Treatment of Warrants, Stock Options and Restricted Stock Units

Warrants

Each issued, unexpired and unexercised warrant to purchase shares of Common Stock (“Warrant”) as of immediately prior to the Effective Time, except for BSV Warrants (as described below), will become exercisable for, in accordance with the terms thereof and in lieu of any other amount or consideration to which a Warrant holder might otherwise have been entitled to receive, an amount of cash equal to the product of (i) the aggregate number of shares of Common Stock for which such Warrant was exercisable immediately prior to the Effective Time multiplied by (ii) the excess, if any, of the Per Share Aggregate Consideration over the per share exercise price under such Warrant (any such excess qualifying such Warrant as “in the money”). Certain Warrants designated by WaferGen under the merger agreement as “BSV Warrants” will become exercisable for, in accordance with the terms thereof and in lieu of any other amount or consideration to which a BSV Warrant holder might otherwise have been entitled to receive, either (A) the product of (i) the aggregate number of shares of Common Stock for which such BSV Warrant was exercisable immediately prior to the Effective Time multiplied by (ii) the excess, if any, of the Per Share Aggregate Consideration over the per share exercise price under such BSV Warrant, or (B) at the holder’s option, exercisable at any time within thirty (30) days following the Effective Time, an amount in cash equal to such BSV Warrant’s Black Scholes Value (as defined in the warrant agreement relating to such BSV Warrant and calculated pursuant to the terms thereof).

Stock Options

Each outstanding and unexercised option to purchase shares of Common Stock granted under an equity compensation plan of WaferGen (“Stock Option”) that is held by an employee employed by WaferGen as of the Effective Time will be fully vested as of the Effective Time. Each such Stock Option having an exercise price less than the Per Share Aggregate Consideration (such Stock Option being “in the money”), will be converted automatically into the right to receive an amount in cash equal to the product of (i) the excess, if any, of the Per Share Aggregate Consideration over the applicable exercise price of such Stock Option and (ii) the number of shares of Common Stock subject to such Stock Option, less all applicable deductions and withholdings required by law to be withheld in respect of such payment. All other Stock Options will be canceled and terminated.

Restricted Stock Units

Each outstanding RSU of WaferGen held by an employee employed by WaferGen as of the Effective Time will be fully vested as of the Effective Time. Each such holder of RSUs will cease to have any rights with respect thereto, other than the right to receive an amount in cash equal to the product of (i) the Per Share Aggregate Consideration multiplied by (ii) the number of shares of Common Stock subject to such RSU (or settleable portion thereof) immediately prior to the Effective Time. If the immediate payment of the above amounts would cause an impermissible acceleration event under Section 409A of the Code, such amounts shall become vested at the Effective Time and will be paid at the earliest time such payment would not cause an impermissible acceleration event under Section 409A.

Purpose and Effects of the Merger

The purpose of the merger is to enable Takara Bio to acquire the assets and business of WaferGen and its subsidiaries. Upon completion of the merger, except as discussed below, the issued and outstanding shares of WaferGen capital stock will be automatically converted into the right to receive the merger consideration. See “—Merger Consideration” on page ~~26.~~27.

Background of the Merger

In November 2015, the board of directors of WaferGen began a process of considering strategic opportunities and alternatives for WaferGen. To initiate this process, the board of directors approved the formation of a strategic committee comprised of Dr. Carlson, Mr. McKenzie, Mr. Schueren and Dr. Trifunovich to evaluate potential

strategic opportunities. From November 2015 through February 2016, the strategic committee considered various strategic options that might be available to WaferGen, including potential acquisitions and asset dispositions, and initiated discussions with potential financial advisors to assist WaferGen in this process.

In February 2016, while not yet determining to pursue a strategic transaction, WaferGen’s board of directors approved and authorized WaferGen’s engagement of Torreya as a financial advisor to identify, explore and evaluate strategic options for WaferGen, including the potential acquisition of new assets or disposition of current assets as well as a potential merger transaction through which either WaferGen would be combined with another company or be acquired for cash. Torreya was familiar with WaferGen’s business and operations due to its understanding of the biotechnology industry, its relationship with potential strategic partners and experience with similar transactions.

During February 2016, the strategic committee and Torreya had several discussions about companies that could be interested in a transaction. During these discussions, the parties considered numerous types of potential strategic partners and a master list of target companies was prepared. From February through April 2016, Torreya engaged with a wide variety of possible strategic partners and acquirers, contacting a total of 49 companies in the process. A total of nine companies expressed preliminary interest in considering a business combination transaction with WaferGen. Of these, four entered into confidentiality agreements and received a confidential presentation and were granted access to WaferGen’s online data room. However, except as described below none of these parties conducted extensive due diligence or submitted any transaction proposals. During this period, the strategic committee met twice weekly with Torreya and legal counsel to consider the status of interactions with potential strategic partners.

In mid-February 2016, WaferGen received an unsolicited proposal from a privately-held genomics company (“Company X”) for a stock merger transaction in which WaferGen’s operations would be combined with those of Company X and shares of WaferGen Common Stock would be issued to Company X’s shareholders. During February 2016, WaferGen began to conduct due diligence on Company X’s business and operations and consider and analyze the proposal.

On February 22, 2016, WaferGen’s board of directors met via telephonic conference call, with Torreya and legal counsel present, and discussed Torreya’s plans for exploring potential strategic opportunities for WaferGen. During this meeting, legal counsel apprised the board of directors regarding certain existing contractual arrangements that could affect a potential transaction including existing severance arrangement and the executive chairman’s employment agreement that, among other things, entitled him to receive 2.5% of the total consideration received by stockholders in connection with certain transactions, including some of the types of transaction being explored by WaferGen.

In late February 2016, as part of its general outreach, Torreya contacted an affiliate of Takara Bio, who expressed interest in a potential acquisition of WaferGen. On February 24, 2016, Takara Bio entered into a confidentiality agreement with WaferGen and commenced its due diligence investigation.

On March 7, 2016, WaferGen’s board of directors met via telephonic conference call, with Torreya and legal counsel present, and considered and discussed the Company X proposal and determined to make a counter proposal.

On March 11, 2016, Takara Bio informed WaferGen that due to concerns regarding absorption of, and need to consolidate, expected near term losses it was not interested in an immediate acquisition of WaferGen but was willing to consider other potential transaction structures, including an acquisition after 2016. From March 11, 2016 to April 4, 2016, the parties had discussions regarding other potential transaction structures.

During March 2016, WaferGen continued its due diligence review of Company X and discussions concerning a potential merger transaction. On March 17, 2016, WaferGen’s management met with Company X’s management to discuss operational details and terms of a possible strategic transaction between the two companies.

On March 24, 2016, WaferGen’s board of directors met in Austin, Texas, with Torreya and legal counsel present, and considered and discussed potential strategic transactions with Company X, Takara Bio and other

potential strategic partners as well as WaferGen’s prospects continuing as a standalone entity, which included consideration of WaferGen’s financing requirements and potential options to satisfy those requirements.

On April 4, 2016, WaferGen’s management met with Company X’s management to further discuss operational plans for a combined company. During April 2016, WaferGen continued its due diligence review of Company X and negotiated the terms of a potential merger agreement with Company X. The most significant issues involved in the negotiations centered on issues pertaining to how to ensure the combined company would have adequate funding to implement its proposed business plan.

On April 4, 2016, WaferGen received a non-binding indication of interest letter from Takara Bio contemplating a minority investment and debt facility with an option to acquire WaferGen in late 2017. Over the next several days, WaferGen and Takara Bio discussed this proposal.

On April 7, 2016, WaferGen received a renewed non-binding indication of interest letter contemplating the potential terms of Takara Bio’s acquisition of WaferGen, which included a purchase price based on a multiple of 2016 revenues and a closing following completion of WaferGen’s 2016 audit. From April 7, 2016 to April 15, 2016, the strategic committee, in consultation with Torreya and legal counsel, negotiated certain improvements in the terms contained in the indication of interest with Takara Bio including faster execution, certain funding for WaferGen pre-closing and the elimination of a closing condition requiring a minimum level of WaferGen earnings. On April 15, 2016, WaferGen entered into a non-binding indication of interest letter with Takara Bio.

