii) commence, continue or renew
any due diligence investigation regarding a Company Business Combination.
CMLSIII Change in Recommendation
CMLSIII is required to include
in the Proxy Statement/Prospectus the recommendation of CMLSIII’s board of directors to CMLSIII’s stockholders that they approve
the transaction proposals (as such proposals are more fully set forth in the Merger Agreement, collectively, the “CMLSIII
Board Recommendation”). CMLSIII is permitted to change the CMLSIII Board Recommendation only as required by applicable legal
requirements.
Conditions to Closing
General Conditions
The consummation of the Merger
is conditioned upon, among other things, (a) receipt of CMLSIII’s stockholder approval, (b) CMLSIII having at least $5,000,001 of
net tangible assets as described under the terms of the Merger Agreement, (c) the expiration or termination of the waiting period under
the Hart-Scott-Rodino Act and (d) the absence of any governmental order, statute, rule or regulation enjoining or prohibiting the consummation
of the Business Combination.
EQRx’s Conditions
to Closing
The obligations of EQRx to
consummate the Merger also are conditioned upon, among other things, (a) customary closing conditions, including, without limitation,
CMLSIII’s delivery of certain agreements, (b) the aggregate cash proceeds from CMLSIII’s trust account, together with the
proceeds from the PIPE Investment (as defined below), equaling no less than $1,000,000,000 (after deducting any amounts paid to CMLSIII
stockholders that exercise their redemption rights in connection with the Business Combination, but prior to paying any unpaid transaction
expenses incurred or subject to reimbursement by CMLSIII or EQRx), and (c) approval by Nasdaq of CMLSIII’s listing
application in connection with the Business Combination.
CMLSIII Conditions to Closing
The obligations of CMLSIII
to consummate the Merger are also conditioned upon, among other things, customary closing conditions, including, without limitation, EQRx’s
delivery of certain agreements.
Termination
The Merger Agreement allows
the parties to terminate the Merger Agreement if certain customary conditions described in the Merger Agreement are not satisfied, including,
without limitation, each party’s right to terminate, subject to certain limited exceptions, if the Business Combination is not consummated
by March 31, 2022 (the “Outside Date”).
If the Merger Agreement is
validly terminated, none of the parties to the Merger Agreement will have any liability or any further obligation under the Merger Agreement
other than customary confidentiality obligations, except in the case of a willful and intentional breach of the Merger Agreement or intentional
fraud in the making of the representations and warranties in the Merger Agreement.
A copy of the Merger Agreement
is filed with this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference, and the foregoing description of
the Merger Agreement is qualified in its entirety by reference thereto. The Merger Agreement contains representations, warranties and
covenants that the respective parties made to each other as of the date of the Merger Agreement or other specific dates. The assertions
embodied in those representations, warranties and covenants were made for purposes of the contract among the respective parties and are
subject to important qualifications and limitations agreed to by the parties in connection with negotiating such agreement. The representations,
warranties and covenants in the Merger Agreement are also modified in important part by the underlying disclosure schedules which are
not filed publicly and which are subject to a contractual standard of materiality different from that generally applicable to stockholders
and were used for the purpose of allocating risk among the parties rather than establishing matters as facts. CMLSIII does not believe that
these schedules contain information that is material to an investment decision.
Certain Related Agreements
Amendment to Letter Agreement
On August 5, 2021, CMLSIII
entered into an amendment to the letter agreement, dated April 6, 2021 pursuant to which the Sponsor (as defined below) agreed to certain
additional transfer restrictions with respect to 50% of its founder shares (or any shares of Class A Common Stock issuable upon conversion
thereof).
The foregoing description
of the Amendment to the Letter Agreement and related Sponsor Founder Shares Lock-up is subject to and qualified in its entirety by reference
to the full text of the Amendment to Letter Agreement, a copy of which is attached as Exhibit 10.1 hereto, and the terms of which are
incorporated herein by reference.