On April 19, 2016, WaferGen received a draft merger agreement from Takara Bio. From April 19, 2016 through May 12, 2016, WaferGen and Takara Bio negotiated the terms of the merger agreement. During this period, members of WaferGen management met with members of Takara Bio management and discussed at a high level the proposed organization and structure for WaferGen post-acquisition. However, there were no discussions or agreements regarding continuing employment for WaferGen’s executives.

On April 24, 2016, WaferGen’s board of directors met via telephonic conference call, with Torreya and legal counsel present, and considered and discussed the terms of the proposed transactions with Takara Bio and Company X.

On April 29, 2016, WaferGen received a draft deposit agreement from Takara Bio. From April 29, 2016 through May 12, 2016, WaferGen and Takara Bio negotiated the terms of the deposit agreement.

On May 4, 2016, Company X informed WaferGen that it was no longer in a position to entertain a potential merger with WaferGen.

During April 2016, Takara Bio continued its due diligence investigation of WaferGen and was granted access to WaferGen’s online data room. In connection with the execution of the merger agreement, WaferGen entered into an amendment to the employment agreement of WaferGen’s executive chairman that extended the employment term until the earlier of the closing of the merger agreement and March 31, 2017.

During April and May 2016 prior to the entry into the merger agreement, the board of directors of WaferGen consulted with K&L Gates LLP and McDonald Carano Wilson, LLP, as Nevada counsel, in connection with WaferGen’s approach to legal negotiations in connection with possible strategic transactions and potential deal terms, including those for the proposed merger with Takara Bio, that could benefit or protect the stockholders of WaferGen and other legal considerations. In consultation with Torreya and legal counsel, WaferGen’s board of directors reviewed and considered the benefits of the proposed merger with Takara Bio to WaferGen’s stockholders and compared such benefits to other potential strategic options which may be available to WaferGen as well as WaferGen’s future as a standalone entity. In considering the standalone scenario, WaferGen’s board of directors considered that WaferGen’s future as a standalone entity would be uncertain given that WaferGen’s revenues had been insufficient to support the development and commercialization of its products to date, WaferGen expected to continue to generate losses in the near-term and based on discussions with potential sources of financing the prospects for obtaining additional needed financing on favorable terms were doubtful.

On May 12, 2016, WaferGen’s board of directors met to consider the proposed transaction. At the meeting, WaferGen’s management and its legal and financial advisors made presentations to the board of directors concerning

the proposed merger and the terms and conditions of the merger agreement, as well as the terms of the deposit agreement. Legal counsel advised the WaferGen board of directors of its fiduciary duties and reviewed the terms of the draft merger agreement and deposit agreement with the WaferGen board of directors. On May 12, 2016 Torreya delivered an opinion to the WaferGen board of directors, a copy of which is attached as Annex C, to the effect that, as of that date, the consideration pursuant to the proposed merger agreement was fair, from a financial point of view, to WaferGen stockholders. The WaferGen board of directors discussed the matters presented by management and by WaferGen’s legal and financial advisors, including the factors discussed under “—WaferGen’s Reasons for the Merger and Recommendation of WaferGen’s Board of Directors.” After discussion, the WaferGen board of directors unanimously approved the merger agreement and other transaction agreements, including the Deposit Agreement, authorized the execution of the merger agreement with Takara Bio and directed that the merger agreement be submitted to the common stockholders of WaferGen along with the WaferGen board of directors’ unanimous recommendation that the WaferGen stockholders vote to approve the merger agreement.

Following the approval of the board of directors of WaferGen, the parties executed the merger agreement and certain related agreements on May 12, 2016. WaferGen issued a press release announcing the merger agreement on the morning of May 13, 2016. Subsequent to reporting entry into the merger agreement, WaferGen has not received any proposals from third parties concerning the potential acquisition of WaferGen.

WaferGen’s Reasons for the Merger and Recommendation of WaferGen’s Board of Directors

At a meeting held on May 12, 2016, the WaferGen board of directors, by a unanimous vote: (1) approved the merger agreement; (2) approved the execution, delivery and performance of the merger agreement and the consummation of all of the transactions contemplated thereby, including the merger; (3) determined that the merger agreement was advisable, fair to and in the best interests of WaferGen and the stockholders of WaferGen; and (4) recommended to the stockholders of WaferGen that they adopt the merger agreement. In making its recommendation on May 12, 2016, the WaferGen board of directors consulted with outside legal and financial advisors and WaferGen’s senior management team at various times leading up to May 12, 2016, and considered a number of factors, including the following principal factors that the WaferGen board of directors believes support such determinations, approvals, resolutions and recommendations:

historical and ~~current~~then-current information concerning WaferGen’s business, financial condition, results of operations and prospects, including the status of and prospects for WaferGen’s base business and its new ICELL8 product;

~~current~~then-current financial market conditions, and historical market prices, volatility and trading information with respect to the Common Stock, as well as the general risks of market conditions that could reduce the Common Stock price;

the prospects of WaferGen if it were to remain an independent, standalone company, including factors such as slower than anticipated sales growth for WaferGen’s ICELL8 product, the prospects for increasing revenues, the expenses and fixed costs associated with its operations, WaferGen’s available cash, WaferGen’s losses from operations, WaferGen’s ability to raise capital in the future as a micro-cap biotechnology company, and the competitive landscape faced by WaferGen;

the fact that the merger consideration will be based on a multiple of WaferGen’s consolidated 2016 revenues which affords WaferGen’s stockholders the opportunity to benefit from the anticipated growth in revenues in 2016;

the anticipated amount of the per share merger consideration, based on projections of WaferGen’s consolidated 2016 revenues and assumed consideration reductions, in each case as of May 12, 2016, as compared to ~~current~~then-current and historical market prices of WaferGen’s ~~common stock,~~Common Stock, and the fact that the estimated per share merger consideration, based on such projections and assumptions, represented a

significant premium over WaferGen’s closing stock price on May 12, 2016 of $0.55, the last day of trading before the announcement of the merger;

WaferGen’s ~~current~~then-current operational plans, including the risks associated with achieving and executing upon WaferGen’s plans and the timing and likelihood of accomplishing WaferGen’s plans and goals, and including the risks associated with growing revenues and maintaining that growth in light of increasing competition in the markets for WaferGen’s ICELL8 single cell product, as well as WaferGen’s other products;

the fact that WaferGen believed it would require significant additional funding to continue its operations and that any such financing would likely be significantly dilutive to WaferGen’s stockholders or feature other unfavorable terms;

the funding expected to be provided by the Deposit Agreement, which, together with WaferGen’s ability to incur debt or issue securities, is expected to give WaferGen access to funds needed to funds its operations through the closing of the merger;

the fact that the merger agreement allows WaferGen to take actions such as incurring debt and modifying severance and bonus obligations which, although such actions could result in deductions from the Aggregate Consideration payable to security holders, could be important to allow WaferGen to try to maximize 2016 revenues and ultimately increase the consideration received by stockholders;

the directors’ assessment that the alternative of remaining an independent, standalone company was not reasonably likely to present superior opportunities for WaferGen to create greater value for WaferGen’s stockholders as compared with the merger, taking into account the risks of execution of WaferGen’s plans, including business, industry, market and competitive risks as well as the time value of money;

the fact that WaferGen, with the assistance of financial and legal advisors, conducted a process to identify potential strategic opportunities to obtain the best value for WaferGen’s stockholders, which included contacting approximately 49 parties regarding the possibility of a variety of types of strategic transactions;

based on the results of the third-party solicitation process that the board of directors conducted before the execution of the merger agreement, with the assistance of WaferGen’s management and financial and legal advisors, including the limited interest expressed by third parties during this process, the directors’ belief that the per share merger consideration negotiated with Takara Bio was the highest reasonably attainable;

the opinion of Torreya rendered to the WaferGen board of directors, as of May 12, 2016, as to the fairness, from a financial point of view, to WaferGen stockholders of the consideration to be received in the merger by such WaferGen stockholders, as more fully described below in the section entitled “—Opinion of WaferGen’s Financial Advisor” beginning on page ~~34;~~35;

the directors’ belief that the merger was more favorable to WaferGen’s stockholders than any other alternative reasonably available to WaferGen and its stockholders, including the alternative of remaining an independent, standalone company;

the course of negotiations regarding the transaction and the merger agreement between WaferGen and Takara Bio resulting in more favorable terms to WaferGen than those originally proposed by Takara Bio (which included a substantial increase in the revenue multiplier over Takara Bio’s initial offer, more favorable closing conditions (including the elimination of a closing condition that would have required WaferGen to achieve a minimum level of earnings), better access to funding through the deposit agreement and less restrictive post-signing operating covenants);

the belief of WaferGen’s board of directors, based upon arm’s length negotiations with Takara Bio, that the price to be paid by Takara Bio was at or very close to the highest price per share that Takara Bio was willing to pay for WaferGen;

the certainty of the value of cash consideration compared to stock or other forms of consideration;

the fact that Takara Bio afforded an appropriate synergistic fit;

the fact that Takara Bio’s obligations under the merger agreement are not subject to any financing conditions and other factors regarding the likelihood that the merger will be completed; and

the terms and conditions of the merger agreement and related documents, as reviewed by the WaferGen board of directors with legal counsel, including that:


◦	the representations, warranties and covenants of the parties, the conditions to the parties’ obligations to complete the merger and their right to terminate the merger agreement under certain circumstances were the result of significant arms’ length negotiations;

◦

the merger agreement provides that the WaferGen board of directors may withdraw or modify its recommendation that WaferGen’s stockholders vote in favor of adoption of the merger agreement in certain circumstances, including in connection with a superior proposal, and that WaferGen may terminate the merger agreement in order to accept a superior proposal and enter into a definitive agreement with respect to such superior proposal, in both cases subject to the terms and conditions of the merger agreement, including required processes and payment of a $2.0 million termination fee;


◦	the board of directors’ belief that the termination fee provisions, pursuant to which WaferGen may be required to pay a termination fee of $2.0 million, and the circumstances under which the same would be payable, are reasonable for transactions of this size and type and would not be likely to preclude another party from making a superior proposal;


◦	WaferGen is entitled to seek specific performance to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement; and


◦	the fact that the merger agreement will be subject to adoption by WaferGen’s common stockholders.

WaferGen’s board of directors also considered the following potentially negative factors and risks in its deliberations concerning the merger agreement:

the consideration to be received by stockholders is based on a multiple of WaferGen’s consolidated 2016 revenues and if revenues achieved are less than expected it would have a negative impact on the per share merger consideration, especially if 2016 revenues are below $9.0 million, which would cause the revenue multiplier to fall from 3.5 to 2.5 or lower;

the consideration to be received by stockholders is based on a multiple of the Company’s consolidated 2016 revenues that is subject to change based on a variety of factors, and which will be modified by deduction line items set forth in the merger agreement, including those relating to indebtedness, transaction fees and unpaid debt and equity issuance costs, each of which adjustments may also be subject to changes based on factors that are inherently speculative;

the risks and costs to WaferGen if the merger does not close, including the potential diversion of management and employee attention, employee attrition and the effect on existing business relationships, and the expenditure of financial resources in pursuit of the merger;

the termination fee payable by WaferGen upon the occurrence of certain events, including the possibility that such termination fee may deter other potential acquirers from making a competing offer for WaferGen that might be more advantageous to the stockholders;

the provisions relating to the conduct of WaferGen’s business prior to the closing of the merger that require WaferGen to discuss and agree with Takara Bio before conducting its business other than in the ordinary course consistent with past practice, and certain other provisions, which could delay or

prevent WaferGen from pursuing business opportunities that would otherwise be in its best interests as a standalone company;

the nature of the merger as a cash transaction means that WaferGen’s stockholders will not participate in future earnings or growth, and will not benefit from any potential appreciation in value, of the surviving corporation;

that the closing of the merger will not take place until after completion of the audit of WaferGen’s 2016 financial statements, estimated to be in the first quarter of 2017, and the possibility that the consummation of the merger may be delayed or not occur at all, and the adverse impact such event would have on WaferGen and its business; and

the interests of WaferGen’s directors and executive officers in the transactions contemplated by the merger agreement, as described in the section entitled “—Interests of WaferGen’s Executive Officers and Directors in the Merger.”

The foregoing discussion of the information and factors considered by WaferGen’s board of directors in reaching their conclusions and recommendations is not intended to be exhaustive, but includes the material factors considered by WaferGen’s board of directors. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the board of directors did not find it practicable, and did not attempt, to quantify, rank or assign any relative or specific weights to the various factors considered in reaching its determination and making its recommendation. In addition, individual directors might have given different weights to different factors. WaferGen’s board of directors considered all of the foregoing factors as a whole and based its recommendation on the totality of the information presented.

WAFERGEN’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” APPROVAL OF THE PROPOSAL TO ADOPT THE MERGER AGREEMENT.

Opinion of WaferGen’s Financial Advisor

Pursuant to an engagement letter dated February 4, 2016, WaferGen retained Torreya to act as financial advisor in connection with the merger and to render an opinion to the WaferGen board of directors as to the fairness, from a financial point of view, to the stockholders of WaferGen in regards to the terms of the merger agreement.

As more specifically set forth in the merger agreement, Takara Bio intends to acquire all of the outstanding equity of WaferGen in exchange for the Aggregate Consideration, subject to adjustment as described in “The Merger Agreement—Merger Consideration”. The terms and conditions of the merger are more fully set forth in the merger agreement.

Torreya rendered to WaferGen’s board of directors at its meeting on May 12, 2016 Torreya’s oral opinion, subsequently confirmed by delivery of a written opinion dated May 12, 2016, that, as of such date, and based upon and subject to the various assumptions, considerations, qualifications and limitations set forth therein, the merger consideration to be received by WaferGen stockholders pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of the written opinion of Torreya, dated May 12, 2016, is attached as Annex C and is incorporated herein by reference. WaferGen encourages WaferGen stockholders to read the opinion in its entirety for the assumptions made, procedures followed, other matters considered and limits of the review by

Torreya. The summary of the written opinion of Torreya set forth herein is qualified by reference to the full text of such opinion. Torreya’s analyses and opinion were prepared for and addressed to the WaferGen board of directors and are directed only to the fairness, from a financial point of view, to WaferGen’s stockholders, of the aggregate transaction value of cash to be paid in the merger. Torreya’s opinion is not a recommendation to any stockholder as to how to vote with respect to the proposed merger or to take any other action in connection with the merger or otherwise.

In connection with its opinion, Torreya reviewed and considered such financial and other matters as it deemed relevant, including, among other things:


▪	A draft of the Agreement and Plan of Merger dated May 12, 2016.


▪	Certain publicly available financial and other information for WaferGen and certain other relevant financial and operating data furnished to Torreya by WaferGen management.


▪	Certain internal financial analyses, reports and other information concerning WaferGen prepared by the management of WaferGen and certain financial forecasts concerning WaferGen prepared by the management of WaferGen in March 2016 (collectively, the “Projections”).


▪	Certain stock market data of WaferGen and certain publicly traded companies Torreya deemed relevant.


▪	Certain acquisition premia paid to other publicly traded companies in the life sciences sector in the last three years Torreya deemed relevant.


▪	Certain financial terms of the merger as compared to the financial terms of certain selected business acquisitions Torreya deemed relevant.


▪	Such other information, financial studies, academic reports, analyst reports, market research, and such other factors that Torreya deemed relevant for the purposes of its opinion.