Subscription Agreements and PIPE Investment
(Private Placement)
On August 5, 2021, concurrently
with the execution of the Merger Agreement, CMLSIII entered into subscription agreements (collectively, the “Subscription
Agreements”) with certain investors (collectively, the “PIPE Investors” which include certain
existing equityholders of EQRx), pursuant to, and on the terms and subject to the conditions of which, the PIPE Investors have collectively
subscribed for 120,000,000 shares of Class A Common Stock for an aggregate purchase price equal to $1.2 billion (the “PIPE
Investment”). The PIPE Investment will be consummated immediately prior to the closing of the Business Combination. The
Subscription Agreements provide for certain customary registration rights for the PIPE Investors. The Subscription Agreements will terminate
with no further force and effect upon the earliest to occur of: (a) such date and time as the Merger Agreement is terminated in accordance
with its terms; (b) the mutual written agreement of the parties to such Subscription Agreement; (c) if on the Closing Date, any of
the conditions to Closing set forth in the Subscription Agreement are not satisfied or waived, and, as a result thereof, the transactions
contemplated in the Subscription Agreement are not consummated at the Closing or (d) the Outside Date.
The foregoing description
of the Subscription Agreements and the PIPE Investment is subject to and qualified in its entirety by reference to the full text of the
form of Subscription Agreement, a copy of which is attached as Exhibit 10.2 hereto, and the terms of which are incorporated herein by
reference.
Stockholder Lock-Up Agreements
In connection with signing,
CMLSIII entered into Lock-Up Agreements (each, a “Lock Up Agreement”) with certain stockholders of EQRx, pursuant
to which such stockholders have agreed, respectively, to, among other things, customary lock-up restrictions following the closing of
the Business Combination.
The foregoing description
of the Lock-Up Agreements is subject to and qualified in its entirety by reference to the full text of the form of Lock-Up Agreements,
the form of which is attached as Exhibit 10.2 hereto, and the terms of which are incorporated herein by reference.
Stockholder Voting and Support Agreements
In connection with signing,
CMLSIII entered into Support Agreements (each, a “Stockholder Support Agreement”) with certain stockholders
of EQRx, pursuant to which such stockholders have agreed, respectively, to execute written consents with respect to their shares of EQRx
Capital Stock held of record or thereafter acquired in favor of the Merger and related matters, in each case, on the terms and subject
to the conditions set forth in the Stockholder Support Agreement.
The foregoing description
of the Stockholder Support Agreement is subject to and qualified in its entirety by reference to the full text of the form of Stockholder
Support Agreement, a copy of which is attached as Exhibit 10.3 hereto, and the terms of which are incorporated herein by reference.
Sponsor Support Agreement
On August 5, 2021, CMLSIII
entered into a Sponsor Support Agreement (the “Sponsor Support Agreement”) with CMLS Holdings III, LLC, a Delaware
limited liability company (“Sponsor”), and EQRx, whereby Sponsor has agreed to, among other things, (a) vote
at any meeting of the stockholders of CMLSIII all of its shares of capital stock of CMLSIII held of record or thereafter acquired in favor
of the Parent Stockholder Matters (as defined in the Merger Agreement), (b) be bound by certain other covenants and agreements related
to the Business Combination and (c) be bound by certain transfer restrictions with respect to such securities, prior to the closing of
the Business Combination, in each case, on the terms and subject to the conditions set forth in the Sponsor Support Agreement.
The foregoing description
of the Sponsor Support Agreement is subject to and qualified in its entirety by reference to the full text of the Sponsor Support Agreement,
a copy of which is attached as Exhibit 10.6 hereto, and the terms of which are incorporated herein by reference.
Sponsor Forfeiture Agreement
On August 5, 2021, the Sponsor
entered into a Sponsor Forfeiture Agreement (the “Forfeiture Agreement”) with EQRx and CMLSIII, whereby Sponsor
has agreed, subject to certain limitations and in accordance with the terms of the Forfeiture Agreement, to forfeit up to 50% of its shares
of class B common stock of CMLSIII, such actual amount tied to actual exercise of redemption rights of CMLSIII stockholders in connection
with the Business Combination, as more fully described in the Forfeiture Agreement.
The foregoing description
of the Forfeiture Agreement is subject to and qualified in its entirety by reference to the full text of the form of Forfeiture Agreement,
a copy of which is attached as Exhibit 10.6 hereto, and the terms of which are incorporated herein by reference.
Amended and Restated Registration Rights Agreement
At the closing of the Business
Combination, EQRx, the Sponsor and certain stockholders of EQRx will enter into an amended and restated registration rights agreement
(the “Registration Rights Agreement”) pursuant to which, among other things, the parties thereto will be granted
certain customary registration rights with respect to shares of Common Stock.
The foregoing description
of the Registration Rights Agreement is subject to and qualified in its entirety by reference to the full text of the form of Registration
Rights Agreement, a copy of which is included as Exhibit 10.7 hereto, and the terms of which are incorporated herein by reference.