In conducting its review and arriving at its opinion, Torreya, with WaferGen’s consent, assumed and relied upon, without independent investigation, the accuracy and completeness of all financial and other information provided to it by WaferGen, or which is publicly available or was otherwise reviewed by Torreya. Torreya did not undertake any responsibility for the accuracy, completeness or reasonableness of, or independent verification of, such information. Torreya relied upon, without independent verifications, the assessment of WaferGen management as to the viability of, and risks associated with, the existing products and services of WaferGen. In addition, Torreya did not conduct or assume any obligation to conduct any physical inspection of the properties or facilities of WaferGen. Torreya, with WaferGen’s consent, assumed that the Projections were reasonably prepared by the management of WaferGen on bases reflecting the best currently available estimates and good faith judgments of such management as to the future performance of WaferGen, and such projections provide a reasonable basis for Torreya’s opinion. Torreya expresses no opinion as to the Projections or the assumptions on which they were made. Torreya further relied upon the assurance of the management of WaferGen that it is unaware of any facts that would make the information provided to Torreya incomplete or misleading in any respect. Torreya expressly disclaims any undertaking or obligation to advise any person of any change in any fact of matter affecting its opinion of which Torreya becomes aware after the date of its opinion.

Torreya did not make or obtain any independent evaluations, valuations or appraisals of the assets or liabilities of WaferGen, nor was Torreya furnished with such materials. Torreya assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Torreya for purposes of its opinion and, with WaferGen’s consent, Torreya relied upon such information as being complete and accurate. Torreya expressed no view as to any other aspect or implication of the merger agreement or any other agreement, arrangement or understanding entered into in connection with the merger agreement or otherwise. Torreya’s opinion is necessarily based upon economic and market conditions and other circumstances as they existed and could be evaluated by Torreya as of the date of its opinion. It should be understood that although subsequent developments may affect

Torreya’s opinion, Torreya does not have any obligation to update, revise or reaffirm its opinion and Torreya expressly disclaims any responsibility to do so.

For purposes of rendering its opinion, Torreya assumed in all respects material to its analysis that the final form of the merger agreement would be substantially similar to the last draft reviewed by Torreya. Torreya also assumed that all governmental, regulatory and other consents and approvals contemplated by the merger agreement will be obtained and that in the course of obtaining any of those consents no restrictions will be imposed or waivers made that would have an adverse effect on the contemplated benefits of the merger agreement.

Torreya’s opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote with respect to the merger agreement or to take any other action in connection with the merger agreement or otherwise. Torreya was not requested to opine as to, and Torreya’s opinion does not in any manner address, WaferGen’s underlying business decision to enter into the merger agreement or the relative merits of the transactions contemplated by the merger agreement as compared to other business strategies or transactions that might be available to WaferGen.

The following is a summary of the material financial analyses performed by Torreya to arrive at its opinion. Some of the summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data set forth in the tables without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of the financial analyses. Torreya performed certain procedures, including each of the financial analyses described below, and reviewed with the management of WaferGen the assumptions on which such analyses were based and other factors, including the historical and projected financial results of WaferGen.

Transaction Overview. Takara Bio has agreed to pay aggregate consideration in connection with the merger equal to 3.5 times WaferGen’s consolidated 2016 revenues if full year consolidated 2016 revenues by WaferGen equal or exceed $9 million, as may be reduced by certain potential deductions. Based on WaferGen management’s forecast of consolidated revenues of $12.2 million for 2016, and assuming no deductions, Torreya determined a high probability range of the consideration to be paid pursuant to the merger agreement of between $34.0 million (20% below forecast) to $50.0 million (20% above forecast). This compares to a company enterprise value of approximately $4.6 million, based on the market price of Common Stock of $0.55 at the close of business on May 12, 2016. However, there can be no assurance that consolidated 2016 revenues will not be less than forecast and if they are the actual merger consideration could be significantly lower.

Analysis of Selected Publicly Traded Companies. Torreya performed a comparable companies analysis, which is designed to provide an implied trading value of a company by comparing it to selected companies with similar characteristics to the subject company. Torreya compared certain financial information of WaferGen with publicly available information for the selected companies. The selected companies were chosen based on Torreya’s knowledge of the industry and because the selected companies have businesses that may be considered similar to WaferGen’s. Although none of the selected companies are identical or directly comparable to WaferGen, all of the selected companies are publicly traded companies in the molecular diagnostics and genomics sector with enterprise values between $311.3 million and $70.1 billion. These companies, which we refer to as the “Selected Publicly Traded Molecular Diagnostics and Genomics Companies,” were:

Thermo Fisher Scientific, Inc.

Becton, Dickinson and Company

Illumina Inc.

Hologic Inc.

Agilent Technologies, Inc.

Waters Corporation

PerkinElmer Inc.

Qiagen NV

VWR Corporation

bioMérieux S.A.

Bruker Corporation

Bio-Rad Laboratories, Inc.

Myriad Genetics, Inc.

Luminex Corporation

Pacific Biosciences of California, Inc.

Fluidigm Corporation

NanoString Technologies, Inc.

Torreya reviewed for the companies listed above, among other things, the enterprise value and the multiple of the enterprise value relative to the last twelve months (“LTM”) revenue. Financial data was based on public filings and other publicly available information at the time of announcement of the relevant transaction.

With respect to the Selected Publicly Traded Molecular Diagnostics and Genomics Companies, the Torreya opinion utilized the following information:



Company	EV / LTM Revenue
Thermo Fisher Scientific, Inc.	4.2x
Becton, Dickinson and Company	3.8x
Illumina Inc.	9.2x
Hologic Inc.	3.4x
Agilent Technologies, Inc.	4.6x
Waters Corporation	5.0x
PerkinElmer Inc.	3.0x
Qiagen NV	4.5x
VWR Corporation	1.3x
bioMérieux S.A.	2.7x
Bruker Corporation	2.7x
Bio-Rad Laboratories, Inc.	1.9x
Myriad Genetics, Inc.	3.0x
Luminex Corporation	3.0x
Pacific Biosciences of California, Inc.	7.4x
Fluidigm Corporation	3.1x
NanoString Technologies, Inc.	4.1x
Selected Companies 25^th Percentile:	3.0x
Selected Companies Mean:	3.9x
Selected Companies Median:	3.4x
Selected Companies 75^th Percentile:	4.5x

Based on the analysis of the relevant metrics for the selected companies and WaferGen LTM revenue of $7.95 million, Torreya selected ranges of multiples from the selected companies’ 25th percentile of 3.0x to the selected companies’ 75th percentile of 4.5x for LTM revenue and applied these ranges of multiples to the relevant financial statistics for WaferGen. This analysis indicated implied enterprise valuations for WaferGen as follows:



Selected Molecular Diagnostics and Genomics Transactions Enterprise Value Range:
25^th Percentile:		$23.8 million
Mean:		$31.3 million
Median:		$26.7 million
75^th Percentile:		$35.7 million

Although the companies referred to above were used for comparison purposes, none of those companies is identical to WaferGen. Accordingly, an analysis of the results of such a comparison is not purely mathematical, but instead involves complex considerations and judgments concerning differences in historical and projected financial and operating characteristics of the Selected Publicly Traded Molecular Diagnostics and Genomics Companies and

other factors that could affect the public trading value of such companies and WaferGen to which they are being compared.

Select Precedent M&A Transactions Analysis. Using publicly available information, Torreya reviewed the terms of selected public and private company precedent transactions announced since March 1, 2010 in which the targets were life sciences tools companies that operate in and/or were exposed to similar lines of business as WaferGen. The following precedent transactions, which we refer to as the “Selected Molecular Diagnostics and Genomics Transactions,” were considered, including their respective dates of announcement:



Buyer / Target	Announcement Date
DiaSorin S.p.A. / Focus Diagnostics, Inc.	03/30/16
Qiagen N.V. / Exiqon A/S	03/29/16
Thermo Fisher Scientific Inc. / Affymetrix Inc.	01/08/16
Charles River Laboratories International, Inc. / WIL Research Company, Inc.	01/07/16
CareDx, Inc. / Allenex AB	12/16/15
Agilent Technologies, Inc. / Seahorse Bioscience, Inc.	09/09/15
Danaher Corporation / Pall Corporation	05/13/15
PE Investor Syndicate / WuXi PharmaTech (Cayman) Inc.	04/30/15
Thermo Fisher Scientific Inc. / Life Technologies Corporation	02/23/15
Merck KGaA / SigmaAldrich Corporation	09/22/14
BioTechne Corporation / Protein Simple	06/17/14
Myriad Genetics, Inc. / Crescendo Bioscience, Inc.	02/04/14
Fluidigm Corporation / DVS Sciences	01/29/14
GE Healthcare Limited / Thermo Fisher Scientific Inc. (HyClone)	01/06/14
American Capital, Ltd. / Cambridge Major Laboratories, Inc.	12/27/12
BGI / Complete Genomics Inc.	09/17/12
Agilent Technologies Europe B.V. / Dako A/S	06/21/12
Hologic, Inc. / Gen-Probe Incorporated	04/30/12
Danaher, Corp. / Beckman Coulter, Inc.	02/07/11
Novartis AG / Genoptix, Inc.	01/24/11
Thermo Fisher Scientific Inc. / Dionex Corporation	12/13/10
Merck KGaA / Millipore Corporation	03/01/10

Torreya reviewed for the transactions listed above, among other things, the enterprise value of the transaction and the multiple of enterprise value relative to the LTM revenue prior to the applicable transaction’s announcement date. Financial data of the Selected Molecular Diagnostics and Genomics Transactions was based on public filings and other publicly available information at the time of announcement of the relevant transaction.

With respect to the Selected Molecular Diagnostics and Genomics Transactions, the Torreya opinion utilized the following information:



Buyer / Target	EV / LTM Revenue
DiaSorin S.p.A. / Focus Diagnostics, Inc.	3.8x
Qiagen N.V. / Exiqon A/S	4.2x
Thermo Fisher Scientific Inc. / Affymetrix Inc.	3.6x
Charles River Laboratories Intl., Inc. / WIL Research Co., Inc.	3.7x
CareDx, Inc. / Allenex AB	2.7x
Agilent Technologies, Inc. / Seahorse Bioscience, Inc.	4.8x
Danaher Corporation / Pall Corporation	4.9x
PE Investor Syndicate / WuXi PharmaTech (Cayman) Inc.	4.8x
Thermo Fisher Scientific Inc. / Life Technologies Corporation	4.0x
Merck KGaA / SigmaAldrich Corporation	4.3x
BioTechne Corporation / Protein Simple	5.4x
Myriad Genetics, Inc. / Crescendo Bioscience, Inc.	6.1x
Fluidigm Corporation / DVS Sciences	5.9x
GE Healthcare Limited / Thermo Fisher Scientific Inc. (HyClone)	4.2x
American Capital, Ltd. / Cambridge Major Laboratories, Inc.	2.1x
BGI / Complete Genomics Inc.	6.9x
Agilent Technologies Europe B.V. / Dako A/S	6.4x
Hologic, Inc. / Gen-Probe Incorporated	6.6x
Danaher, Corp. / Beckman Coulter, Inc.	1.9x
Novartis AG / Genoptix, Inc.	2.4x
Thermo Fisher Scientific Inc. / Dionex Corporation	4.7x
Merck KGaA / Millipore Corporation	4.1x
Selected Transactions 25^th Percentile:	3.7x
Selected Transactions Mean:	4.4x
Selected Transactions Median:	4.3x
Selected Transactions 75^th Percentile:	5.3x

Based on the analysis of the relevant metrics for the selected companies, Torreya selected a range of multiples from the selected companies’ 25th percentile of 3.7x to the selected companies’ 75th percentile of 5.3x for LTM revenue and applied these ranges of multiples to WaferGen’s LTM revenue of $7.95 million. This analysis indicated implied enterprise valuations for WaferGen as follows:



Selected Molecular Diagnostics and Genomics Transactions enterprise value range:
25^th Percentile:		$29.3 million
Mean:		$35.3 million
Median:		$34.0 million
75^th Percentile:		$42.0 million

No company or transaction utilized as a comparison in the selected precedent transactions analysis is identical to WaferGen; nor are the transactions identical to the transactions contemplated by the Merger Agreement. In evaluating the transactions listed above, Torreya made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are

beyond the control of WaferGen, such as the impact of competition on the business of WaferGen or the industry generally, industry growth and the absence of any adverse material change in the financial condition or property of WaferGen or the industry or in the financial markets in general. Accordingly, mathematical analysis, such as determining the average or median, is not in itself a meaningful method of using comparable transaction data.

Control Premium Analysis. Using publicly available information relating to (i) several broader public U.S. and E.U. target transactions sized between $20 million and $16.4 billion between February 4, 2014 and November 3, 2014 across the life sciences tools and services industry included in the below table (collectively, the “Life Sciences Tools and Services Transactions”) and (ii) the aforementioned Selected Molecular Diagnostics and Genomics Transactions for which the target was a public company, Torreya reviewed the premium paid in connection with each such precedent transactions at the unaffected target stock price, the target stock price as of one week prior to, and the target stock price as of one month prior to, the applicable transaction’s announcement date.



Buyer / Target	Announcement Date
Lab Corp / MEDTOX Scientific	02/23/15
Lab Corp / Covance	11/03/14
Linden LLC / SeraCare Life Sciences	06/17/14
Sterigenics / Nordion	03/28/14
Perkin Elmer / Caliper Life Sciences	02/04/14
Source BioScience / Vindon Healthcare	07/15/13
JLL Partners / BioClinica	01/30/13

Based on the analysis of the premiums paid in connection with the selected precedent transactions, Torreya formulated a range of premiums of between 23.0% and 41.7%, implying a range of implied enterprise values based on WaferGen’s market capitalization at market close on May 12, 2016, between $6.9 million and $8.8 million.

WaferGen Discounted Cash Flow Analysis. Torreya performed a discounted cash flow analysis to determine a range of potential enterprise values for WaferGen, using the Projections. Torreya calculated a range based on the sum of the discounted after-tax net present values of (i) annual free cash flows that WaferGen is estimated to generate for the fiscal years ending December 31, 2016 through December 31, 2021, and (ii) a projected terminal value as of December 31, 2021 using terminal earnings before interest, tax, depreciation and amortization (“EBITDA”) multiples from 12.5x - 18.5x, which represented a range around WaferGen’s assumed EBITDA multiple of 15.5x, which was found using the selected public traded companies analysis. Torreya then discounted the cash flows back to May 12, 2016 using discount rates of 8.5% - 11.5%, which represented a range around WaferGen’s weighted average cost of capital of 9.1%. Based on this analysis, Torreya calculated a range of potential values of WaferGen of between $16.9 million and $41.9 million.

General. The summary set forth above does not purport to be a complete description of all the analyses performed by Torreya. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to partial analysis or summary description. Torreya did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, notwithstanding the separate factors summarized above, Torreya believes, and has advised the WaferGen board of directors, that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the process underlying its opinion. In performing its analyses, Torreya made numerous assumptions with respect to industry performance, business and economic conditions and other matters, many of which are beyond the control of WaferGen. These analyses performed by Torreya are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the value of businesses do not purport to be appraisals or to reflect the prices at which businesses or securities may actually be sold. Accordingly, such analyses and estimates are inherently subject to uncertainty, being based upon numerous factors

or events beyond the control of the parties or their respective advisors. None of WaferGen, Torreya or any other person assumes responsibility if future results are materially different from those projected. The analyses supplied by Torreya and its opinion were among several factors taken into consideration by the WaferGen board of directors in making its decision to enter into the merger agreement and should not be considered as determinative of such decision.

In the prior two years, except in connection with Torreya’s current engagement by WaferGen, Torreya has not provided any investment banking or other services to WaferGen or any of its affiliates. Torreya may provide investment banking and other services to or with respect to WaferGen or its affiliates in the future, for which Torreya may receive compensation.

The WaferGen board of directors selected Torreya as its financial advisor in connection with the merger based on Torreya’s reputation and experience with respect to the life sciences industry generally. Torreya is a nationally recognized investment banking firm that has substantial experience in transactions similar to the merger.

Pursuant to Torreya’s engagement letter with WaferGen dated February 4, 2016, Torreya will receive a transaction fee equal to 3% of the Consideration (as defined in Torreya’s engagement letter) paid in connection with the merger subject to a minimum of $1 million (the “Success Fee”), and also received a fee for rendering its opinion of $150,000 regardless of the conclusions reached in such opinion. In addition, WaferGen has agreed to indemnify Torreya against certain liabilities that may arise out of its engagement and to reimburse Torreya’s expenses. Torreya will not receive any other significant payment of compensation contingent upon the successful completion of the merger other than the Success Fee.

Certain WaferGen Financial Information Provided to Torreya

WaferGen does not, as a matter of course, publicly disclose forecasts or internal projections as to its longer term future performance or results of operations due to the inherent unpredictability of the underlying assumptions and projections. In connection with the review by WaferGen’s board of directors of potential strategic alternatives, WaferGen’s management prepared the “Projections.” WaferGen provided the Projections to its board of directors and to Torreya and directed Torreya to use the Projections in connection with the rendering of its fairness opinion to the WaferGen board of directors and performing its related financial analysis, as described above under the heading “—Opinion of WaferGen’s Financial Advisor” in this proxy statement.

The prospective financial information included in this proxy statement has been prepared by, and is the responsibility of, WaferGen’s management. SingerLewak LLP, WaferGen’s independent registered public accounting firm, has neither examined nor compiled the accompanying prospective financial information and, accordingly, does not express an opinion or any other form of assurance with respect thereto.

The Projections were prepared by WaferGen’s management for internal use. The Projections were not prepared with a view toward public disclosure, or with a view toward compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. Neither WaferGen’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the prospective financial information included below, or expressed any opinion or any other form of assurance on such information or its achievability.

The Projections set forth below are included solely to give WaferGen stockholders access to certain financial projections that were made available to WaferGen’s board of directors and advisors.

The Projections are forward-looking ~~statements.~~statements and were prepared in March 2016. Accordingly, there can be no assurance that the Projections will be realized, and actual results may vary materially from those shown. The inclusion of the Projections in this proxy statement should not be regarded as an indication that WaferGen or any of its affiliates, advisors or representatives considered or consider the Projections to be predictive of actual future events, and the Projections should not be relied upon as such. In fact, as disclosed in the section “Sample

Calculations of Per Share Aggregate Consideration” beginning on page 59, as of the date of this proxy statement the Company expects that 2016 Revenues will range between $10.0 million and $12.0 million, which is less than the $12.2 million of 2016 Revenues reflected in the Projections. Neither WaferGen nor any of its affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from the Projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing after the date the Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Projections are shown to be in error. WaferGen does not intend to make publicly available any update or other revision to the Projections, except as otherwise required by ~~law.~~law, although WaferGen has provided additional information with regard to its expectations for its 2016 Revenues in the section entitled “Sample Calculations of Per Share Aggregate Consideration.” For information on factors that may cause WaferGen’s future financial results to materially vary from those reflected in

the projections prepared by WaferGen’s management, see the section entitled “Cautionary Note Regarding Forward Looking Statements” beginning on page ~~23.~~24.

The following is a summary of the Projections:

Consolidated Summary of Unaudited Prospective Financial Information

($ in Thousands, except per share data)



	FORECAST
	2016F			2017F			2018F		2019F		2020F		2021F
Net Revenue	$	12,207		$	25,676		$	41,073	$	51,342	$	59,043	$	64,947
Gross Profit	$	6,586		$	14,635		$	24,644	$	30,805	$	35,426	$	38,968
Operating Income	$	(15,002	)	$	(8,250	)	$	1,519	$	3,074	$	3,859	$	4,345
EBITDA	$	(14,057	)	$	(7,351	)	$	2,134	$	3,627	$	4,357	$	4,793
Net Income	$	(15,002	)	$	(8,250	)	$	1,519	$	2,767	$	2,509	$	2,824
EPS	$	(0.49	)	$	(0.27	)	$	0.05	$	0.09	$	0.08	$	0.09

The Projections reflect numerous estimates, assumptions and simplifications made by WaferGen’s management with respect to general business, economic, competitive, regulatory ~~reimbursement~~ and other market and financial conditions and other future events, all of which are difficult to predict and many of which are beyond WaferGen’s control.

~~Examples of significant~~ Such estimates, assumptions and simplifications included, without limitation: the impact of competition on the business of WaferGen is in line with that on the life sciences industry generally; industry growth is consistent with its historical pattern; there is no material adverse change in the ~~Projections are:~~financial condition and prospects of WaferGen; there is no material adverse change in the regulatory environment; and there is no material adverse change in the life sciences industry or the financial markets in general. Furthermore, the projections:

nodo not include deal-related costs ~~are included~~ in the expenses;

assume no increases in management and staffing headcounts; ~~and~~

assume strong continued growth in sales of WaferGen’s ~~products.~~products;

were based upon numerous estimates or expectations, beliefs, opinions and assumptions with respect to WaferGen’s business, including results of operations and financial condition, customer requirements and competition, all of which are difficult to predict and many of which are beyond WaferGen’s control and may not be realized;

do not take into account the effect of any transactions, circumstances or events occurring after the date the Projections were prepared, including the merger, or the effect of any failure of the merger to occur;

are not necessarily indicative of current market conditions or values or future performance, which may be significantly more or less favorable than as set forth in the Projections; and

are not, and should not be regarded as, a representation that any of the expectations contained in, or forming a part of, the Projections will be achieved.

As described below in the section “Sample Calculations of Per Share Aggregate Consideration” beginning on page 59, as of the date of this proxy statement the Company expects that 2016 Revenues will range between $10.0 million and $12.0 million, which is less than the $12.2 million of 2016 Revenues reflected in the Projections. The primary reason for this reduction is that based on results for the first half of 2016, the sales cycle for the Company’s ICELL8 product has turned out to be longer than expected. This change in anticipated 2016 Revenues does not affect in any way the board of director’s recommendation to stockholders that they adopt the merger agreement. Although a lower amount of anticipated revenues does implicate a potentially lower amount of expected consideration to stockholders, any such reduction in revenues would also be expected to result in a lower perceived value of the Company and a lower stock price.

Interests of WaferGen’s Executive Officers and Directors in the Merger

In considering the recommendation of the WaferGen board of directors that WaferGen common stockholders vote to approve the merger proposal, WaferGen stockholders should be aware that some of WaferGen’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of WaferGen stockholders generally. The WaferGen board of directors was aware of and considered these potential interests, among other things, in evaluating and negotiating the merger agreement and the related transactions, in approving the merger agreement and in recommending the approval of the merger proposal. For purposes of the employment agreements described below, to the extent applicable, the completion of the merger will constitute a change of control, change in control, or a term of similar meaning. These interests are described in further detail below, and certain of them are quantified in the narrative and table below.

Executive Change in Control and Severance Payments

Rolland Carlson. Dr. Carlson’s employment agreement provides for the payment of certain severance benefits in the event that he is terminated within three months before or 12 months following a “Change of Control.” As the merger would be considered a “Change of Control” under his employment agreement, Dr. Carlson’s termination within three months before or 12 months following the Effective Time, unless such termination is For Cause, By Death, By Disability, by Dr. Carlson for other than Good Reason or by Non-Renewal (as such terms are defined in Dr. Carlson’s employment agreement), would entitle him to (i) an amount equal to 12 months of his current annual base salary of $350,000, one-half of which to be paid in a single lump-sum amount, less applicable withholdings, and the remaining one-half to be paid in the form of salary continuation on WaferGen’s regular payroll schedule, less applicable withholdings, over 12 months, (ii) if Dr. Carlson elects to continue his group health coverage under

COBRA, payment of COBRA premiums until the earlier of the end of the 18 month period following the date of termination or the date Dr. Carlson becomes covered under another employer’s health plan, subject to certain tax considerations set forth in the employment agreement, and (iii) a supplemental severance payment equal to three additional months of Dr. Carlson’s annual base salary, such amount to be paid in a single lump-sum amount, less applicable withholdings, on the later of the Effective Date and the date of termination.

Ivan Trifunovich. Dr. Trifunovich’s employment agreement does not provide for the payment of any severance benefits. However, in connection with the merger, Dr. Trifunovich will be entitled to receive a payment from WaferGen or the surviving corporation equal to the amount, if any, by which (i) 2.5% of the Aggregate Residual Consideration Amount exceeds (ii) the portion of Aggregate Residual Consideration Amount paid to Dr. Trifunovich with respect to compensatory WaferGen equity interests then held by Dr. Trifunovich, less the exercise price paid or payable by Dr. Trifunovich for such compensatory equity interests. This payment would be paid to Dr. Trifunovich in the same manner and at the same time as the portion of Aggregate Residual Consideration Amount payable to WaferGen stockholders is distributed after the Effective Time. The amount of the payment to Dr. Trifunovich described in this paragraph will constitute a deduction to the Aggregate Consideration in the calculation of the Per Share Aggregate Consideration, as further described in “The Merger—Merger Consideration” beginning on page 2627 of this proxy statement.

Dr. Trifunovich is also eligible to participate in a long-term incentive plan established by WaferGen under which he is entitled to receive a cash payment in connection with a change in control of WaferGen that occurs while he is employed by WaferGen or within six months thereafter. Under such plan, upon a change in control of WaferGen, Dr. Trifunovich would be entitled to a cash payment based on the aggregate equity transaction value in such a change of control transaction. In the event of a transaction with an aggregate equity transaction value of more than $50 million, and up to $75 million, he would be entitled to receive a cash payment equal to 1% of the aggregate equity transaction value. Pursuant to the merger agreement, the maximum amount of Aggregate Consideration to be paid in connection with the merger is $50 million; therefore, WaferGen does not expect Dr. Trifunovich to be eligible to receive such cash payment described in this paragraph.

Michael Henighan. Mr. Henighan’s employment agreement does not provide for any additional benefits in connection with a change of control of WaferGen. However, if Mr. Henighan is terminated for any reason except For Cause, By Death, By Disability, by Mr. Henighan other than for Good Reason or by Non-Renewal (as such terms are defined in Mr. Henighan’s employment agreement), he would be entitled to (i) an amount equal to six months of his current base salary of $220,000, one-half of which to be paid in a single lump-sum amount, less applicable withholdings, and the remaining one-half to be paid in the form of salary continuation on WaferGen’s regular payroll schedule, less applicable withholdings, over six months, and (ii) if Mr. Henighan elects to continue his group health coverage under COBRA, payment of COBRA premiums until the earlier of the end of the six month period following the date of termination or the date Mr. Henighan becomes covered under another employer’s health plan, subject to certain tax considerations set forth in the employment agreement.

For additional information regarding compensation that will be received by WaferGen’s named executive officers in connection with the merger, see “—Golden Parachute Arrangements for WaferGen Named Executive Officers” beginning on page ~~45.~~47.

WaferGen Stock-Based Awards

Stock Options. Certain executive officers and directors of WaferGen hold outstanding awards of options to purchase shares of Common Stock (“Stock Options”) granted under the WaferGen 2008 Stock Incentive Plan. Each outstanding and unexercised Stock Option that is held by an employee employed by WaferGen as of the Effective Time will be fully vested as of the Effective Time. Each such Stock Option having an exercise price less than the Per Share Aggregate Consideration (such Stock Option being “in the money”), will be converted automatically into the right to receive an amount in cash equal to the product of (i) the excess of the Per Share Aggregate Consideration over the applicable exercise price of such Stock Option and (ii) the number of shares of Common Stock subject to such Stock Option, less all applicable deductions and withholdings required by law to be withheld in respect of such payment. All other Stock Options will be canceled and terminated.

Restricted Stock Units. Certain executive officers and directors of WaferGen hold restricted stock units (“RSUs”) granted under the WaferGen 2008 Stock Incentive Plan. At the Effective Time, outstanding RSUs will be fully vested and each holder of such RSUs will have the right to receive an amount of cash equal to the Per Share Aggregate Consideration times the number of shares of Common Stock subject to such RSUs.

Equity Awards Held by WaferGen’s Executive Officers and Directors. Based upon estimated equity compensation holdings as of February 28, 2017 and subject to the assumptions and qualifications described in the applicable footnotes, WaferGen’s executive officers and directors will hold the following equity awards as of the Effective Time, which would be treated as described above:


Name of Beneficial Owner	Shares Subject to Unvested Stock Options (1)	Shares Subject to Unvested Restricted Stock Units (2)	Estimated Value of Options and Restricted Stock Units that will Accelerate ($)(3)	Shares Subject to Unvested Stock Options (1)	Shares Subject to Unvested Restricted Stock Units (2)	Estimated Value of Options and Restricted Stock Units that will Accelerate ($)(3)
Executive Officers
Rolland Carlson	—	33,334	47,778	—	33,334	47,117
Ivan Trifunovich	—	—	—	—	—	—
Michael P. Henighan	33,334	13,334	48,223	33,334	13,334	47,297

Directors
Dr. R. Dean Hautamaki	—	10,465	15,000	—	10,612	15,000
Makoto Kaneshiro	—	10,465	15,000	—	10,612	15,000
Joel Kanter	—	10,465	15,000	—	10,612	15,000
William McKenzie	—	10,465	15,000	—	10,612	15,000
Robert Schueren	—	10,465	15,000	—	10,612	15,000



Filed by the Registrant			þ

Filed by a Party other than the Registrant			o

Check the appropriate box:

	þ	Preliminary Proxy Statement

	o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

	o	Definitive Proxy Statement

	o	Definitive Additional Materials

	o	Soliciting Material under Rule 14a-12



Payment of Filing Fee (Check the appropriate box):

	o	No fee required.

	þo	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

		(1)	Title of each class of securities to which transaction applies: ~~Common Stock, par value $0.001 per share, and Preferred Stock, par value $0.001 per share.~~

		(2)	Aggregate number of securities to which transaction applies: 18,927,726 shares of Common Stock issued and outstanding; 430 shares of Preferred Stock convertible into 4,300,000 shares of Common Stock; 398,730 restricted stock units; 1,069,700 stock options; and 23,032,838 warrants.

		(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): Solely for the purpose of calculating the filing fee, the underlying value of the transaction was calculated as $50,000,000, the maximum amount payable in connection with the merger pursuant to the merger agreement. The filing fee was determined by multiplying $0.0001007 by the maximum aggregate value of the transaction as determined in accordance with the preceding sentence.

		(4)	Proposed maximum aggregate value of transaction: ~~$50,000,000.~~

		(5)	Total fee paid: ~~$5,035.~~

	oþ	Fee paid previously with preliminary materials.

	o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

		(1)	Amount Previously Paid:

		(2)	Form, Schedule or Registration Statement No.:

		(3)	Filing Party:

		(4)	Date Filed:



ABOUT THE MERGER AND THE SPECIAL MEETING		2
SUMMARY		1112
	The Companies	1112
	The Merger and the Merger Agreement	1112
	The Special Meeting of WaferGen Stockholders	2021
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS		2324
WAFERGEN PROPOSALS		2425
THE MERGER		2627
	Structure of the Merger	2627
	Merger Consideration	2627
	Treatment of Warrants, Stock Options and Restricted Stock Units	2729
	Purpose and Effects of the Merger	2829
	Background of the Merger	2829
	WaferGen’s Reasons for the Merger and Recommendation of WaferGen’s Board of Directors	3132
	Opinion of WaferGen’s Financial Advisor	3435
	Certain WaferGen Financial Information Provided to Torreya	4142
	Interests of WaferGen’s Executive Officers and Directors in the Merger	4244
	Golden Parachute Arrangements for WaferGen Named Executive Officers	4547
	Non-Employee Director and Strategic Committee Compensation	4648
	Regulatory Filings and Approvals	4648
	Dissenters’ Rights	4648
	Material U.S. Federal Income Tax Consequences of the Merger	4850
	Stock Exchange Quotation	5153
	Delisting and Deregistration of Common Stock	5153
	Closing and Effective Time of the Merger	5153
PARTIES TO THE MERGER		5355
	Distribution Agreement	5355
THE MERGER AGREEMENT		5456
	Structure of the Merger	5456
	Closing and Effective Time of the Merger	5456
	Merger Consideration	5456
	Treatment of Warrants, Stock Options and Restricted Stock Units	5658
	Sample Calculations of Per Share Aggregate Consideration	5759
	Surrender and Payment Procedures	6167
	Representations and Warranties	6167
	Conduct of Business by WaferGen	6470
	Recommendation of WaferGen’s Board of Directors	6672
	No Solicitation of Transactions	6874



	Efforts to Consummate the Merger	6874
	Directors’ and Officers’ Indemnification and Insurance	6975
	Employee Benefits Matters	6975
	Certain Other Covenants	6975
	Conditions to Completion of the Merger	7076
	Termination of the Merger Agreement	7177
	Effect of Termination	7278
	Termination Fee and Expenses	7278
	TBUSA Guarantee	7379
	Miscellaneous	7379
DEPOSIT AGREEMENT		7480
NON-EMPLOYEE DIRECTOR AND STRATEGIC COMMITTEE COMPENSATION		7480
	Non-Employee Director Compensation	7581
	Non-Employee Strategic Committee Compensation	7581
	Non-Employee Director and Strategic Committee Compensation	7581
THE SPECIAL MEETING		7783
	Date, Time and Place	7783
	Purpose of the Special Meeting	7783
	Recommendation of the Board of Directors of WaferGen	7783
	Record Date; Stockholders Entitled to Vote	7783
	Quorum Requirement	7884
	Stock Ownership of Directors and Executive Officers	7884
	Votes Required to Approve the Proposals	7884
	Failure to Vote; Abstentions and Broker Non-Votes	7884
	Submission of Proxies	7985
	Appointment of Proxies	86
	Revocation of Proxies	8086
	Solicitation of Proxies	8086
MARKET PRICE OF COMMON STOCK		8087
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		8188
STOCKHOLDER PROPOSALS		8490
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS		8591
WHERE YOU CAN FIND ADDITIONAL INFORMATION		8591
OTHER MATTERS		8591
ANNEX A - MERGER AGREEMENT		A-1
ANNEX B - DEPOSIT AGREEMENT		B-1
ANNEX C - OPINION OF WAFERGEN’S FINANCIAL ADVISOR		C-1
ANNEX D - DISSENTERS’ RIGHTS UNDER NEVADA REVISED STATUTES		D-1


Name	Cash ($)(1)	Equity ($)(2)	Benefits ($)(3)	Total ($)	Cash ($)(1)	Equity ($)(2)	Benefits ($)(3)	Total ($)
Executive Officers
Rolland Carlson	437,500	47,778	37,399	522,677	437,500	47,117	37,399	522,016
Ivan Trifunovich	605,479	255,311	—	860,790	619,742	249,508	—	869,250
Michael P. Henighan	110,000	48,223	12,183	170,406	110,000	47,297	12,183	169,480



	Sincerely,

	Ivan Trifunovich
	Executive Chairman of the Board of Directors


4.	Adjournment. To approve any adjournments of the special meeting, if necessary, to solicit additional proxies in order to approve the foregoing proposals.



	By Order of the Board of Directors,

	Michael P. Henighan
	Secretary


1.	To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of May 12, 2016, by and among Takara Bio, Walrus Acquisition Corporation, a Nevada corporation and wholly owned subsidiary of Takara Bio (“Merger Sub”), WaferGen, and, solely for the purposes stated therein, Takara Bio USA, Inc., a Delaware corporation (“TBUSA”), a copy of which is attached as Annex A;


3.	To consider and vote on a proposal to approve certain payments to the non-employee members of WaferGen’s board of directors and to the non-employee members of the strategic committee of WaferGen’s board of directors that was formed in November 2015 to consider and evaluate strategic opportunities and alternatives for WaferGen; and


4.	To approve any adjournments of the special meeting, if necessary, to solicit additional proxies in order to approve the foregoing proposals.


(ii)	2.0, if revenues are equal to or greater than $3.0 million and less than $6.0 million;


(iii)	2.5, if revenues are equal to or greater than $6.0 million and less than $9.0 million; or


(iv)	3.5, if revenues are equal to or greater than $9.0 million.


3.	The amount of WaferGen’s transaction fees, which include fees and commissions due to Torreya Partners LLC (“Torreya”) as WaferGen’s financial advisor and payments due to the Executive Chairman of WaferGen’s board of directors in connection with the merger, paid by Takara Bio or otherwise not paid by WaferGen prior to the effective time of the merger.


5.	The amount of any unpaid costs incurred in connection with any issuance by WaferGen of debt or equity securities after the date of the merger agreement, as determined as of the effective time of the merger.


2.	430 shares of preferred stock convertible into 4,300,000 shares of common stock;


(1)	Represents options with an exercise price of $0.56 and excludes certain options with an exercise price of $3.78 or greater.


1.	any amounts paid by Takara Bio to WaferGen under the Deposit Agreement that have not been returned to Takara Bio in accordance with the terms of the Deposit Agreement and the merger agreement (the “Deposit Adjustment”);


1.	2016 Revenues. The level of the Company’s consolidated 2016 revenues (“2016 Revenues”) which will determine the Revenue Multiple Amount which amount will be used to determine the aggregate amount paid to stockholders prior to potential reductions.


2.	Consideration Reductions. Each of the following adjustments which, if applicable, will reduce the aggregate amount paid to stockholders (each, a “Consideration Reduction”):


3.	Fully Diluted Share Amount. The Fully Diluted Share Amount, which number will be used to determine the Per Share Aggregate Consideration paid to stockholders.


◦	the Company’s consolidated revenues for the first six months of 2016 were approximately $4.4 million;


◦	as of August 19, 2016 the Company had total backlog of approximately $1.2 million;


◦	as of the date of this proxy statement, the Company expects regular repeat orders of consumables of at least $1.0 million;


◦	the Company’s consolidated 2015 revenues were approximately $7.2 million; and


◦	the Company anticipates consolidated revenues for the second six months of 2016 will likely be similar to revenues for the first six months, with potential upside attributable to increased sales of the Company’s ICELL8 product (which only accounted for approximately $0.4 million of revenues in 2015).


◦	Deposit Adjustment. Depending on the results for the second half of 2016, the Company expects it will need to utilize cash to be made available to it under the Deposit Agreement, resulting in a Deposit Adjustment ranging between $2.5 million and $5.0 million.


1.	Expected Minimum Per Share Aggregate Consideration. The expected minimum Per Share Aggregate Consideration of $0.33014 assumes 2016 Revenues of $6.0 million, total Consideration Reductions of $7.2 million and a Fully Diluted Share Amount of 23,626,456.


◦	Assuming total 2016 Revenue is greater than $6.0 million and less than $9.0 million, approximately $610,000 and $0.025, respectively; and


(i)	in the sample illustrative calculations set forth in the column labelled “Highest Estimate of Deductions,” the Deposit Adjustment equals $5.0 million and the total amount of the Debt Adjustment, Closing Related Costs Adjustment, Bonus Adjustment and Debt/Equity Issuance Cost Adjustment equals $1.0 million;


~~(iii)~~	~~the~~ Closing Related Costs Adjustment, ~~equals $180,000,~~


~~(v)~~	~~the~~and Debt/Equity Issuance Cost Adjustment equals ~~$100,000~~$0; and


~~(vi)~~(iii)	WaferGen’s outstanding shares of Common Stock and Preferred Stock, Stock Options, Warrants and RSUs remain the same as at May 31, 2016.



Illustrative 2016 Revenue	$	6,000,000
times Revenue Multiplier	2.5
Revenue Multiple Amount	$	15,000,000
plus Warrant/Stock Option Adjustment	—
minus BSV Amount	(50,000		)
minus Deposit Adjustment	(5,000,000		)
minus Debt Adjustment	(500,000		)
minus Closing Related Costs Adjustment	(180,000		)
minus Transaction Fee Adjustment	(1,196,829		)
minus Bonus Adjustment	(150,000		)
minus Debt/Equity Issuance Cost Adjustment	(100,000		)
Aggregate Residual Consideration Amount	$	7,823,171

Shares of Common Stock	18,927,726
Shares issuable upon Conversion of Preferred Stock	4,300,000
In the Money Options/Warrants	—
Restricted Stock Units	398,730
Other Equity Securities	—
Fully Diluted Share Amount	23,626,456

Per Share Aggregate Consideration Amount	$	0.33112